REG - Brooks Macdonald Grp - Final results for the year ended 30 June 2024
12/09/2024 07:00
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RNS Number : 9232D Brooks Macdonald Group PLC 12 September 2024
12 September 2024
BROOKS MACDONALD GROUP PLC
Final results for the year ended 30 June 2024
Focusing on clients to reignite growth
Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group") today announces
its audited results for the year ended 30 June 2024, which show a rise in
funds under management, a double-digit increase in underlying profit before
tax, a strong capital and cash position and the nineteenth successive annual
dividend increase for the Group. Also released today are two further
announcements regarding the disposal of the International business and
appointment of the new CFO.
Andrew Shepherd, CEO of Brooks Macdonald, said:
"Despite the challenging market conditions, we have delivered good results,
with our Funds Under Management growing to £18.0 billion and having
maintained strong underlying profit margins. This performance is a testament
to our robust business model and the unwavering commitment of our people. I
want to thank the entire team at Brooks Macdonald for their hard work,
dedication, and resilience throughout this past year and indeed during the
three years of my tenure as CEO. As I hand over the reins to Andrea Montague,
who has already made a significant impact as CFO, I have every confidence that
she will lead Brooks Macdonald to even greater success as CEO."
Andrea Montague, CEO Designate of Brooks Macdonald, said:
"Over the last 12 months, I have been impressed with the deep client
relationships that we have at Brooks Macdonald as well as the expertise and
commitment of our people to our clients. To be the best, we know there is more
we can do. Today we are redefining our strategy to reignite growth with a
renewed focus on excellent client service, broadening and deepening our client
reach and exploring targeted opportunities to drive scale and efficiencies. We
are also simplifying the Group by announcing the sale of our International
business for a total consideration of up to £50.85 million.
"I announced this morning the appointment of Katherine Jones as our new Chief
Financial Officer. This appointment will strengthen my leadership team so we
can continue to drive performance and execute our strategy. Looking ahead, I
am hugely excited about what we can achieve as we unlock the full potential of
Brooks Macdonald."
Good financial performance and strategic progress
· Group Funds Under Management ("FUM") reached £18.0 billion (FY23:
£16.8 billion), up 7.0% on prior year reflecting a strong investment
performance:
o Gross inflows totalled £2.3 billion (FY23: £2.7 billion) reflecting
strong client demand with the fourth quarter showing an improvement on each of
the prior quarters of the financial year
o Gross outflows in the year were elevated, driven by the macroeconomic
backdrop and higher interest rate environment leading to net outflows of £0.6
billion (FY23: net inflows of £0.8 billion)
o Performance in absolute terms over the 10-year period, across all our risk
profiles, is very strong delivering a range of +30% (for low risk) through to
+97% for our highest risk strategy (all net of fees).
o The last 12 months to the end of June 2024 has seen this outperformance
compared to peers cemented. All 5 risk profiles have delivered outstanding
absolute returns for clients and outperformed the ARC Private client index
series.
· Revenue of £128.3 million (FY23: £123.8 million), up 3.6% driven
by increased transactional and FX income, and the full year contribution from
the financial planning businesses acquired part way through FY23
· Management actions realised annualised cost savings of £4.0
million through organisational changes resulting in broadly flat underlying
costs for the year
· Underlying profit(1) of £34.1 million (FY23: £30.3 million), up
12.5% and an improved underlying profit margin of 26.6% (FY23: 24.5%).
· Total dividend up 4.0% to 78.0p (FY23: 75.0p) reflecting the
Board's confidence in the Group's medium-term growth strategy. This is the
nineteenth successive annual dividend increase since shares began trading on
AIM
· Sale of Brooks Macdonald International (BMI) to Canaccord Genuity
Wealth Management for a total consideration of up to £50.85 million,
including an initial consideration of £28 million payable in cash upon
completion.
Key financial results
Year ended Year ended Change
30.06.2024 30.06.2023
FUM and Revenue
Funds under management ("FUM") £18.0bn £16.8bn 7.0%
Net flows growth rate (3.7)% 5.2% (8.9)ppt
Revenue £128.3m £123.8m 3.6%
Underlying results(1)
Profit before tax £34.1m £30.3m 12.5%
Profit margin before tax 26.6% 24.5% 2.1ppt
Basic earnings per share 163.8p 153.8p 10.0p
Diluted earnings per share 161.0p 151.0p 10.0p
Statutory results
Profit before tax £11.6m £22.2m (47.7)%
Profit margin before tax 9.0% 17.9% (8.9)ppt
Basic earnings per share 40.1p 114.7p (74.6)p
Diluted earnings per share 39.4p 112.6p (73.2)p
Capital
Net cash(2) £44.7m £53.4m (16.3)%
Own Funds adequacy ratio 348.5% 328.1% 20.4ppt
Dividends
Proposed final dividend per share 49.0p 47.0p 4.3%
Total dividend per share 78.0p 75.0p 4.0%
( )
(1)The underlying figures represent the results for the Group's continuing
activities excluding certain adjusting items as listed in the Financial
Review. These represent an alternative performance measure for the Group. A
reconciliation between the Group's statutory and underlying profit before tax
is also included in the Financial Review.
(2)During the year, the Group invested £30 million of surplus cash resources
into UK Gilts which are held on the balance sheet as financial assets held at
amortised cost.
Redefining our Strategy and setting medium-term targets
We plan to reignite growth through a renewed focus on:
1. Delivering excellent client service:
o unlock the full potential of Brooks Macdonald's client-centric culture;
o proactively tailor our service to client needs; and,
o launch differentiated and innovative new products to further drive
business growth.
2. Broadening and deepening our client reach
o take the Group's broad product range to our existing network and build new
connections;
o increase brand awareness; and,
o enhance client data management and analytics to support lead generation.
3. Driving scale and efficiencies:
o build talent and execution capabilities to support delivery of client
service;
o leverage automation across front-office and support teams to increase
productivity; and,
o optimise investment and client reporting processes to improve efficiency.
As a result of this strategy, we announce today the following medium-term
targets:
· 5% annualised net inflows
· underlying cost growth of less than 5% per annum
Successful Execution of M&A strategy
The completion of the following transaction will progress our strategy to
reignite growth and create a simplified wealth management and financial
planning business in the UK:
· Following a strategic review of Brooks Macdonald International
(BMI), the Board concluded that a sale of the business was in the best
interests of the Group. The separately announced sale to Canaccord Genuity
Wealth Management for a total consideration of up to £50.85m which includes
initial consideration of £28 million payable in cash upon completion, with
additional contingent consideration of up to £22.85 million payable on the
second anniversary of completion, subject to meeting certain revenue targets
and secures a highly credible future owner for BMI.
Update on regulatory matters
· Regarding the FCA's review of ongoing advice: the Group undertook a
review of historical data and practices in the second half of the financial
year and consequently, the Board concluded no provision was required.
· Consumer Duty: the Group fully supports the principles of Consumer
Duty and completed its first annual Consumer Duty Board report in the year.
We continue to have a constructive, ongoing dialogue with all of our
regulators and remain committed to delivering excellent outcomes for all of
our clients.
FY25 Guidance and Outlook
The structural growth opportunity in our industry remains highly attractive,
underpinned by demographics, government policy and increasing need for advice.
This, coupled with an improving economic outlook gives us strong confidence in
delivering the strategy we have announced today.
As a result, we anticipate a return to overall positive net flows later in the
financial year. We continue to expect to see the blended revenue yield follow
its established trend as our Platform MPS business continues to grow at pace,
which will drive operational leverage through the business.
The BMI transaction is subject to regulatory approval with anticipated
completion by March 2025 and an impact of c £2m on group underlying profit in
FY25.
As we guided at the half year, H224 interest income was in line with our
guidance at £5m. Following on from that, we expect interest income to be
impacted by further BOE base rate reductions. For FY25, we expect client
interest turn to be c. £7-8m.
We continue to actively manage our costs and drive efficiencies to ensure we
are well-positioned for future growth.
We expect capital expenditure to average £4-5m in FY25.
Conference call and investor presentation details
A video presentation and results presentation slides will be available from
7:00 a.m. today on the Investor Relations section of Brooks Macdonald's
website using the following link:
https://www.brooksmacdonald.com/investor-relations
(https://www.brooksmacdonald.com/investor-relations)
There will be a Q&A session for analysts and investors at 9:30 a.m. today
via conference call.
For details please contact FTI Consulting on +44 (0) 07976 870961 or
brooksmacdonald@fticonsulting.com (mailto:brooksmacdonald@fticonsulting.com)
Enquiries to:
Brooks Macdonald Group plc www.brooksmacdonald.com
Andrea Montague, CEO Designate and CFO Andrea.Montague@brooksmacdonald.com
Singer Capital Markets (Nominated Adviser and Broker) +44 (0) 20 7496 3000
Charles Leigh-Pemberton / James Moat
Investec Bank (Joint Broker) +44 (0) 20 7597 5970
Christopher Baird / David Anderson
FTI Consulting brooksmacdonald@fticonsulting.com (mailto:brooksmacdonald@fticonsulting.com)
Edward Berry/Katherine Bell 07703 330199/07976870961
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries, provides leading
wealth 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 £18.0 billion as at 30 June 2024.
Brooks Macdonald offers outsourced discretionary investment management for
intermediaries and advice-led integrated wealth management for private
clients. The Group also acts as fund manager to a range of onshore and
international funds.
The Group has a strong local presence across the UK and Crown Dependencies.
The information contained within this announcement was previously deemed by
the Company to constitute inside information as stipulated by Market Abuse
Regulation (EU) No 596/2014 ("EU MAR") and the retained UK law version of EU
MAR pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2019 (SI
2019/310) ("UK MAR"). With the publication of this announcement via a
Regulatory Information Service, this information is now considered to be in
the public domain. For the purposes of UK MAR, the person responsible for
arranging for the release of this information on behalf of Brooks Macdonald is
Company Secretary Phil Naylor.
Forward-looking statements
This announcement may include statements, beliefs or opinions that are, or may
be deemed to be, "forward-looking statements". These forward-looking
statements may be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "plans", "projects",
"anticipates", "targets", "aims", "continues", "expects", "intends", "hopes",
"may", "will", "would", "could" or "should" or, in each case, their negative
or other variations or comparable terminology, or by discussions of strategy,
plans, objectives, goals, future events or intentions. No representation or
warranty is made that any of these statements or forecasts will come to pass
or that any forecast results will be achieved. Forward-looking statements may
and often do differ materially from actual results. Any forward-looking
statements contained in the announcement speak only as of their respective
dates, reflect Brooks Macdonald's current view with respect to future events
and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to Brooks Macdonald's business, results
of operations, financial position, liquidity, prospects, growth and
strategies.
Except as required by any applicable law or regulation, Brooks Macdonald
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained in this
announcement or any other forward-looking statements it may make whether as a
result of new information, future developments or otherwise.
LEI: 213800WRDF8LB8MIEX37
www.brooksmacdonald.com (http://www.brooksmacdonald.com) / @BrooksMacdonald
Chair's statement
Focus on reigniting growth
I am delighted to present my first Annual Report as your new chair. I have
spent recent months getting to know Brooks Macdonald and I have great first
impressions. In particular, our client-centric culture - the service and
commitment we provide to clients and advisers is exemplary, together with the
strength of our relationships and the calibre of our people. I have also met
shareholders, corporate advisers and competitors, and have gained a good
understanding of Brooks Macdonald, and it's position in the UK wealth market.
Brooks Macdonald is an excellent business that serves a critical need for
individual saving and investment. The structural opportunity for our industry
remains strong and we are well positioned to help clients navigate all market
conditions. We will continue to focus on delivering consistently good
investment returns for our clients and partners.
The Group delivered good financial results in the year to 30 June 2024.
Underlying PBT increased by 12.5% to £34.1m, with our results reflecting the
resilience of our business model and the added value of the services we
provide. The financial review in this Annual Report contains detailed
information on our performance.
Since our financial year end, the Bank of England ("BOE") has cut the interest
base rate for the first time since the aggressive hikes that started late 2021
to stave off soaring inflation. As macroeconomic conditions stabilise, we are
confident that our business is well positioned to benefit, with clients being
more likely to commit funds for long-term investment. As a Board, we are
focused on implementing our strategy and achieving the goals we have set for
the Group.
Enhancing our strategy
We have set out our strategy to reignite growth with a renewed focus on:
• Delivering excellent client service
• Broadening and deepening client reach
• Driving scale and efficiencies
By focusing on these growth levers, which include enhancing our technology,
scaling our products and being more data-led, and by carrying out targeted
M&A (using strict criteria) we are confident that we will achieve the new
medium-term targets that we have set. We recognise that we need to improve our
flows, to attract new clients and to retain existing clients, and are
committing to a medium-term target of 5% net inflows per annum. However, we
also recognise the importance of doing this efficiently and will limit
underlying cost growth to less than 5% per annum.
Our tailored distribution, to advisers and direct to clients, and our broad
proposition set that meets clients' needs throughout their entire investment
lifecycle give us an excellent base from which to grow. With an enhanced focus
on our refined strategy, I look forward to seeing BM delivering enhanced
returns for all our stakeholders.
Dividend
The Board has recommended a final dividend of 49.0p (FY23: 47.0p), which,
subject to approval by shareholders, will result in total dividends for the
year of 78.0p (FY23: 75.0p). This represents an increase of 4.0% in the total
dividend on the previous year and underlines the Board's confidence in the
prospects for the Group. The final dividend will be paid on 1 November 2024 to
shareholders on the register at the close of business on 20 September 2024.
We have increased our dividend each year for 19 years, demonstrating the
capital strength of our business through the cycle and our commitment to
shareholder returns.
Governance
In March 2024, following a nine-year term on the Board, Richard Price stepped
down after various positions including Chair of the Audit Committee, Senior
Independent Director and Acting Chair. I would like to thank Richard for the
significant contribution he made to Brooks Macdonald and for leaving the Group
in a strong position.
In June this year, we announced that CEO, Andrew Shepherd will be retiring
after 22 years with the Group. From 1 October 2024, our Chief Financial
Officer, Andrea Montague, will be appointed as CEO, subject to regulatory
approval. Andrea has been working closely with Andrew since this announcement
and has been in position as CEO Designate since 1 July 2024. I am confident of
a smooth handover and that Andrea's demonstrated experience, pace and
leadership stand her in excellent stead to deliver our ambitious growth plans.
I would like to take this opportunity to reiterate the gratitude of the Group
to Andrew for the immense contribution he has made to Brooks Macdonald during
his tenure as CEO and for the many years before. He has shown extraordinary
dedication and commitment to the Group. We will miss 'Shep' and wish him all
the best in the future.
Culture and colleagues
Our people are our greatest strength and we are focused on developing them to
be the best they can be. Throughout the year, we have evolved our People
strategy to increase leadership and management capability, to drive high
performance and to improve the employee experience. Each of these is
underpinned by our 'Inclusive by Design' strategy which challenges us to
ensure we adopt an inclusive approach to everything that we do, in turn
fostering a culture that inspires motivation and engagement from our
workforce.
In July this year, we conducted a 'Speak-up' employee engagement survey and
had a participation rate of 79%. We saw improved scores in Performance
Management and Fulfilling Careers with employees commenting positively on our
culture of continuous improvement. Based on this survey, we provide each
business area with a report to enable managers to address specific needs of
their teams. The Board and the Executive leadership team will ensure that we
make Brooks Macdonald an even better place to work by implementing changes
suggested by our people.
Looking ahead
Demographics in the form of an ageing population continue to underpin the
strategic opportunity for Brooks Macdonald. With an ambitious new government
in place we must hope that dis-incentivising pension savings does not become a
new source of funding for the various state spending plans. The high inflation
stress seems to be behind us and a first BOE base rate reduction bodes well
for the clients of wealth managers. The bank of mum and dad alongside the
temptation of debt reduction has been and remains tough competition for wealth
managers, but with further rate cuts on the horizon, prospects are looking up
for long-term investment strategies as offered by Brooks Macdonald. Under
Andrea's leadership our redefined strategy, coupled with a strong balance
sheet and robust cash generation will ensure we continue to be well positioned
for the future. Finally I would like thank our shareholders for their
continued support, our colleagues for their hard work and our clients and
partners for their business and trust in our organisation.
Maarten Slendebroek
Chair
11 September 2024
CEO's review
As I present my final review as CEO of Brooks Macdonald, I reflect on the
immense pride I have felt in holding this position. Brooks Macdonald is a
great business that delivers excellent outcomes for our clients across their
entire investment lifecycle. By generating consistently strong investment
returns to support their long-term financial goals, we provide them with
increased certainty and reassurance over their financial futures, regardless
of the economic backdrop.
Throughout my tenure as CEO, we have remained focused on our Purpose of
realising ambitions and securing futures, which means we keep our clients at
the forefront of our minds, whilst also providing for all our stakeholders -
employees, intermediaries and shareholders.
This year has been no different. Clients have benefitted from the close
relationships with our investment managers and financial planners which is
even more important when markets are challenging, and have further benefitted
from strong returns from our rigorous investment process.
Financial performance
For much of our financial year, inflation remained high, together with
persistently high interest rates. Clients remained under pressure in terms of
higher costs of living and continued to be encouraged to pay down increasingly
expensive debt. These factors impacted our industry and our Group, where we
saw net outflows of £616 million, largely in our Bespoke and Funds products.
MPS continued to be a driver of growth with net inflows of £388 million,
reflecting the trend for MPS as a solution of choice for accumulation.
Gross inflows across our propositions were strong throughout the year, with
£2.3 billion gross inflows at the Group level and we ended the year with the
best-performing quarter. Platform MPS gross inflows contributed approximately
half of these flows. Although outflows were stubbornly high, we saw signs of
improvement in the fourth quarter. Given our internal efforts on client
retention, combined with a more stable economic outlook, we are confident that
outflows will decrease.
We had a year of good financial performance in FY24, with underlying profit
before tax increased to £34.1 million (FY23: £30.3 million). The underlying
profit margin increased by 2.1 percentage points to 26.6% as we implemented
cost efficiencies and benefited from increased interest and transactional
income. Statutory profit before tax fell to £11.6 million from £22.2
million, primarily due to the impairment of the International goodwill balance
announced in our half-year results.
Our year-end closing FUM was a record £18.0 billion, up 7% in the year, with
investment performance of £1.8 billion more than offsetting the impact of net
outflows.
Investment performance and market conditions
Our aggregate investment performance across all our risk profiles for the year
was 10.7%. These strong returns have been generated through our robust
Centralised Investment Proposition where we have constructed portfolios with a
balanced approach utilising multiple asset classes and investment vehicles
against a backdrop that has seen headline index returns dominated by a
focussed set of large and mega cap stocks.
During the second half of the year, we saw an improvement for UK companies
benefitting from better sentiment, signs of political stability and economic
improvement. Our clients continued to benefit from our rigorous investment
process, which provides diversified portfolios for their long-term investment
horizons. Our investment strategies outperformed their relevant ARC peer group
indices for the year and maintained strong results over the 10-year period.
Looking ahead, we are encouraged by the recent falls in inflation and
anticipate interest rate cuts across Western economies that should be
supportive of asset prices. Additionally, the change in government in the UK
is seen to encourage international asset allocators to review exposure to the
region.
We are retaining our slight overweight position to equity markets but
maintaining our balance between value and growth investment styles as we
recognise diversification as critical in the current uncertain outlook.
Review of business performance
UK Investment Management
Across UK Investment Management ("UKIM"), our people have once again worked
incredibly hard to provide exceptional levels of support to their clients and
intermediaries resulting in strong gross inflows of £2.0 billion in the year.
The Platform Managed Portfolio Service ("PMPS") was the strongest performer,
achieving net inflows of approximately £330 million for the year. This
reflects both the robust current and potential growth of this product at
Brooks Macdonald and within the broader industry.
BM Investment Solutions ("BMIS"), our business-to-business offering,
collaborates with adviser firms to provide tailored services aligned to their
objectives. Once again, BMIS demonstrated good performance, achieving net
inflows of approximately £140 million.
In our Bespoke Portfolio Service ("BPS") product, UKIM has experienced
significant growth in our specialist offerings - Responsible Investing
Service, Decumulation, and Court of Protection, and especially with our Gilts
product which was introduced to meet client demand for their portfolios to
take advantage of higher interest rates whilst avoiding equity risk. However,
beyond these specialist offerings, BPS saw net outflows due to a broader
market trend, compounded by the impact of higher interest rates and
macroeconomic uncertainty.
Despite our funds business facing challenges this year, with net outflows
similar to much of the sector, we remain optimistic about the potential for
growth in our multi-asset funds. We are confident in the actions we have
already taken to drive medium-term growth and are actively reviewing
additional steps to further strengthen our position.
International
In our interim results in March 2024, we announced a strategic review of the
International business following performance that had been behind plan. I
would like to thank the International team for their unwavering commitment
during this time. We conducted a thorough review aimed at determining how to
maximise value from the business. It has been concluded that the sale of the
International business is in the best interests of the Group as it simplifies
the Group's operations to focus on its core activities of high-quality
investment management and financial planning within the UK.
Distribution
We operate in a significant and growing market and have traditionally
leveraged our relationships with advisers to distribute our products. In
recent years we have recognised the growing opportunity in distributing direct
to clients, especially where we have a financial planning relationship. As at
30 June 2024, the Group had £5.3 billion Funds under Management or Advice
("FUM/A") with private clients who deal with the Group directly. £4.5 billion
related to portfolios in the Group's investment management and £0.8 billion
to portfolios with third-party investment managers.
We made two senior appointments to newly created roles in the year to reflect
this targeted distribution with Alex Charalambous joining the Group as Head of
Wealth and, since year end, Greg Mullins joining as Head of Adviser Solutions.
Alex is leading the Group's advice-led integrated wealth management offering
for private clients and Greg will focus on delivering exceptional service to
the adviser community, both supporting our ambitious growth plan.
Investing in our people
Our commitment to a strong people agenda has been unwavering, and our
client-centric culture continues to be one of our most valuable assets. This
year, we have deepened our investment in our people, bringing in talented new
hires and enhancing our team's capabilities. We have made significant strides
in our people strategy by advancing management training programmes, expanding
professional development opportunities, and refining our performance
management approach. These efforts are complemented by regular employee
feedback, which we use to continuously improve our processes and ensure they
align with the needs of our people.
Leadership transitions are a critical moment in any organisation, and in June
2024, I announced my resignation alongside the Board's decision to appoint
Andrea Montague as our new CEO, effective 1 October 2024, subject to
regulatory approval.
As Chief Financial Officer since August 2023, Andrea has been a vital member
of our leadership team. Her drive to redefine our strategy to reignite growth
puts Brooks Macdonald in excellent hands and in a strong position for the
future.
This financial year, we also undertook necessary organisational changes to
ensure the Group's long-term competitiveness. These changes, which included a
reduction in roles by approximately 10%, were difficult but necessary to align
our resources with our strategic objectives. The resulting cost savings of
approximately £4 million per annum have strengthened our commercial position
and enhanced our ability to compete effectively in the market.
Employee wellbeing remains at the forefront of our agenda, particularly during
times of change. We continue to support our people through various
initiatives, including enhanced employee assistance programmes, mental health
support, and professional development opportunities. Our goal is to foster an
environment where every employee can thrive, both personally and
professionally.
Andrew Shepherd
CEO
11 September 2024
Our strategy
Brooks Macdonald has redefined its strategy to take advantage of the growth
opportunities in the UK wealth management sector. We have strong foundations
in place and we continue to make substantial progress. Although persistently
high interest rates have made the short term difficult, the longer-term
outlook for the business is excellent.
Reigniting growth
Brooks Macdonald was founded to give clients wealth management driven by
purpose and principles, and that remains as true as ever.
We have multiple stakeholders - clients always come first, and if we look
after our clients, our employees, and our intermediaries, then our
shareholders will get the returns they seek. For all of them, the reason
Brooks Macdonald is here is to help them realise their ambitions and secure
their futures.
We work every day to protect and enhance our clients' wealth through
high-quality investment management and financial planning, underpinned by
exceptional client service.
We are dedicated to the highest professional standards, inspired by our
guiding principles: we do the right thing, we are connected, we care, and we
make a difference. We are proud of the powerful blend of talented people we
have in Brooks Macdonald, and together we are confident and ambitious in what
we can achieve and the difference we can make for our clients.
Focused distribution
We have aligned our business around our two key distribution channels -
financial advisers and private clients. Our proposition is different in the
two channels - outsourced discretionary investment management for advisers, in
our Adviser Solutions unit, and integrated wealth management for private
clients in our Wealth team. Aligning the organisation to the needs of the
different propositions is helping make us more effective and efficient in
serving our clients and advisers.
Strategic priorities
Our strategy is grounded in three key areas, each with a number of principal
initiatives for 2025.
1. Delivering excellent client service
We aim to unlock the full potential of Brooks Macdonald's client-centric
culture, proactively tailor our service to client needs and launch
differentiated and innovative new products to further drive business growth.
2. Broadening and deepening our client reach
We will focus on taking the Group's broad product range to our existing
network and new connections, increase brand awareness and, enhance client data
analytics to support lead generation.
3. Driving scale and efficiencies
We will focus on building talent and execution capabilities to support
delivery of client service, leverage automation across the front-office and
support teams to increase productivity and optimise investment and client
reporting processes to improve efficiency.
Strategic progress in FY24
Following Consumer Duty 'go live' in July, we updated our Target Market Guide
and published it on our website.
We continued to make incremental improvements to our client and adviser portal
InvestBM.
We continued to align the advice process across our financial planning teams.
Gross inflows held up well in FY24 at 13.8%, despite persistent higher
interest rates weakening investor sentiment.
Our Platform MPS product had net flows of c.13%.
We have continued to see positive net flows (c.22%) and FUM growth (27%) in
our specialist BPS products, including Decumulation, Responsible Investment
and Gilts.
We rebuilt our marketing function to align to the new distribution channel
focus and to deliver high-quality marketing support to our distribution and
front office teams.
We upgraded our capabilities with selective external hires in key functional
areas, including Finance, HR, Risk and Compliance.
We experimented with generative AI to bring greater efficiency to internal
processes and to build our understanding of what the technology can deliver.
Financial review
Review of results for the year
The Group delivered a good set of results for FY24, seeing growth in revenue
and an improvement in underlying profit and underlying profit margin on the
prior year.
The Group recorded net outflows in the year of £0.6 billion as a result of
the challenging macroeconomic environment and the impact of higher interest
rates prevailing during the year. These were offset by positive investment
performance of £1.8 billion, leading to a record closing FUM of £18.0
billion at 30 June 2024 (£16.8 billion at 30 June 2023).
Revenue increased by 3.6% on the prior year to £128.3 million, and underlying
profit was up 12.5% to £34.1 million, resulting in an underlying profit
margin of 26.6% (FY23: 24.5%).
On a statutory basis, profit before tax was £11.6 million, down 47.7% from
the prior year as a result of the previously communicated goodwill impairment
charge recognised at 31 December 2023 of £11.6 million in relation to the
International business.
Refer to the reconciliation between underlying and statutory profits section
for details on the statutory adjustments, including the goodwill impairment.
Group financial results summary
Table 1 shows the Group's financial performance for the year ended 30 June
2024 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 for a glossary of the Group's
APMs, their definition, and the criteria for how underlying adjustments are
considered.
Table 1 - Group financial results summary
FY24 FY23 Change
£m
£m
Revenue 128.3 123.8 3.6%
Fixed staff costs (45.8) (45.2) 1.3%
Variable staff costs (12.8) (10.9) 17.4%
Total staff costs (58.6) (56.1) 4.5%
Non-staff costs (38.0) (37.8) 0.5%
FSCS levy (0.5) (0.5) -
Total non-staff costs (38.5) (38.3) 0.5%
Net finance income 2.9 0.9 222.2%
Total underlying costs (94.2) (93.5) 0.7%
Underlying profit before tax 34.1 30.3 12.5%
Underlying adjustments (22.5) (8.1) 177.8%
Statutory profit before tax 11.6 22.2 (47.7)%
Taxation (5.2) (4.1) 26.8%
Statutory profit after tax 6.4 18.1 (64.6)%
Underlying profit margin before tax 26.6% 24.5% 2.1ppts
Underlying basic earnings per share 163.8p 153.8p 10.0p
Underlying diluted earnings per share 161.0p 151.0p 10.0p
Statutory profit margin before tax 9.0% 17.9% (8.9)ppts
Statutory basic earnings per share 40.1p 114.7p (74.6)p
Statutory diluted earnings per share 39.4p 112.6p (73.2)p
Own Funds adequacy ratio 348.5% 328.1% 20.4ppts
Dividends per share 78.0p 75.0p 4.0%
FUM movement in the year
The table below shows the opening and closing FUM position and the flows for
the year broken down by segment and by the key services within UK Investment
Management ("UKIM").
Table 2 - Movements in funds under management
Year ended 30 June 2024 (£m)
Opening Organic net new business Total inv. perf. Total organic net new business Total
mvmt
Closing
FUM Q1 Q2 Q3 Q4 Total FUM
1 Jul 23
30 Jun 24
BPS 8,527 (98) (94) (205) (158) (555) 908 8,880 (6.5)% 4.1%
MPS Custody 966 (14) (21) (20) (25) (80) 88 974 (8.3)% 0.8%
MPS Platform 3,489 147 121 65 135 468 410 4,367 13.4% 25.2%
MPS total 4,455 133 100 45 110 388 498 5,341 8.7% 19.9%
UKIM discretionary 12,982 35 6 (160) (48) (167) 1,406 14,221 (1.3)% 9.5%
Funds 1,708 (78) (71) (112) (76) (337) 174 1,545 (19.7)% (9.5)%
UKIM total 14,690 (43) (65) (272) (124) (504) 1,580 15,766 (3.4)% 7.3%
International 2,157 (27) (33) (22) (30) (112) 217 2,262 (5.2)% 4.9%
Total 16,847 (70) (98) (294) (154) (616) 1,797 18,028 (3.7)% 7.0%
Total investment performance 10.7%
( )
FUM increased by £1.2 billion or 7.0% during the year, to £18.0 billion at
30 June 2024 (30 June 2023: £16.8 billion). The Group's broad product
offering and continued focus on serving clients in a changing economic
environment has resulted in robust gross inflows of £2.3 billion for the
year, however, gross outflows were elevated driven by the prevailing backdrop
of market volatility and higher interest rates continuing to affect client
behaviour, resulting in net outflows for the period of £0.6 billion.
Investment performance for the year added £1.8 billion to the closing FUM,
representing an increase of 10.7%. Performance in absolute terms over the
10-year period, across all our risk profiles, is very strong delivering a
range of +30% (for low risk) through to +97% for our highest risk strategy
(all net of fees).
The last 12 months to the end of June 2024 has seen this outperformance
compared to peers cemented. All 5 risk profiles have delivered outstanding
absolute returns for clients and outperformed the ARC Private client index
series.
BPS experienced net outflows of £0.6 billion or 4.1% during the year, as
clients withdrew funds to repay debt or to hold higher cash balances. The
gilts offering launched at the end of the last financial year within the BPS
product range saw strong demand, enabling clients to take advantage of higher
interest rates whilst avoiding equity risk. Our Decumulation specialised
product, offering a solution to meet clients' income requirements by shielding
their portfolio from downturn in the early years of withdrawal, grew by 6.3%
in the year.
Platform MPS, including the Group's B2B offering for financial advisers, BM
Investment Solutions ("BMIS"), grew to £4.4 billion, an increase of 25.2%,
with organic net flows contributing 13.4%.
Funds saw net outflows during the period, driven by the wider market
conditions and in line with the trend observed across the sector.
International FUM grew moderately by 4.9% over the period with net outflows of
£0.1 billion, offset by investment performance.
Revenue
Table 3 - Breakdown of the Group's total revenue
FY24 FY23 Change
£m
£m
%
Fee income 92.1 91.5 0.7%
Transactional and FX income 15.3 13.3 15.0%
Financial planning income 8.2 6.6 24.2%
Interest income 12.7 12.4 2.4%
Total revenue 128.3 123.8 3.6%
The Group's revenue for FY24 increased by 3.6% from £123.8 million to £128.3
million. Fee income was slightly up on last year to £92.1 million, driven by
a combination of the impact from flows, product mix, and investment
performance.
Transactional and FX income increased by 15.0% on the prior year due to higher
trading volumes in the year and the impact of asset allocation strategies in
response to the volatile market during the year.
Financial planning fees totalled £8.2 million in FY24, with an additional
£1.8 million of revenue recognised in the current year from the full period
impact of the Integrity Wealth Solutions Limited and Adroit Financial Planning
Limited businesses acquired in FY23.
Interest income, net of increasing amounts paid out to clients on cash
holdings, was up by £0.3 million to £12.7 million in the current year as a
result of the continued rise in the Bank of England base rates during the
year.
Table 4 - Revenue, average FUM and yields
Revenue Average FUM Yield
FY24 FY23 Change FY24 FY23 Change FY24 FY23 Change
£m
£m
£m
£m
£m
%
bps
bps
bps
BPS fees 54.4 54.2 0.2 8,579 8,318 3.1 63.5 65.1 (1.6)
BPS non-fees (transactional income and FX fees) 12.2 10.4 1.8 - - - 14.2 12.5 1.7
BPS non-fees (interest income) 10.2 9.7 0.5 - - - 11.9 11.7 0.2
Total BPS 76.8 74.3 2.5 8,579 8,318 3.1 89.6 89.3 0.3
MPS Custody 5.8 5.7 0.1 972 967 0.5 59.2 59.1 0.1
MPS Platform 7.1 5.2 1.9 3,892 2,750 41.5 18.2 18.8 (0.6)
MPS non-fees (interest income) 1.2 1.1 0.1 - - - 11.9 11.7 0.2
Total MPS 14.1 12.0 2.1 4,864 3,717 30.9 29.0 32.3 (3.3)
UKIM discretionary 90.9 86.3 4.6 13,443 12,035 11.7 67.6 71.7 (4.1)
Funds 8.4 9.6 (1.2) 1,769 1,997 (11.4) 47.7 48.3 (0.6)
Total UKIM 99.3 95.9 3.4 15,212 14,032 8.4 65.3 68.4 (3.1)
International fees 15.6 16.1 (0.5) 2,215 2,198 0.8 70.4 73.3 (2.9)
International non-fees (transactional income and FX fees) 2.9 2.6 0.3 - - - 13.2 11.7 1.5
International non-fees (interest income) 1.4 1.6 (0.2) - - - 6.2 7.2 (1.0)
Total International 19.9 20.3 (0.4) 2,215 2,198 0.8 89.8 92.2 (2.4)
Total FUM-related revenue 119.2 116.2 3.0 17,427 16,230 7.4 68.4 71.6 (3.2)
Financial planning income 8.2 6.6 1.6
Other income 0.9 1.0 (0.1)
Total non-FUM-related revenue 9.1 7.6 1.5
Total Group revenue 128.3 123.8 4.5
The Group's overall yield decreased by 3.2bps or 4.5% compared to the prior
year. This was driven by a number of factors across the products set out
below.
The yield on BPS fees for UKIM decreased by 1.6bps to 63.5bps during the year
(FY23: 65.1bps), driven by the impact of flows, the underlying product mix and
rates achieved on new business.
The BPS non-fee transactional and FX income yield increased by 1.7bps in the
year, as a result of higher trading volumes. The yield on interest income was
up 0.2bps, due to the increase of the Bank of England base rate in Q1, offset
by higher amounts paid to clients.
The MPS Custody yield of 59.2bps continued to remain stable on FY23, whereas
the yield on MPS Platform fell slightly by 0.6bps to 18.2bps due to the impact
of product mix as Platform MPS includes our BM Investment Solutions offering
that attracts relatively larger mandates and benefits from discounted tiered
rates. Additionally, we saw growth in our passive Platform MPS offering during
the year, which attract lower yields. This has resulted in the overall MPS
yield decreasing from 32.3bps to 29.0bps in the year.
The UK Funds fee yields reduced by 0.6bps to 47.7bps during the year,
primarily driven by the impact and timing of flows during the year.
International fee income yield reduced by 2.9bps to 70.4bps during FY24,
driven by a change in product mix and the impact of flows. International
non-fees transactional and FX income increased by 1.5bps, whilst interest
income yield reduced by 1.0bp due to the impact of cash balances denominated
in foreign currencies. This has resulted in the overall International yield
decreasing from 92.2bps to 89.8bps during the year.
Underlying costs
Total underlying costs were broadly flat on last year, increasing marginally
by 0.7% to £94.2 million in FY24 (FY23: £93.5 million). Excluding the
full-year impact of the Integrity and Adroit businesses acquired part way
through the prior year, underlying costs reduced by £0.4 million.
Staff costs
Total staff costs increased by £2.5 million to £58.6 million. Of this, £1.4
million was driven by the full-year impact of the two acquired businesses last
year. Excluding acquired costs, staff costs increased by £1.1 million, from
£54.5 million to £55.6 million.
Excluding the full-year impact of acquisitions, fixed staff costs decreased by
£0.3 million. This was contributed by the organisational restructure the
Group carried out in October 2023 where opportunities to streamline and remove
duplication from core processes were identified with roles being made
redundant as a result. This saving was offset by inflationary pay rises, the
impact of net joiners and further investment in staff training and
development.
Variable staff costs increased from £10.9 million to £12.8 million driven by
the increase in pre-variable pay profit. Within this, the share-based payments
charge was down £0.3 million on the prior year due to lapses recognised in
FY24 as a result of leavers, and a reduction in the Group's share price
impacting the associated employer national insurance contributions.
Non-staff costs
Non-staff costs amounted to £38.5 million, broadly flat on last year, a
reflection of management's continued cost discipline. The Group continued to
incur generic inflationary increases on the cost base, in addition to an
increase in legal and professional fees to assist with the review of the
Group's targeted operating model and potential M&A opportunities.
Net finance income
The Group's net finance income increased from £0.9 million to £2.9 million
in FY24 as the Group attracted higher interest rates on its corporate cash
balances.
Profit before tax
Combined, the above gave rise to an underlying profit before tax for the year
of £34.1 million, an increase of 12.5% on the prior year (FY23: £30.3
million) and resulting in a profit margin of 26.6%, up by 2.1 points on last
year's margin of 24.5%.
The Group's statutory profit before tax was £11.6 million, a reduction from
last year (FY23: £22.2 million), contributed by the impairment charge
recognised at 31 December 2023 in relation to the goodwill held in respect of
the International business.
Segmental analysis
For FY24, the Group continued to report its results across two key operating
segments, UK Investment Management and International.
The tables below provide a breakdown of the full-year performance broken down
by these segments, with comparatives.
UKIM, which includes the Group's Private Clients business, increased its
revenue by 4.7%, driven by higher financial planning revenue of £1.7 million
as a result of the full period impact of the acquisitions, along with £2.2
million additional Investment Management fees and £1.8 million additional
transactional income. These uplifts were offset by a decline in Fund
Management fees. Total underlying costs increased by 8.6% as a result of the
factors outlined previously, including the full-period impact of the
acquisitions. This gave rise to an underlying profit for FY24 of £33.5
million (FY23: £34.5 million) and an underlying profit margin of 30.9% (FY23:
33.3%).
The International segment reported reduced revenues of £19.9 million, down
2.0% from the prior year, with reductions in Investment Management fees, Fund
Management fees and Interest income, slightly offset by increases in
Transactional and foreign exchange fees. The total International cost base
reduced by 16.2%, as a result of the organisational restructure and cost
discipline. This resulted in underlying profit increasing from £0.1 million
to £3.3 million this year, and an underlying profit margin of 16.6% (FY23:
0.5%).
Table 5 - Segmental analysis
FY24 (£m) UK Investment Management International Group and consolidation Total
adjustments
Revenue 108.4 19.9 - 128.3
Direct costs (47.9) (11.1) (38.1) (97.1)
Operating contribution 60.5 8.8 (38.1) 31.2
Indirect cost recharges (28.7) (6.0) 34.7 -
Net finance income 1.7 0.5 0.7 2.9
Underlying profit/(loss) before tax 33.5 3.3 (2.7) 34.1
Underlying adjustments (5.3) (3.6) (13.6) (22.5)
Statutory profit/(loss) before tax 28.2 (0.3) (16.3) 11.6
Underlying profit margin before tax 30.9% 16.6% N/A 26.6%
Statutory profit/(loss) margin before tax 26.0% (1.5)% N/A 9.0%
FY23 (£m) UK Investment Management International Group and consolidation Total
adjustments
Revenue 103.5 20.3 - 123.8
Direct costs (47.4) (13.6) (33.4) (94.4)
Operating contribution 56.1 6.7 (33.4) 29.4
Indirect cost recharges (22.1) (6.8) 28.9 -
Net finance income 0.5 0.2 0.2 0.9
Underlying profit/(loss) before tax 34.5 0.1 (4.3) 30.3
Underlying adjustments (4.8) (3.0) (0.3) (8.1)
Statutory profit/(loss) before tax 29.7 (2.9) (4.6) 22.2
Underlying profit margin before tax 33.3% 0.5% N/A 24.5%
Statutory profit/(loss) margin before tax 28.7% (14.3)% N/A 17.9%
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 compared to the statutory results as it
excludes income and expense categories, which are deemed to be of a
non-recurring nature or a non-cash operating item. Reporting at an underlying
basis is also considered appropriate for external analyst coverage. Underlying
profit is deemed to be an alternative performance measure ("APM"); (refer to
the Non-IFRS financial information section 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 year ended 30 June 2024 with comparatives is shown in the table
below:
Table 6 - Reconciliation between underlying profit and statutory profit before
tax
FY24 FY23
£m
£m
Underlying profit before tax 34.1 30.3
Goodwill impairment (11.6) -
Amortisation of client relationships (6.0) (5.7)
Organisational restructure (3.0) -
International strategic review (1.5) -
Acquisition and integration-related costs (0.4) (0.6)
Dual running operating platform costs - (1.6)
Changes in fair value and finance cost of deferred contingent consideration - (0.2)
Total underlying adjustments (22.5) (8.1)
Statutory profit before tax 11.6 22.2
Goodwill impairment (£11.6 million)
Goodwill is reviewed for impairment indicators at each reporting period, and
if indicators are present, an impairment test is carried out based on the
carrying value of the asset compared to its expected recoverable amount. The
review of our International business at 31 December 2023 indicated that the
estimated recoverable amount arising from future cash flows, was less than the
carrying value of the goodwill held on the Group's Consolidated statement of
financial position that was recognised upon the acquisition of the business in
2012. The goodwill impairment charge has been excluded from underlying profit
in view of its non-recurring nature, and the fact that it does not impact cash
or regulatory capital. The annual impairment review at 30 June 2024 was also
carried out and the remaining goodwill balance was fully supported. (Refer to
Note 9 in the Notes to the consolidated financial statements for more
details).
Amortisation of client relationship contracts (£6.0 million)
These intangible assets are created in the course of acquiring funds under
management and financial advice portfolios, which are amortised over their
useful life, which have been assessed to range between 6 and 20 years. This
amortisation charge has been excluded from the underlying profit since it is a
significant non-cash item. (Refer to Note 9 in the Notes to the consolidated
financial statements for more details).
Organisational restructure (£3.0 million)
The Group carried out an organisational restructure in December 2023 to ensure
it is set up for future success. The Group identified opportunities to
streamline and remove duplication from core processes, resulting in redundancy
and associated third-party consultancy costs. These have been excluded from
underlying earnings in view of their one-off nature.
International strategic review (£1.5 million)
As announced as part of the Group's half-year results in March 2024, the Group
is carrying out a strategic review of the International business as a result
of its performance falling behind plan. The costs incurred relate to
third-party consultancy spend to assist with the review and have been excluded
from underlying earnings in view of their non-recurring nature.
Acquisition and integration-related costs (£0.4 million)
These represent the share-based payment integration charge for share options
awarded to acquired employees as part of acquisitions in the prior period. In
the prior year, costs were incurred in relation to the acquisitions of
Integrity Wealth Solutions on 31 October 2022 and Adroit Financial Planning on
15 December 2022, in addition to the share-based payment integration charges.
FY23 - Dual running operating platform costs (£1.6 million)
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. As part of the transition process in
the prior year, the Group incurred net incremental costs in running two
operating platforms concurrently. The dual running costs were excluded from
underlying profit in view of their non-recurring nature.
FY23 - Changes in fair value and finance cost of deferred contingent
consideration (£0.2 million)
This comprises the associated net finance costs arising on deferred contingent
consideration payments from acquisitions carried out by the Group, together
with their fair value measurements, where applicable.
Reconciliation between profits and earnings before interest, tax, depreciation
and amortisation ("EBITDA")
The tables below provide reconciliations between the Group's underlying and
statutory profit before tax and the underlying and statutory earnings before
interest, tax, depreciation and amortisation ("EBITDA"), which constitutes an
APM, and which the Board considers to be an appropriate alternative measure to
the Group's BAU performance.
Table 7 - Underlying EBITDA reconciliation
FY24 FY23 Change
£m
£m
%
Underlying profit before tax 34.1 30.3 12.5%
Add back:
Net finance income (2.9) (0.9) 222.2%
Depreciation and amortisation 4.6 3.8 21.1%
Underlying EBITDA 35.8 33.2 7.8%
Table 8 - EBITDA reconciliation
FY24 FY23 Change
£m
£m
%
Statutory profit before tax 11.6 22.2 (47.7)%
Add back:
Net finance income (2.9) (0.8) 262.5%
Depreciation and amortisation 10.6 9.5 11.6%
Goodwill impairment 11.6 - N/A
EBITDA 30.9 30.9 -
Taxation
The Group's total tax charge for the year was £5.2 million, representing an
increase of 26.8% from last year (FY23: £4.1 million). The Group's underlying
effective tax rate has increased from 19.7% to 22.7% and the statutory
effective tax rate increased from 18.4% to 44.4%. This has been contributed to
by the goodwill impairment not deductible for tax purposes, the increased CT
rate in the current year and under provision from prior period tax charges.
(Details on taxation are provided in Note 6 in the Notes to the consolidated
financial statements).
Earnings per share
Basic statutory earnings per share for the Group in FY24 was 40.1p (FY23:
114.7p), reducing as a result of the goodwill impairment charge. On an
underlying basis, basic earnings per share was 163.8p representing an increase
of 6.5% on the prior year (FY23: 153.8p) driven by the increase in underlying
earnings. (Details on the basic and diluted earnings per share are provided in
Note 7 in the Notes to the consolidated financial statements).
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 proposed a final dividend of
49.0p per share (FY23: 47.0p).
Including the interim dividend of 29.0p per share (FY23: 28.0p), this results
in a total dividend for the year of 78.0p per share (FY23: 75.0p), which is an
overall increase of 3.0p or 4.0%. (Refer to Note 8 in the Notes to the
consolidated financial statements for more details).
The recommended dividend is subject to shareholders' approval, which will be
sought at the Company's Annual General Meeting on 24 October 2024.
Financial position and regulatory capital
Net assets were £152.3 million at 30 June 2024 (FY23: £157.3 million),
demonstrating the Group's robust financial position. The Group's tangible net
assets (net assets excluding intangibles) was £69.1 million at 30 June 2024
(FY23: £56.7 million). As at 30 June 2024, the Group had regulatory capital
resources of £75.7 million (FY23: £64.6 million). As at 30 June 2024, the
Group had an own funds adequacy ratio of 348.5% (FY23: 328.1%). 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 year's profits (net of the
declared interim dividends) as these are deemed to be verified at the date of
publication of the annual results.
Table 9 - Own funds reconciliation
FY24 FY23
£m
£m
Share capital 0.2 0.2
Share premium 83.1 81.8
Other reserves 6.3 9.1
Retained earnings 62.7 66.2
Total equity 152.3 157.3
Intangible assets (net book value) (83.2) (100.6)
Deferred tax adjustment 6.6 7.9
Own funds 75.7 64.6
The Group includes five regulated entities that provide personalised
investment management and financial consultancy services to clients within the
UK and abroad. These entities comply with regulations set by the Financial
Conduct Authority ("FCA"), Jersey Financial Services Commission ("JFSC"), and
Guernsey Financial Services Commission ("GFSC"). The Group operates under its
parent company, Brooks Macdonald Group plc ("BMG"), which is incorporated and
registered in England and Wales, with the UK as its primary business market.
The Group's main operating subsidiary, Brooks Macdonald Asset Management
Limited ("BMAM"), is categorised as a MIFIDPRU Non-SNI Firm under the
Investment Firms Prudential Regime ("IFPR") and is authorised and regulated by
the FCA. As such, the Group, being the parent entity, is obliged to adhere to
MIFIDPRU rules within the IFPR framework and reports to the FCA on a
prudential consolidation basis.
In compliance with the regulations of the FCA, JFSC, and GFSC, the Group
routinely conducts assessments of its regulatory capital and liquidity. This
is achieved through the Internal Capital Adequacy and Risk Assessment
("ICARA") and Adjusted Net Liquid Asset ("ANLA") evaluations. These include a
series of stress tests and scenario analyses to ascertain the requisite levels
of regulatory capital and liquidity. The Group forecasts surplus capital and
liquidity, factoring in anticipated outflows and proposed dividends, to ensure
the perpetual adequacy of capital and liquidity.
The FY23 ICARA review was conducted for the year ended 30 June 2023 and signed
off by the Board in December 2023. 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 IFPR Public 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.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation from operations.
Total cash resources at the end of the year were £44.7 million (FY23: £53.4
million) and the Group had no borrowings at 30 June 2024. The reduction in
cash balance compared to the previous year was contributed by the Group
investing surplus corporate cash into financial assets at amortised cost of
£30.0 million, refer to Note 12 in the Notes to the consolidated financial
statements for further information. Combining the financial assets at
amortised cost and the cash balance totals £74.7 million at 30 June 2024, an
increase of £21.3 million on the prior year.
The Group incurred capital expenditure of £1.8 million (FY23: £3.7 million).
This comprised technology-related development of £1.7 million (FY23: £3.0
million), property-related and IT and office equipment of £0.1 million (FY23:
£0.7 million). Half of the technology-related spend was incurred in
connection with continued developments on our partnership with SS&C and
amortisation started at the end of July 2022 following the migration, with the
capital expenditure amortised over the remaining eight years from migration.
Reigniting growth
We have a strong business model that consistently delivers for our clients.
Our current strengths include a broad investment proposition, strong
distribution and brand, a robust investment process yielding attractive
returns, and a talented team. Moving forward, we aim to build on these
strengths to drive further growth in the attractive markets we serve. We have
identified three key enablers to achieve this:
1. Delivering excellent client service. This includes working to continually
improve our technology delivery to clients, scaling our existing specialist
products and creating new products to serve client demand.
2. Broadening and deepening client reach. Improving distribution both
directly to clients and to advisers by using data more heavily and
effectively. We will also adapt employee incentives to reward retention of
client funds as well as winning new business.
3. Driving scale and efficiencies. Remaining focused on managing costs
across the business and optimising our technology to best serve clients,
freeing up time for our client-facing employees.
FY25 guidance and outlook
The structural growth opportunity in our industry remains highly attractive,
underpinned by demographics, government policy and increasing use of advice.
This, coupled with an improving economic outlook gives us strong confidence in
delivering our strategy.
We anticipate a return to overall positive net flows later in the financial
year. We expect to see the established blended revenue yield trend to follow
as our Platform MPS business continues to grow at pace, which will drive
operational leverage through the business.
The International transaction is due to complete by March 2025 with an impact
of c. £2 million on group underlying profit in FY25.
As we guided at the half year, H2 FY24 interest income was in line with our
guidance at £5 million. Following on from that, we expect interest income to
be impacted by further BOE base rate reductions. For FY25, we expect client
interest turn to be c. £7 million - £8 million.
We remain focused on cost discipline and efficiency to ensure we are
well-positioned for future growth. Capital expenditure for FY25 is expected to
be c. £4 million - £5 million.
Andrea Montague
CEO Designate and Chief Financial Officer
11 September 2024
Risk management
We have a robust approach to risk management to support positive client
outcomes.
We continue to enhance our risk management processes across the Group as we
look to continue to embed risk management and deliver positive risk outcomes.
This work is enhancing efficiencies across the risk management framework
through the greater use of data-driven evidence-based risk analysis and
reporting.
We remain mindful of the current geopolitical and macroeconomic uncertainties
and continue to monitor these closely both as an Executive and a Risk and
Compliance Committee ("RCC").
Risk management framework
The Group's risk management framework consists of the following components:
Risk culture. We promote a risk culture that encourages ownership of and
management of risk. Risk management is the responsibility of everyone.
Risk governance. The Board is ultimately responsible for the Group's risk
management framework but has delegated certain responsibilities to the Risk
and Compliance Committee ("RCC"), a sub-committee of the Board. The Group
operates a 'three lines of defence' approach to managing risks across the
Group.
Risk appetite. The objective of the Group's risk appetite framework is to
ensure that the Board and senior management are properly engaged in agreeing
and monitoring the Group's appetite for risk and setting acceptable boundaries
for business activities and behaviours. The risk appetite categories are
reviewed by the Executive Risk Management Committee ("ERMC"), RCC and approved
by the Board on an annual basis. Key Risk Indicators ("KRIs") are mapped to
the risk appetite categories, with KRI tolerances aligned to risk appetite.
The KRIs and tolerances are subject to an annual approval process by the ERMC,
RCC and Board.
Risk reporting. Risk reporting is presented to ERMC and RCC. This includes
details of underlying KRIs mapped to the risk appetite categories, breaches,
risk events and emerging risks.
Risk identification. The Group adopts a top-down and a bottom-up approach to
the identification of risks. The ERMC and the RCC have identified the
principal risks that could impact the ability of the Group to meet its
strategic objectives. In addition, the Group maintains a bottom-up operational
Group risk register, mapped to the Group's risk appetite categories.
Risk assessment and management. All of the risks included in the Group risk
register are scored according to probability and impact and assessed on an
inherent basis (before the impact of controls) and on a residual basis (after
the impact of controls). Where risks are classed as outside the Group's risk
appetite, actions must be taken to bring the risk back within appetite.
Risk and control self-assessment ("RCSA"). The Group's bottom-up assessment of
risk is managed through the RCSA process which supports a comprehensive
understanding of risks and controls in place at the operational and business
process level. The RCSA process enables the risk and control owners to
identify any omissions in the risk environment and to close any control gaps
or weaknesses as necessary.
Policy governance framework. The policy governance framework provides minimum
standards for managing the key risks that the Group faces. Each Group policy
has an Executive Committee-level owner who is ultimately accountable for the
design, implementation and maintenance of the policy.
Internal Capital Adequacy and Risk Assessment ("ICARA"). The Group conducts an
ICARA process to ensure that it has appropriate systems and controls in place
to identify, monitor and, where proportionate, reduce all potential material
harms that may result from the ongoing operation of its business. The Group
holds financial resources (capital and liquidity) in excess of our minimum
regulatory requirements.
Principal risks
The principal risks facing the Group are detailed below, as well as any change
in the year-on-year risk profile.
Key risks identified by the risk management framework Change since last year Rationale for change
1. Credit risk • Cash deposits with external banks Unchanged The risk continues to remain unchanged given the strong credit risk control
environment, including ongoing monitoring and due diligence on all
The risk of loss arising from a client or counterparty failing to meet their • Client credit risk counterparties.
financial obligations to a Brooks Macdonald entity as and when they fall due.
• Counterparty credit risk
• Custodian-related credit risk
• Indirect counterparty risk in respect of referrals
2. Liquidity risk • Corporate cash deposited with external banks Unchanged The Group continues to maintain liquidity resources above its minimum
regulatory requirement and internal thresholds. The Group regularly monitors
The risk that assets are insufficiently liquid and/or Brooks Macdonald does • Client cash deposited with external banks (CASS rules) forecast against actual cash flows and matches the maturity profiles of
not have sufficient liquidity resources available to meet liabilities as they
financial assets and liabilities. The Group has robust contingency funding
fall due or can secure such resources only at excessive cost. Liquidity risk • Failed trades arrangements, which are tested on a periodic basis.
also includes the risk that the Group is unable to meet liquidity ratios.
• Indirect liquidity risk associated with client portfolios
• Indirect liquidity risks associated with dealing
• Indirect risk in respect of the liquidity of individual holdings in
a fund
• Indirect risk in respect of the overall liquidity of our funds
3. Market risk • Failed trades Unchanged Market risk remains at a heightened level (unchanged, year-on-year), due to
the relatively unstable political landscape; with numerous significant general
The risk that arises from fluctuations in the value of, or income arising • Indirect market risk associated with advising on client portfolios elections in 2024 and ongoing conflicts in Ukraine and the Middle East, this
from, movements in equity, bonds, or other traded markets, interest rates or
may result in increased volatility.
foreign exchange rates that have a financial impact. • Indirect market risks associated with dealing
• Indirect market risk associated with managing client portfolios
4. Capital risk • Capital requirements Unchanged The Group continues to maintain capital resources above its minimum regulatory
requirement and internal thresholds. The Group regularly monitors its capital
The risk of adverse business and/or client impact resulting from breaching resources versus capital requirements.
capital requirements.
5. Strategic risk • Acquisitions Unchanged Despite current macroeconomic and geopolitical challenges, the Group continues
to post positive gross flows and record funds under management, highlighting
The risk of having an inadequate business model or making strategic decisions • Business growth the resiliency of its
that may result in lower than anticipated profit or losses or exposes the
business model.
Group to unforeseen risks. • Extreme market events
• Investment performance
6. Conduct risk • Conduct/consumer harm risk Unchanged The Group continues to work on numerous initiatives to promote good risk and
compliance culture and awareness to ensure positive client outcomes.
The risk of causing detriment to clients, stakeholders or the integrity of the
wider market because of inappropriate execution of Brooks Macdonald's business
activities.
7. Operational risk • Financial control Unchanged The Group continues to monitor and enhance its oversight framework to mitigate
any external threats brought about by the current geopolitical environment,
The risk of loss resulting from inadequate or failed internal processes, • Change coupled with idiosyncratic risks linked to the Group's transition to a new
people and systems, or from external events.
operating model.
• IT infrastructure
• Operational resilience
• Deferred delivery
• Third parties
• People
• Suitability
8. Legislation and regulatory risk • Regulatory Unchanged This risk remains unchanged given that the regulatory landscape and focus on
the wealth management industry has not changed.
Legislation and regulatory risk is defined as the risk of exposure to legal or • Legal
regulatory penalties, financial forfeiture and material loss due to failure to
act in accordance with industry laws and regulations. • Tax
9. Financial crime risk • Fraud Unchanged This risk remains unchanged, the Group maintains robust controls in place to
minimise financial crime.
The risk of failure to protect the Group and its customers from all aspects of • AML
financial crime, including anti-money laundering ("AML") and market abuse.
• Market abuse
10. Cyber risk • Cyber Unchanged The cyber threat landscape remains at a heightened level (unchanged,
year-on-year), with a high volume of sophisticated cyber threat activity.
The risk of a malicious attack by individuals or organisations attempting to
gain access to the Company's network to corrupt data, disrupt, and steal
confidential information.
11. Environmental, Social & Governance ("ESG") risk • Environmental, physical and transition Unchanged This risk remains unchanged. The Group has established an Environmental,
Social and Governance Advisory Committee ("ESGAC") to manage all ESG-related
The risk that environmental, social and governance factors could negatively • Diversity, equity and inclusion matters.
impact the Group, its clients and the wider community.
• Governance The Group is committed to creating an inclusive workplace and prioritising
employee wellbeing.
The Group has a robust governance framework.
Emerging Risks
Definition Context
12. Geopolitical landscape Geopolitical events have a direct impact on market risk listed previously.
Prolonged economic downturn also has an impact on client sentiment and thus
The relatively unstable political landscape, with numerous significant general strategic risk as listed previously. The large majority for Labour in the UK
elections in 2024 and ongoing conflicts in Ukraine and the Middle East. general election is viewed as being good for market sentiment and stability.
13. Generational wealth change With generational wealth poised to change hands, primarily from the baby
boomers to Gen X and millennials through the next decade, younger investors
The potential decrease in FUM as financial assets are distributed from one may have different priorities and views on how their inheritance is managed.
generation to the next.
14. Disruptive technologies With the introduction of new technologies such as AI, the industry is being
impacted particularly in automated trading, investment advice, fraud
The risk that innovative technologies significantly alter the way businesses detection, customer service, and portfolio management.
operate.
Viability statement
In accordance with the UK Corporate Governance Code, the Board has assessed
the Group's viability over a five-year period. The decision to do so is to be
aligned with the Group's strategy, its budgeting and forecasting process and
the scenarios set out in the 2023 Internal Capital Adequacy and Risk
Assessment ("ICARA").
The Board has carried out a robust assessment of the principal risks facing
the Group along with the stress tests and scenarios that would threaten the
sustainability of its business model, future performance, solvency or
liquidity. This assessment is based on the Group's Medium-Term Plan ("MTP"),
the ICARA and an evaluation of the Group's emerging and principal risks, as
set out in the Risk management section.
In assessing the future viability of the overall business, the Board has
considered the current and future strategy. The Board has also considered the
business environment of the Group and the potential threats to its business
model arising from regulatory, demographic, political and technological
changes. Moreover, the Board's assessment considered the current macroeconomic
environment, the impact of volatile markets, inflation, and interest rates on
the Group's profitability, regulatory capital and liquidity forecasts. The
Board's assessment of the Group's capital and liquidity position also
considers the implications of meeting the Group's proposed interim and final
dividend pay-outs.
The five-year MTP forms part of the Group's annual business planning process.
The model translates the Group's current and future strategy into a detailed
year-one budget, followed by higher-level forecasts for years two through to
five. The combination of this detailed budgeting, longer-term forecasting and
various stress tests provides a transparent and holistic view of the
forward-looking financial prospects of the Group. The Board reviews and
challenges the Group's MTP annually. The MTP covering the five-year period
from FY24 to FY28, which underpins the 2023 ICARA, was challenged and approved
by the Board in December 2023. The MTP for the five-year period covering FY25
to FY29 was reviewed and challenged by the Board in August 2024.
In addition to the annual MTP preparation process, a re-forecast is carried
out by management and reviewed by the Board on a quarterly basis. These
reflect updates for prevailing trading conditions and other changes required
to the budget assumptions set at the start of the year.
As part of the ICARA, the Group models a range of downside scenarios and a
severe but plausible stress scenario designed to assess the Group's ability to
withstand a market-wide shock, such as a sharp market decline triggered by a
global recession, Group-specific stresses, such as the loss of an investment
management team or key introducer, and a combination of both.
The Group modelled a multi-layered scenario involving a significant decline in
financial markets over a five-year period (with UK equities modelled to lose
45% of their value with correlated impacts modelled across the Group's
portfolios, with a gradual recovery), combined with the loss of a key
investment management team. This scenario would have a material impact on the
Group's profitability compared to the MTP base case, giving a significant
reduction to regulatory capital surpluses, before putting in place any
mitigating management actions.
Management identified a number of mitigating actions that could be implemented
in the event of such severe stresses. In this scenario, the mitigation actions
implemented were to reduce discretionary compensation and to impose
departmental cost reductions to ensure a greater capital surplus was
maintained against the minimum capital requirement. Although the Group does
not fall into a regulatory capital deficit during the stress period,
management actions were implemented to strengthen regulatory resources and
bolster profitability. If deemed appropriate, mitigating actions could include
reduction of external dividend payments and an increased focus on cost
reduction across the business. The implementation of the above actions depends
on the nature of the specific stress events and the time frames over which
they occur.
These scenarios are subject to regular review to ensure they remain relevant
and continue to be a suitable tool for developing our controls and mitigating
actions. Management also considers a reverse stress case and carries out an
assessment of the cost to the Group of a wind-down in the event of a
non-recoverable shock to the operating model. Moreover, management has
identified a number of actions that could be implemented in the event of
severe stresses.
Taking into consideration the assessment of the above factors, including the
results of the latest ICARA, the Group's risk management framework and the
mitigating actions that can be put in place, the Board has reasonable
expectations the Group will be able to continue in operation and meet its
liabilities as they fall due over the period under assessment. This assessment
also supports the Group's Consolidated financial statements to be prepared on
a going concern basis, as discussed in Note 2 in the Notes to the consolidated
financial statements.
Consolidated statement of comprehensive income
For the year ended 30 June 2024
Note 2024 2023
£'000
£'000
Revenue 4 128,262 123,777
Administrative costs (107,934) (102,207)
Gross profit 20,328 21,570
Other gains/(losses) - net 83 (162)
Operating profit 20,411 21,408
Finance income 5 3,056 1,127
Finance costs 5 (208) (296)
Goodwill impairment 9 (11,641) -
Profit before tax 11,618 22,239
Taxation 6 (5,161) (4,090)
Profit for the year 6,457 18,149
Other comprehensive income - -
Total comprehensive income for the year 6,457 18,149
Earnings per share
Basic 7 40.1p 114.7p
Diluted 7 39.4p 112.6p
Consolidated statement of financial position
As at 30 June 2024
Note 30 June 2024 30 June 2023
£'000
£'000
Assets
Non-current assets
Intangible assets 9 83,224 100,582
Property, plant and equipment 10 1,350 2,123
Right-of-use assets 11 3,225 4,329
Financial assets at amortised cost 12 29,963 -
Financial assets at fair value through other comprehensive income 500 500
Total non-current assets 118,262 107,534
Current assets
Financial assets at fair value through profit or loss 905 825
Trade and other receivables 29,061 33,542
Cash and cash equivalents 44,732 53,355
Total current assets 74,698 87,722
Total assets 192,960 195,256
Liabilities
Non-current liabilities
Lease liabilities 14 (1,645) (3,181)
Provisions 15 (378) (322)
Net deferred tax liabilities 13 (5,394) (6,033)
Other non-current liabilities (587) (783)
Total non-current liabilities (8,004) (10,319)
Current liabilities
Lease liabilities 14 (2,169) (1,960)
Provisions 15 (1,628) (1,000)
Deferred contingent consideration - (1,467)
Trade and other payables (27,889) (22,521)
Current tax liabilities (935) (645)
Total current liabilities (32,621) (27,593)
Net assets 152,335 157,344
Equity
Share capital 17 165 164
Share premium account 17 83,135 81,830
Other reserves 6,363 9,112
Retained earnings 62,672 66,238
Total equity 152,335 157,344
The Consolidated financial statements were approved by the Board of Directors
and authorised for issue on 11 September 2024, and signed on their behalf by:
Andrew
Shepherd
Andrea Montague
CEO
CEO Designate and Chief Financial Officer
Company registration number: 4402058
Consolidated statement of changes in equity
For the year ended 30 June 2024
Note Share capital Share Other Retained earnings Total
£'000
premium
reserves
£'000
equity
account
£'000
£'000
£'000
Balance at 1 July 2022 162 79,141 9,962 59,160 148,425
Comprehensive income
Profit for the year - - - 18,149 18,149
Other comprehensive income - - - - -
Total comprehensive income - - - 18,149 18,149
Transactions with owners
Issue of ordinary shares 17 2 2,689 - - 2,691
Share-based payments - - 2,686 - 2,686
Share options exercised - - (3,201) 3,201 -
Purchase of own shares by Employee Benefit Trust - - - (2,850) (2,850)
Tax on share options - - (335) - (335)
Dividends paid 8 - - - (11,422) (11,422)
Total transactions with owners 2 2,689 (850) (11,071) (9,230)
Balance at 30 June 2023 164 81,830 9,112 66,238 157,344
Comprehensive income
Profit for the year - - - 6,457 6,457
Other comprehensive income - - - - -
Total comprehensive income - - - 6,457 6,457
Transactions with owners
Issue of ordinary shares 17 1 1,305 - - 1,306
Share-based payments - - 2,407 - 2,407
Share options exercised - - (4,221) 4,221 -
Purchase of own shares by Employee Benefit Trust - - - (2,150) (2,150)
Tax on share options - - (935) - (935)
Dividends paid 8 - - - (12,094) (12,094)
Total transactions with owners 1 1,305 (2,749) (10,023) (11,466)
Balance at 30 June 2024 165 83,135 6,363 62,672 152,335
Consolidated statement of cash flows
For the year ended 30 June 2024
Note 2024 2023
£'000
£'000
Cash flows from operating activities
Cash generated from operations 16 43,336 30,093
Corporation tax paid (6,444) (5,134)
Net cash generated from operating activities 36,892 24,959
Cash flows from investing activities
Purchase of computer software 9 (1,734) (2,954)
Purchase of property, plant and equipment 10 (83) (745)
Investment in financial assets at amortised cost 12 (29,978) -
Purchase of financial assets at fair value through profit or loss - (30)
Consideration paid for acquisitions - (15,111)
Deferred contingent consideration paid (852) (334)
Interest received 5 3,231 1,127
Net cash used in investing activities (29,416) (18,047)
Cash flows from financing activities
Proceeds of issue of shares 17 681 1,691
Payment of lease liabilities 14 (2,536) (2,304)
Purchase of own shares by Employee Benefit Trust 17 (2,150) (2,850)
Dividends paid to shareholders 8 (12,094) (11,422)
Net cash used in financing activities (16,099) (14,885)
Net decrease in cash and cash equivalents (8,623) (7,973)
Cash and cash equivalents at beginning of year 53,355 61,328
Cash and cash equivalents at end of year 44,732 53,355
Notes to the consolidated financial statements
For the year ended 30 June 2024
1. General information
Brooks Macdonald Group plc (the "Company") is the Parent Company of a group of
companies (the "Group"), which offer 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 by shares, incorporated and domiciled
in England, United Kingdom under the Companies Act 2006 and listed on AIM. The
address of its registered office is 21 Lombard Street, London, EC3V 9AH,
England.
2. Principal accounting policies
The general accounting policies applied in the preparation of these Financial
statements are set out below. These policies have been applied consistently to
all years presented, unless otherwise stated.
a. Basis of preparation
The Group's Consolidated financial statements for the year ended 30 June 2024
have been prepared in accordance with UK-adopted International Accounting
Standards ("IAS") and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards. These Consolidated
financial statements have been prepared on a historical cost basis, except for
the revaluation of certain financial instruments or deferred contingent
consideration that are measured at fair value. Historic cost is generally
based on the fair value of the consideration given in exchange for the assets.
The principal accounting policies adopted are set out below. Unless otherwise
stated, they have been applied consistently to all periods presented in the
Financial statements.
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 the Financial
statements. For further details on the Group's going concern assessment, refer
to the Viability statement. There have been no post balance sheet events that
have materially impacted the Group's liquidity headroom and going concern
assessment.
b. Changes in accounting policies
The Group's accounting policies, which have been applied in preparing these
Financial statements, are consistent with those disclosed in the Annual Report
and Financial Statements for the year ended 30 June 2023, except as explained
below.
New accounting standards, amendments and interpretations adopted in the year
In the year ended 30 June 2024, the Group did not adopt any new standards or
amendments issued by the International Accounting Standards Board ("IASB") or
interpretations by the International Financial Reporting Standards
Interpretations Committee ("IFRS IC") that have had a material impact on the
Consolidated financial statements.
Certain new accounting standards, amendments to accounting standards, and
interpretations have been published that are not mandatory for 30 June 2024
reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material
impact on the Group in the current or future reporting periods or on
foreseeable future transactions.
Standard, Amendment or Interpretation Effective date
IFRS 17 'Insurance contracts' 1 January 2023
Deferred tax related to assets and liabilities arising from a single 1 January 2023
transaction (amendment to IAS 12)
Definition of Accounting Estimates (amendments to IAS 8) 1 January 2023
Disclosure of Accounting Policies (amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2)
Classification of Liabilities as Current or Non-Current (amendments to IAS 1) 1 January 2023
Initial application of IFRS 17 and IFRS 9 - Comparative information 1 January 2022
(amendments to IFRS 17)
c. Critical accounting estimates and material accounting policy information
The preparation of financial information requires the use of assumptions,
estimates and judgements about future conditions. Use of currently available
information and application of judgement are inherent in the formation of
estimates. Actual results in the future may differ from those reported. In
this regard, the Directors believe that the accounting policies, where
important estimations are used, relate to the measurement of intangible assets
and the estimation of the fair value of share-based payments. Management also
needs to exercise judgement in applying the Group's accounting policies.
The preparation of the Group's Consolidated financial statements includes the
use of estimates, assumptions and significant judgements. The significant
accounting estimates, being those with a significant risk of a material change
to the carrying value of assets and liabilities within the next year in terms
of IAS 1, 'Presentation of Financial Statements', are the useful economic life
estimates for acquired client-relationship contracts.
The Consolidated financial statements include other areas of judgement and
accounting estimates. Whilst these areas do not meet the definition under IAS
1 of significant accounting estimates or critical accounting judgements, the
recognition and measurement of certain material assets and liabilities are
based on assumptions and/or are subject to longer-term uncertainties. The
other areas of judgement and accounting estimates are the pre-tax discount
rate and perpetuity growth rate used within the International, Braemar,
Cornelian, Adroit and Integrity CGU goodwill impairment reviews. See Note 9
for further details on the discount rate and the perpetuity growth for the
various CGUs. Additionally, the inputs into the Black-Scholes model used to
value the Group's equity-settled share-based payments (Note 18).
The underlying assumptions and estimates are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised only if the revision affects both current and future
periods.
Further information about key assumptions and sources of estimation
uncertainty are set out below.
Intangible assets
The Group has acquired client relationships and the associated investment
management and financial advice contracts as part of business combinations,
through separate purchase or with newly employed teams of fund managers, as
described in Note 9. In assessing the fair value of these assets, the Group
has estimated their finite life based on information about the typical length
of existing client relationships. Acquired client relationship contracts are
amortised on a straight-line basis over their estimated useful lives, ranging
from 6 to 20 years.
Of the client relationship intangible assets held by the Group at 30 June
2024, the expected amortisation charge for the year ending 30 June 2025 is
£5,326,000. If the useful economic lives were to reduce by one year, the
estimated charge would increase by £3,547,000.
Goodwill recognised as part of a business combination is not amortised but
instead reviewed annually for impairment, or when a change in circumstances
indicates that it might be impaired. The recoverable amounts of CGUs are
determined by value-in-use calculations, which require the use of estimates to
derive the projected future cash flows attributable to each unit. Details of
the more significant assumptions and sensitivity analysis are given in Note 9.
In assessing the value of client relationships and the associated investment
management and financial advice contracts and goodwill or gain on bargain
purchase arising as part of a business combination, the Group prepares
forecasts for the cash flows acquired and discounts to a net present value.
The Group uses a pre-tax discount rate, adjusting from a post-tax discount
rate calculated by the Group's weighted average cost of capital ("WACC"),
adjusted for any specific risks for the relevant CGU. The Group uses the
capital asset pricing model ("CAPM") to estimate the WACC, which is calculated
at the point of acquisition for a business combination, or the relevant
reporting period date. The key inputs are the risk-free rate, market risk
premium, the Group's adjusted beta with reference to beta data from
peer-listed companies, small company premium and any risk-adjusted premium for
the relevant CGU. See Note 9 for further details on the discount rate for the
various CGUs.
Share-based payments
The Group operates various share-based payment schemes in respect of services
received from certain employees. Estimating the fair value of these
share-based payments requires the Group to apply an appropriate valuation
model and determine the inputs to that model (Note 18). The charge to the
Consolidated statement of comprehensive income in respect of share-based
payments is calculated using assumptions about the number of eligible
employees that will leave the Group and the number of employees that will
satisfy the relevant performance conditions. These estimates are reviewed
regularly. A decrease of 10% in the total options would decrease the estimated
share-based payment charge and the associated national insurance charge in the
Consolidated statement of comprehensive income for the year by £381,000 and
£87,000, respectively, hence these assumptions do not constitute a critical
estimate. The key inputs into the fair value calculations for the options
granted during the year are disclosed in Note 18.
Income tax
The Directors have to estimate at each year end a provision for income taxes
that takes into account the utilisation of existing deferred tax assets when
available and, therefore, the level of the future taxable profits of the
Company that support the recoverability of these deferred tax assets. The key
inputs are management approved forecasts, determining if there will be
sufficient future taxable profits to recognised deferred tax assets.
Non-current assets held for sale
IFRS 5 'Non-current assets held for sale and discontinued operations' outlines
how to account for non-current assets held for sale. Management judgement is
required in determining whether the IFRS 5 held for sale criteria are met,
including whether a sale is highly probable and expected to complete within
one year of classification. Judgement typically involves evaluating the
likelihood of obtaining any necessary approvals, determining the stage of
negotiations and commitment of any potential interested parties, the
likelihood of selling at a reasonable price and any possibility of a sale plan
to change. Once classified as held-for-sale, continuous judgement is required
to ensure the classification remains appropriate in future accounting periods.
As part of the ongoing strategic review of the International business, the
Group evaluated potential outcomes, including the possible disposal of the
International business. Management applied judgement in assessing that the
International business did not meet the IFRS 5 criteria for classification as
held for sale at 30 June 2024 on the basis that a potential sale was still at
the early stages. Consequently, the International business has not been
classified as held for sale within these Consolidated financial statements.
3. Segmental information
For management purposes, the Group's activities are organised into two
operating divisions: UK Investment Management and International. The Group's
other activity, offering nominee and custody services to clients, is included
within UK Investment Management. These divisions are the basis on which the
Group reports its primary segmental information to the Group Board of
Directors, 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, as well as wealth 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 the Isle of Man,
offering a similar range of investment management and wealth management
services as 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. Sales between segments are carried out at arm's length.
Centrally incurred expenses are allocated to business segments on an
appropriate pro rata basis.
Year ended 30 June 2024 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Total revenue 113,713 19,911 - 133,624
Inter-segment revenue (5,362) - - (5,362)
External revenue 108,351 19,911 - 128,262
Underlying administrative costs (47,863) (11,126) (38,122) (97,111)
Operating contribution 60,488 8,785 (38,122) 31,151
Allocated costs (28,743) (5,951) 34,694 -
Net finance income and other gains/losses 1,774 477 690 2,941
Underlying profit/(loss) before tax 33,519 3,311 (2,738) 34,092
Goodwill impairment - - (11,641) (11,641)
Amortisation of acquired client relationship contracts (3,383) (2,465) - (5,848)
Organisational restructure (1,729) (887) (423) (3,039)
International strategic review costs - - (1,513) (1,513)
Acquisition and integration related costs (423) - - (423)
Finance cost of deferred contingent consideration - - (13) (13)
Change in fair value of deferred contingent consideration - - 3 3
Profit/(loss) mark-up on Group allocated costs 258 (258) - -
Total underlying adjustments (5,277) (3,610) (13,587) (22,474)
Profit/(loss) before tax 28,242 (299) (16,325) 11,618
Taxation (5,161)
Profit for the year attributable to equity holders of the Company 6,457
Year ended 30 June 2024 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Total assets 92,377 26,706 73,877 192,960
Total liabilities (33,775) (2,775) (4,075) (40,625)
Net assets 58,602 23,931 69,802 152,335
Year ended 30 June 2024 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Statutory operating costs included the following:
- Amortisation 4,296 941 2,214 7,451
- Depreciation 2,175 809 11 2,995
- Interest income 1,709 516 606 2,831
Year ended 30 June 2023 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Total revenue 109,737 20,319 - 130,056
Inter-segment revenue (6,279) - - (6,279)
External revenue 103,458 20,319 - 123,777
Underlying administrative costs (47,405) (13,576) (33,373) (94,354)
Operating contribution 56,053 6,743 (33,373) 29,423
Allocated costs (22,127) (6,844) 28,971 -
Net finance costs 590 226 88 904
Underlying profit/(loss) before tax 34,516 125 (4,314) 30,327
Amortisation of client relationships (3,205) (2,465) - (5,670)
Dual running costs of operating platforms (1,424) (192) - (1,616)
Acquisition and integration-related costs (499) - (69) (568)
Changes in fair value of deferred contingent consideration - - (173) (173)
Finance cost of deferred contingent consideration - (7) (54) (61)
Profit/(loss) mark-up on Group allocated costs 299 (299) - -
Total underlying adjustments (4,829) (2,963) (296) (8,088)
Profit/(loss) before tax 29,687 (2,838) (4,610) 22,239
Taxation (4,090)
Profit for the year attributable to equity holders of the Company 18,149
Year ended 30 June 2023 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Total assets 91,141 26,537 77,578 195,256
Total liabilities (30,175) (2,541) (5,196) (37,912)
Net assets 60,966 23,996 72,382 157,344
Year ended 30 June 2023 UK Investment Management International Group and consolidation adjustments Total
£'000
£'000
£'000
£'000
Statutory operating costs included the following:
- Amortisation 3,429 912 2,491 6,832
- Depreciation 1,943 689 17 2,649
- Interest income 762 279 51 1,092
4. Revenue
Year ended 30 June 2024 UK Investment Management International Total
£'000
£'000
£'000
Investment management fees 67,825 12,027 79,852
Transactional income and foreign exchange trading fees 12,394 2,946 15,340
Fund management fees 8,583 3,565 12,148
Financial planning income 8,182 - 8,182
Interest income 11,367 1,373 12,740
Total revenue 108,351 19,911 128,262
Year ended 30 June 2023 UK Investment Management International Total
£'000
£'000
£'000
Investment management fees 65,626 12,292 77,918
Transactional income and foreign exchange trading fees 10,578 2,704 13,282
Fund management fees 9,983 3,739 13,722
Financial planning income 6,446 - 6,446
Interest income 10,825 1,584 12,409
Total revenue 103,458 20,319 123,777
a. Geographic analysis
The Group's operations are located in the United Kingdom and the Channel
Islands. The following table presents external revenue analysed by the
geographical location of the Group subsidiary entity providing the service.
2024 2023(1)
£'000
£'000
United Kingdom 108,351 103,458
Channel Islands 19,911 20,319
Total revenue 128,262 123,777
(1 The prior year geographical revenue analysis has been reclassified with
£146,000 previously reported within the Isle of Man now recognised within the
Channel Islands.)
b. Major clients
The Group is not reliant on any one client or group of connected clients for
the generation of revenues.
5. Finance income and finance costs
2024 2023
£'000
£'000
Finance income
Dividends on preference shares 28 35
Interest on assets held at amortised cost 197 -
Bank interest on deposits 2,831 1,092
Total finance income 3,056 1,127
Finance costs
Finance cost of lease liabilities (Note 14) 195 235
Finance cost of deferred contingent consideration 13 61
Total finance costs 208 296
6. Taxation
The tax charge on profit for the year was as follows:
2024 2023
£'000
£'000
UK Corporation Tax at 25% (FY23: 20.5%) 6,221 5,703
Over provision in prior years 514 (834)
Total current tax 6,735 4,869
Deferred tax credits (1,788) (1,189)
Under provision of deferred tax in prior years 214 410
Income tax expense 5,161 4,090
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:
Year ended 30 June 2024 Underlying profit Underlying profit adjustments Statutory profit
£'000
£'000
£'000
Profit/(loss) before taxation 34,092 (22,474) 11,618
Profit/(loss) multiplied by the standard rate of tax in the UK of 25% 8,523 (5,619) 2,904
Tax effect of amounts that are not deductible/(taxable) in calculating taxable
income:
Depreciation and amortisation 543 34 577
Non-taxable income (6) - (6)
Overseas tax losses not available for UK tax purposes (366) - (366)
Lower tax rates in other jurisdictions in which the Group operates (121) - (121)
Disallowable expenses 316 3 319
Share-based payments (1,676) 106 (1,570)
Over provision in prior years 514 - 514
Goodwill impairment - 2,910 2,910
Income tax expense/(credit) 7,727 (2,566) 5,161
Effective tax rate 22.7% n/a 44.4%
The higher effective tax rate on underlying and statutory profit has been
contributed by the goodwill impairment not deductible for tax purposes, the
increased Corporation Tax rate in the current year and under provision from
prior period tax charges.
Year ended 30 June 2023 Underlying profit Underlying profit adjustments Statutory profit
£'000
£'000
£'000
Profit/(loss) before taxation 30,327 (8,088) 22,239
Profit/(loss) multiplied by the standard rate of tax in the UK of 20.5% 6,217 (1,658) 4,559
Tax effect of amounts that are not deductible/(taxable) in calculating taxable
income:
Depreciation and amortisation 604 (285) 319
Non-taxable income (124) - (124)
Overseas tax losses not available for UK tax purposes 67 - 67
Lower tax rates in other jurisdictions in which the Group operates (107) - (107)
Disallowable expenses 263 48 311
Share-based payments (512) - (512)
Over provision in prior years (423) - (423)
Income tax expense/(credit) 5,985 (1,895) 4,090
Effective tax rate 19.7% n/a 18.4%
The standard rate of Corporation Tax in the UK was 25.0% with effect from 1
April 2023. Accordingly, the Company's profits for this accounting year are
taxed at a rate of 25.0% (FY23: 20.5%). The relevant deferred tax balances
have been remeasured at this increased rate from the prior year. Deferred tax
assets and liabilities are calculated at the rate that is expected to be in
force when the temporary differences unwind, however, limited to the extent
that such rates have been substantively enacted.
The deferred tax charges for the year arise from:
2024 2023
£'000
£'000
Share-based payments (503) (1)
Accelerated capital allowances 71 (27)
Accelerated capital allowances on research and development (152) (117)
Dilapidations 7 (54)
Amortisation of acquired client relationship contracts (1,427) (934)
Trading losses carried forward 216 (56)
Under provision in prior years 214 410
Deferred tax charge (1,574) (779)
7. Earnings per share
The Directors believe that underlying earnings per share provides an
appropriate reflection of the Group's performance in the year. Underlying
earnings per share, which is an alternative performance measure ("APM"), is
calculated based on 'underlying earnings', which is also an APM. Refer to the
Non-IFRS Information section for a glossary of the Group's APMs, their
definition and criteria for how underlying adjustments are considered. The tax
effect of the underlying adjustments to statutory earnings has also been
considered; refer to Note 6 for the taxation on underlying and statutory
profit. Earnings for the year used to calculate earnings per share as reported
in these Consolidated financial statements were as follows:
2024 2023
£'000
£'000
Earnings attributable to ordinary shareholders 6,457 18,149
Amortisation of acquired client relationship contracts (Note 9) 5,848 5,670
Dual running costs of operating platform - 1,616
Acquisition and integration-related costs 423 568
Changes in fair value of deferred contingent consideration (3) 173
International strategic review 1,513 -
Impairment of goodwill 11,641 -
Restructure costs 3,039 -
Finance cost of deferred contingent consideration 13 61
Tax impact of adjustments (Note 6) (2,566) (1,895)
Underlying earnings attributable to ordinary shareholders 26,365 24,342
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 year was as follows:
2024 2023
Number of shares
Number
of shares
Weighted average number of shares in issue 16,098,412 15,825,397
Effect of dilutive potential shares issuable on exercise of employee share 275,450 293,992
options
Diluted weighted average number of shares in issue 16,373,862 16,119,389
Earnings per share for the year attributable to equity holders of the Company
were:
2024 2023
p
p
Based on reported earnings:
Basic earnings per share 40.1 114.7
Diluted earnings per share 39.4 112.6
Based on underlying earnings:
Basic earnings per share 163.8 153.8
Diluted earnings per share 161.0 151.0
8. Dividends
Amounts recognised as distributions to equity holders of the Company in the
year were as follows:
2024 2023
£'000
£'000
Final dividend paid for the year ended 30 June 2023 of 47.0p (FY22: 45.0p) per 7,467 7,021
share
Interim dividend paid for the year ended 30 June 2024 of 29.0p (FY23: 28.0p) 4,627 4,401
per share
Total dividends 12,094 11,422
Final dividend proposed for the year ended 30 June 2024 of 49.0p (FY23: 47.0p) 7,865 7,448
per share
The interim dividend of 29.0p (FY23: 28.0p) per share was paid on 16 April
2024.
A final dividend for the year ended 30 June 2024 of 49.0p (FY23: 47.0p) per
share was declared by the Board of Directors on 12 September 2024 and is
subject to approval by the shareholders at the Company's Annual General
Meeting. It will be paid on 1 November 2024 to shareholders who are on the
register at the close of business on 20 September 2024. In accordance with IAS
10 'Events After the Reporting Period', the aggregate amount of the proposed
dividend expected to be paid out of retained earnings is not recognised as a
liability in these Consolidated financial statements.
9. Intangible assets
Goodwill Computer software Acquired client relationship contracts Contracts acquired with fund managers Total
£'000
£'000
£'000
£'000
£'000
Cost
At 1 July 2022 51,887 6,930 70,011 3,521 132,349
Additions 12,486 2,954 6,087 - 21,527
Disposals - (1,054) - (3,521) (4,575)
At 30 June 2023 64,373 8,830 76,098 - 149,301
Additions - 1,734 - - 1,734
At 30 June 2024 64,373 10,564 76,098 - 151,035
Accumulated amortisation and impairment
At 1 July 2022 11,213 251 31,477 3,521 46,462
Amortisation charge - 1,162 5,670 - 6,832
Accumulated amortisation on disposals - (1,054) - (3,521) (4,575)
At 30 June 2023 11,213 359 37,147 - 48,719
Amortisation charge - 1,603 5,848 - 7,451
Impairment 11,641 - - - 11,641
At 30 June 2024 22,854 1,962 42,995 - 67,811
Net book value
At 1 July 2022 40,674 6,679 38,534 - 85,887
At 30 June 2023 53,160 8,471 38,951 - 100,582
At 30 June 2024 41,519 8,602 33,103 - 83,224
The amortisation charge of intangible assets is recognised within
administrative costs in the Consolidated statement of comprehensive income.
At 30 June 2024, intangible assets net book value totalling £70,009,000 are
recognised in the United Kingdom and £13,215,000 are recognised in the
Channel Islands.
a. Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the
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:
2024 2023
£'000
£'000
Funds
Braemar Group Limited ("Braemar") 3,320 3,320
International
Brooks Macdonald Asset Management (International) Limited ("Brooks Macdonald 9,602 21,243
International")
Cornelian
Cornelian Asset Managers Group Limited ("Cornelian") 16,111 16,111
Integrity
Integrity Wealth (Holdings) Limited ("Integrity") 3,945 3,945
Adroit
Adroit Financial Planning Limited ("Adroit") 8,541 8,541
Total goodwill 41,519 53,160
Goodwill is reviewed annually for impairment and its recoverability has been
assessed at 30 June 2024 by comparing the carrying amount of the CGUs to their
expected recoverable amount, estimated on a value-in-use basis. The value in
use of each CGU has been calculated using pre-tax discounted cash flow
projections based on the most recent budgets and forecasts approved by the
relevant subsidiary company boards of directors. The most recent budgets
prepared are part of the detailed budget process for the year ending 30 June
2024, and then extrapolated over a longer period for the following four years,
resulting in the budgets and forecasts covering a period of five years. Cash
flows are then extrapolated beyond the five-year budget and forecast period
using an expected long-term growth rate, with the long-term growth rate
considered reasonable against the budgeted and forecast growth.
During the six months ended 31 December 2023, the prevailing macroeconomic
environment and market volatility seen during the reporting period had an
impact on client sentiment and new business, whilst the higher interest rate
environment resulted in higher outflows with clients withdrawing funds to
repay debt. This gave rise to impairment indicators in relation to the
International CGU, which were recognised upon the acquisition of the
Spearpoint business in 2012. Accordingly, an impairment review was carried out
for this CGU, and based on a value-in-use calculation, the recoverable amount
of the International CGU at 31 December 2023 did not support the carrying
amount of the International CGU of £31,311,000. As a result, the
International goodwill balance was impaired by £11,641,000, leaving a
goodwill balance of £9,061,000 as at 31 December 2023.
International
Based on a value-in-use calculation as at 30 June 2024, the recoverable amount
of the Brooks Macdonald International CGU at 30 June 2024 was £36,697,000
(FY23: £33,642,000), giving a surplus over the Brooks Macdonald International
CGU carrying amount of £17,263,000, 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% (FY23: 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. The key input in forecasting revenue is FUM,
which is forecast to grow based on new business targets, attrition and
estimated impact of market performance. FUM is multiplied by estimated fee
yields for the business resulting in annual revenue growth between 4% and 6%
annually over the five-year period. Expenditure growth is forecast to increase
by between 3% and 4% annually over the five-year period, which includes
consideration for reasonable allocated costs. The underlying methodology for
allocating costs is reviewed by management each year when preparing the
value-in-use calculations to ensure the methodology remains appropriate. The
period covered is five years and the forecasts are based on management's
growth projections for the business based on its strategic objectives, taking
into account historic performance and prevailing market and economic
conditions. The 2% long-term growth rate applied is considered prudent in the
context of the long-term average growth rate for the funds and investment
management industries in which the CGU operates.
The Directors do not believe that any reasonably possible change would result
in an impairment, including the outcome of the strategic review discussed in
Note 21; however, to provide additional analysis, sensitivity analysis has
been performed to show what may be required for an impairment to be
recognised.
• An increase of the pre-tax discount rate of 10% (FY23: 2%), from 13%
to 23%, would result in an impairment.
• The perpetuity growth rate would need to reduce by 29% (FY23: 2%),
from 2% to (27%), to result in an impairment.
• The forecast pre-tax cash inflows would need to reduce by 44% (FY23:
11%) each year to result in an impairment.
Cornelian
The Cornelian CGU recoverable amount was calculated as £37,223,000 at 30 June
2024 (FY23: £46,836,000), giving a surplus over the Cornelian CGU carrying
amount of £8,416,000, 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.
The revenue growth forecasts range between 8% and 9% annually over the
five-year period. Revenue growth is forecast using new business targets,
expected outflows and estimated impact of market performance on FUM,
multiplied by estimated fee yields for both the discretionary and fund
management business. Expenditure growth forecasts range between 4% and 9%
annually over the five-year period. Both the revenue growth and expenditure
growth reflect historic actual growth and planned management actions and are
considered to be reasonable in the current market and industry conditions. A
pre-tax discount rate of 13% has been used (FY23: 15%), based on the Group's
assessment of the risk-free rate of interest and specific risks relating to
Cornelian. The recoverable amount was based on the estimated cash inflows over
the next five financial years, the period covered by the most recent
forecasts, which reflect planned management actions and are considered to be
reasonable in the current market and industry conditions. The 2% long-term
growth rate applied is considered prudent in the context of the long-term
average growth rate for the funds and investment management industries in
which the CGU operates.
The Directors do not believe that any reasonably possible change would result
in an impairment; however, to provide additional analysis, sensitivity
analysis has been performed to show what may be required for an impairment to
be recognised.
• An increase of the pre-tax discount rate of 3% (FY23: 6%), from 13%
to 16%, would result in an impairment.
• The perpetuity growth rate would need to reduce by 5% (FY23: 10%),
from 2% to (3%), to result in an impairment.
• The forecast pre-tax cash inflows would need to reduce by 21% (FY23:
28%) each year to result in an impairment.
Funds
Based on a value-in-use calculation, the recoverable amount of the Braemar CGU
at 30 June 2024 was £13,602,000 (FY23: £14,463,000), giving a surplus over
the Braemar CGU carrying amount of £9,384,000 indicating that there is no
impairment. A pre-tax discount rate of 15% (FY23: 16%) has been used, based on
the Group's assessment of the risk-free rate of interest and specific risks
relating to Braemar. The key underlying assumptions of the calculation are the
discount rate, the growth in FUM of the funds business and the long-term
growth rate. Forecasted FUM is multiplied by estimated fee yields for each of
the funds resulting in forecasted revenue remaining flat over the five-year
period. FUM growth is forecast using estimated new business targets, expected
outflows and estimated impact of market performance. Expenditure growth is
forecast to decrease by between 1% and 3% annually over the five-year period.
The inputs to the forecast cash inflows over the next five financial years
reflect historic actual growth and planned management activities and are
considered to be reasonable in the current market and industry conditions. The
2% long-term growth rate applied is considered prudent in the context of the
long-term average growth rate for the funds industry in which the CGU
operates.
The Directors do not believe that any reasonably possible change would result
in an impairment; however, to provide additional analysis, sensitivity
analysis has been performed to show what may be required for an impairment to
be recognised.
• An increase of the pre-tax discount rate of 30% (FY23: 28%), from
15% to 45%, would result in an impairment.
• The 2% perpetuity growth rate could reduce by >100% (FY23: 100%)
to trigger an impairment.
• The forecast pre-tax cash inflows would need to reduce by 54% (FY23:
52%) each year to result in an impairment.
Integrity
Based on a value-in-use calculation, the recoverable amount of the Integrity
CGU at 30 June 2024 was £9,335,000 (FY23: £7,725,000), giving a surplus over
the Integrity CGU carrying amount of £4,010,000, 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 14% (FY23: 15%) has been used, based on
the Group's assessment of the risk-free rate of interest and specific risks
relating to Integrity. The key input in forecasting revenue is based on new
business, which is forecast to grow based on new business targets, attrition
and estimated impact of market performance. The revenue growth forecasts range
between 8% and 13% annually over the five-year period. Revenue growth is
forecast using new business targets, expected outflows and estimated impact of
market performance on AUM. Expenditure growth is forecast to increase by
between 4% and 6% annually over the five-year period, which includes
consideration for reasonable allocated costs. The underlying methodology for
allocating costs is reviewed by management each year when preparing the
value-in-use calculations to ensure the methodology remains appropriate. In
the current year, this resulted in a change to the allocation metrics used
within the five-year forecast. The period covered is five years and the
forecasts are based on management's growth projections for the business based
on its strategic objectives, taking into account historic performance and
prevailing market and economic conditions. The 2% long-term growth rate
applied is considered prudent in the context of the long-term average growth
rate for the funds, investment management and financial planning industries in
which the CGU operates.
The Directors do not believe that any reasonably possible change would result
in an impairment; however, to provide additional analysis, sensitivity
analysis has been performed to show what may be required for an impairment to
be recognised.
• An increase of the pre-tax discount rate of 8% (FY23: 4%), from 14%
to 22%, would result in an impairment.
• The perpetuity growth rate would need to reduce by 15% (FY23: 6%),
from 2% to (13%), to result in an impairment.
• The forecast pre-tax cash inflows would need to reduce by 36% (FY23:
23%) each year to result in an impairment.
Adroit
Based on a value-in-use calculation, the recoverable amount of the Adroit CGU
at 30 June 2024 was £12,854,000 (FY23: £12,121,000), giving a surplus over
the Adroit CGU carrying amount of £2,769,000 indicating that there is no
impairment. A pre-tax discount rate of 14% (FY23: 15%) has been used, based on
the Group's assessment of the risk-free rate of interest and specific risks
relating to Adroit. The key input in forecasting revenue is based on new
business, which is forecast to grow based on new business targets, attrition
and estimated impact of market performance. The revenue growth forecasts range
between 9% and 15% annually over the five-year period. Revenue growth is
forecast using new business targets, expected outflows and estimated impact of
market performance on AUM. The inputs to the forecast cash inflows over the
next five financial years reflect historic actual growth and planned
management activities and are considered to be reasonable in the current
market and industry conditions. The 2% long-term growth rate applied is
considered prudent in the context of the long-term average growth rate for the
funds, investment management and financial planning industries in which the
CGU operates.
The Directors do not believe that any reasonably possible change would result
in an impairment; however, to provide additional analysis, sensitivity
analysis has been performed to show what may be required for an impairment to
be recognised.
• An increase of the pre-tax discount rate of 3% (FY23: 1%), from 14%
to 17%, would result in an impairment.
• The perpetuity growth rate would need to reduce by 4% (FY23: 6%),
from 2% to (2%), to result in an impairment.
• The forecast pre-tax cash inflows would need to reduce by 9% (FY23:
8%) each year to result in an impairment.
b. Computer software
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, with some specific projects amortised over longer useful economic lives
("UELs") based on their size and usability.
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 Consolidated statement of comprehensive income
on a straight-line basis over their estimated useful lives (6 to 20 years).
During the prior year ended 30 June 2023, the Group acquired client
relationship contracts totalling £3,156,000 and £2,931,000, as part of the
Integrity and Adroit acquisitions, respectively, which were recognised as
separately identifiable intangible assets in the Condensed consolidated
statement of financial position, with UEL of 15 years.
d. Contracts acquired with fund managers
This asset represents the fair value of the future benefits accruing to the
Group from contracts acquired with fund managers. Payments made to acquire
such contracts are stated at cost and amortised on a straight-line basis over
a UEL of five years.
10. Property, plant and equipment
Leasehold improvements£'000 Fixtures, fittings and office equipment IT equipment Total
£'000
£'000
£'000
Cost
At 1 July 2022 2,688 741 1,246 4,675
Additions 477 74 194 745
Disposals (19) (173) (474) (666)
At 30 June 2023 3,146 642 966 4,754
Additions 13 47 23 83
Disposals (11) (3) (3) (17)
At 30 June 2024 3,148 686 986 4,820
Accumulated depreciation
At 1 July 2022 1,131 513 829 2,473
Depreciation charge 535 102 187 824
Depreciation on disposals (19) (173) (474) (666)
At 30 June 2023 1,647 442 542 2,631
Depreciation charge 571 95 190 856
Depreciation on disposals (11) (3) (3) (17)
At 30 June 2024 2,207 534 729 3,470
Net book value
At 1 July 2022 1,557 228 417 2,202
At 30 June 2023 1,499 200 424 2,123
At 30 June 2024 941 152 257 1,350
During the year ended 30 June 2024, the Group conducted a review of the
property, plant and equipment assets and retired assets from the fixed asset
register with a £nil net book value, and no longer used in the business. This
resulted in disposals of property, plant and equipment with cost and
accumulated depreciation both totalling £17,000.
Property, plant and equipment net book value totalling £1,062,000 at 30 June
2024 are recognised in the United Kingdom and £288,000 are recognised in the
Channel Islands.
11. Right-of-use assets
Cars Property Total
£'000
£'000
£'000
Cost
At 1 July 2022 328 9,425 9,753
Additions 470 713 1,183
At 30 June 2023 798 10,138 10,936
Additions 174 1,125 1,299
Adjustment on change of lease terms (91) (315) (406)
At 30 June 2024 881 10,948 11,829
Accumulated depreciation
At 1 July 2022 37 4,745 4,782
Depreciation charge 158 1,667 1,825
At 30 June 2023 195 6,412 6,607
Depreciation charge 210 1,929 2,139
Adjustment on change of lease terms 50 (192) (142)
At 30 June 2024 455 8,149 8,604
Net book value
At 1 July 2022 291 4,680 4,971
At 30 June 2023 603 3,726 4,329
At 30 June 2024 426 2,799 3,225
The Group offers a car leasing arrangement to provide a salary sacrifice car
leasing scheme for employees. Each vehicle leased to individual employees
creates a separate right-of-use asset and lease liability measured at present
value of the remaining lease payments, discounted using the lessee's estimated
incremental borrowing rate (see Note 14).
The property additions relate to six new leases that commenced during the year
ended 30 June 2024.
Right-of-use assets net book value totalling £2,823,000 at 30 June 2024 are
recognised in the United Kingdom and £402,000 are recognised in the Channel
Islands.
12. Financial assets held at amortised cost
2024 2023
£'000
£'000
At 1 July - -
Additions 29,978 -
Implied interest income 197 -
Contractual coupons received (212) -
At 30 June 29,963 -
During the year ended 30 June 2024, the Group invested £29,978,000 in UK
Government Investment Loan and Treasury Stock ("Gilts"). The Gilts carry
coupon rates ranging from 1.5%-4.5% per annum and have maturity dates ranging
from 2026-28. Investments in Gilts are classified as financial assets at
amortised cost.
13. Net deferred tax liabilities
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.
2024
UK CI Total
£'000
£'000
£'000
Deferred tax assets
Share-based payments 1,901 - 1,901
Trading losses carried forward - 147 147
Dilapidations 111 1 112
Accelerated capital allowances 93 - 93
Total deferred tax assets 2,105 148 2,253
Deferred tax liabilities
Intangible asset amortisation (5,809) (920) (6,729)
Accelerated capital allowances on research and development (918) - (918)
Total deferred tax liabilities (6,727) (920) (7,647)
Net deferred tax liabilities (4,622) (772) (5,394)
2023
UK CI Total
£'000
£'000
£'000
Deferred tax assets
Share-based payments 2,333 - 2,333
Trading losses carried forward - 363 363
Dilapidations 92 27 119
Accelerated capital allowances 164 - 164
Total deferred tax assets 2,589 390 2,979
Deferred tax liabilities
Intangible asset amortisation (7,404) (752) (8,156)
Accelerated capital allowances on research and development (856) - (856)
Total deferred tax liabilities (8,260) (752) (9,012)
Net deferred tax liabilities (5,671) (362) (6,033)
The gross movement on the deferred income tax account during the year was as
follows:
2024 2023
£'000
£'000
At 1 July (6,033) (4,957)
Additional liability on acquisition of client relationship intangible assets - (1,520)
Credit to the Consolidated statement of comprehensive income (Note 6) 1,574 779
Charge recognised in equity (935) (335)
At 30 June (5,394) (6,033)
The change in deferred income tax assets and liabilities during the year was
as follows:
Share-based payments Trading losses carried forward Dilapidations Accelerated capital allowances Total
£'000
£'000
£'000
£'000
£'000
Deferred tax assets
At 1 July 2022 2,667 133 65 137 3,002
Over provision in prior years - 174 - - 174
Charge to the Consolidated statement of comprehensive income 1 56 54 27 138
Credit to equity (335) - - - (335)
At 30 June 2023 2,333 363 119 164 2,979
Credit to the Consolidated statement of comprehensive income 503 (216) (7) (71) 209
Charge to equity (935) - - - (935)
At 30 June 2024 1,901 147 112 93 2,253
2024 2023
£'000
£'000
Deferred tax assets
Deferred tax assets to be settled after more than one year 1,061 1,198
Deferred tax assets to be settled within one year 1,192 1,781
Total deferred tax assets 2,253 2,979
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. There is an
amount of unrecognised deferred tax in relation to capital losses carried
forward at 30 June 2024 of £859,000. A deferred tax asset is not recognised
in these Consolidated financial statements, nor the Parent Company financial
statements, on the basis that it is not probable that capital gains will be
available against which capital losses can be offset.
The change in deferred income tax liabilities during the year is as follows:
Accelerated capital allowances on research and development Intangible asset amortisation Total
£'000
£'000
£'000
Deferred tax liabilities
At 1 July 2022 389 7,570 7,959
Additional liability on acquisition of client relationship intangible assets - 1,520 1,520
Credit to the Consolidated statement of comprehensive income (117) (934) (1,051)
Over provision in prior year 584 - 584
At 30 June 2023 856 8,156 9,012
Credit to the Consolidated statement of comprehensive income 62 (1,427) (1,365)
At 30 June 2024 918 6,729 7,647
2024 2023
£'000
£'000
Deferred tax liabilities
Deferred tax liabilities to be settled after more than one year (6,641) (7,777)
Deferred tax liabilities to be settled within one year (1,006) (1,235)
Total deferred tax liabilities (7,647) (9,012)
14. Lease liabilities
Cars Property Total
£'000
£'000
£'000
At 1 July 2022 292 5,735 6,027
Additions 470 713 1,183
Payments made (169) (2,135) (2,304)
Finance cost of lease liabilities 18 217 235
At 30 June 2023 611 4,530 5,141
Additions 174 1,157 1,331
Adjustment on change of lease terms (142) (175) (317)
Payments made (225) (2,311) (2,536)
Finance cost of lease liabilities 21 174 195
At 30 June 2024 439 3,375 3,814
Analysed as:
Amounts falling due within one year 194 1,975 2,169
Amounts falling due after more than one year 245 1,400 1,645
Total lease liabilities 439 3,375 3,814
The Group offers a car leasing arrangement to provide a salary sacrifice car
leasing scheme for employees. Each vehicle leased to individual employees
creates a separate right-of-use asset (Note 11) and lease liability measured
at present value of the remaining lease payments, discounted using the
lessee's estimated incremental borrowing rate.
The Group is party to leases as lessee in relation to property agreements for
the use of office space. All leases are accounted for by recognising a
right-of-use asset and a lease liability at the lease commencement data. Lease
liabilities are initially measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate implicit in the lease.
Right-of-use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for lease
payments made at or before commencement of the lease, initial direct costs
incurred and the amount of any provision recognised where the Group is
required to dismantle, remove or restore the asset. Additionally, they may be
re-measured to reflect reassessment due to lease modifications.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term. Additionally,
the right-of-use asset is periodically reduced by impairment losses, if any,
and adjusted for certain re-measurements of the lease liability.
If the Group revises its estimate of the term of any lease, it will adjust the
carrying amount of the lease liability to reflect the payments to be made over
the revised term, discounted at the revised discount rate. An equivalent
adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining (revised) lease
term.
15. Provisions
Client compensation FSCS levy Leasehold dilapidations Tax-related Total
£'000
£'000
£'000
£'000
£'000
At 1 July 2022 112 386 367 280 1,145
Charge to the Consolidated statement of comprehensive income 579 239 260 - 1,078
Utilised during the year (441) (458) (2) - (901)
At 30 June 2023 250 167 625 280 1,322
Charge to the Consolidated statement of comprehensive income 640 691 83 - 1,414
Utilised during the year (295) (167) (268) - (730)
At 30 June 2024 595 691 440 280 2,006
Analysed as:
Amounts falling due within one year 595 691 62 280 1,628
Amounts falling due after more than one year - - 378 - 378
Total provisions 595 691 440 280 2,006
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. FSCS levy
Following confirmation by the FSCS in July 2024 of its final industry levy for
the 2024/25 scheme year, the Group has made a provision of £691,000 (FY23:
£167,000) for its estimated share.
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.
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 FY23.
16. Reconciliation of operating profit to net cash inflow from operating
activities
2024 2023
£'000
£'000
Operating profit 20,411 21,408
Adjustments for:
Amortisation of intangible assets 7,451 6,832
Depreciation of property, plant and equipment 856 824
Depreciation of right-of-use assets 2,139 1,825
Other (gains)/losses - net (83) 162
Decrease/(increase) in receivables 4,391 (2,215)
Increase/(decrease) in payables 5,276 (1,526)
Increase/(decrease) in provisions 684 (147)
(Decrease)/increase in other non-current liabilities (196) 244
Share-based payments charge 2,407 2,686
Net cash inflow from operating activities 43,336 30,093
17. Share capital and share premium account
The movements in share capital and share premium during the year were as
follows:
Number of shares Exercise price Share capital Share premium Total
p
£'000
account
£'000
£'000
At 1 July 2022 16,205,542 162 79,141 79,303
Shares issued:
on exercise of options 1,866 1,710.0 - 2,400.0 - 30 30
to Sharesave Scheme 140,171 1,172.0 - 1,704.0 1 1,660 1,661
of consideration for the acquisition of Integrity 52,084 1,900.0 - 1,920.0 1 999 1,000
At 30 June 2023 16,399,663 164 81,830 81,994
Shares issued:
on exercise of options 8,554 1,381.0 - 1,725.0 - 135 135
to Sharesave Scheme 35,488 1,172.0 - 1,988.0 1 545 546
of consideration for the acquisition of Integrity 28,748 1,900.0 - 2,174.0 - 625 625
At 30 June 2024 16,472,453 165 83,135 83,300
The total number of ordinary shares issued and fully paid at 30 June 2024 was
16,472,453 (FY23: 16,399,663) with a par value of 1p per share.
There was £1,306,000 share capital issued on exercise of options and to
Sharesave Scheme members in the year ended 30 June 2024 (FY23: £2,691,000).
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; see Note 18(b). At 30 June 2024, the EBT held
421,938 (FY23: 552,633) 1p ordinary shares in the Company, acquired for a
total consideration of £19,100,000 (FY23: £16,950,000) with a market value
of £8,228,000 at 30 June 2024 (FY23: £11,633,000). They are classified as
treasury shares in the Consolidated statement of financial position, their
cost being deducted from retained earnings within shareholders' equity.
18. Equity-settled share-based payments
All share options granted to employees under the Group's equity-settled
share-based payment schemes are valued using the Black-Scholes model, based on
the market price of the Company's shares at the grant date and annualised
volatility of up to 50%, covering the period to the end of the contractual
life. Volatility has been estimated on the basis of the Company's historical
share price subsequent to flotation. The risk-free annual rate of interest is
deemed to be the yield on a gilt-edged security with a maturity term between
seven months and five years, ranging from 0.01% to 2.00%. No options
outstanding at 30 June 2024 (FY23: none) carry any dividend or voting rights.
The share options in issue under the various equity-settled share-based
payment schemes have been valued at prices ranging from £7.35 to £16.49 per
share. The charge to the Consolidated statement of comprehensive income for
the year in respect of these was £2,407,000 (FY23: £2,686,000). The weighted
average remaining contractual life of all equity-settled share-based payment
schemes at 30 June 2024 was 1.36 years (FY23: 1.17 years). The weighted
average share price of all options exercised during the year was £18.32
(FY23: £19.34).
A summary of the inputs into the fair value calculations for options granted
during the year is set out below.
Long-Term Incentive Plan Save As You Earn ("SAYE")
Grant date Various 01/06/2024
Share price at grant £16.50 - £18.05 £20.60
Vesting period 27 - 51 months 36 months
Volatility 35.34 - 38.06% 38.01%
Annual dividend 4.26 - 4.73% 3.79%
Risk-free rate 3.95 - 4.92% 4.07%
Option value £14.33 - £16.49 £7.35
The exercise price and fair value of share options granted during the year
were as follows:
Exercise price Fair value Number of options
£
£
Long-Term Incentive Plan - 14.33 - 16.49 232,851
Employee Sharesave Scheme 14.62 7.35 63,603
a. Long-Term Incentive Plan
The Long-Term Incentive Plan was approved by shareholders at the 2018 Annual
General Meeting and encompasses annual deferral of bonuses into a Deferred
Bonus Plan ("DBP"), Long-Term Incentive Plan ("LTIP") awards made to senior
management, and Exceptional Share Option Awards ("ESOA"). Certain ESOA grants
carry performance conditions. All awards are subject to continued employment
and are made at the discretion of the Remuneration Committee. No awards
expired during the year (FY23: 1,452).
2024 2023
Number of options Weighted average exercise price Number of options Weighted average exercise price
£
£
At 1 July 687,360 - 711,763 -
Awarded in the year 232,851 - 306,603 -
Exercised in the year (252,507) - (168,107) -
Forfeited in the year (58,541) - (162,899) -
At 30 June 609,163 - 687,360 -
i. Deferred Bonus Plan ("DBP") Awards
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date) Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2018 - 2019 - 2021 2,694 12,491
2019 - 2020 - 2022 8,278 13,132
2020 - 2021 - 2023 17,071 27,689
2021 - 2022 - 2024 26,619 44,239
2022 - 2023 - 2025 54,931 78,834
2023 - 2024 - 2026 63,107 -
All years 172,700 176,385
ii. Long-Term Incentive Plan ("LTIP") Awards
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date) Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2020 - 2023 - 10,128
2021 - 2024 42,964 44,619
2022 - 2025 55,100 59,088
2023 - 2026 113,878 -
All years 211,942 113,835
iii. Exceptional Share Option Awards ("ESOA")
The number of share options outstanding at the reporting date was as follows:
Financial year of grant Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2018 - 2018 - 2023 7,460 8,302
2019 - 2019 - 2024 51,208 122,092
2020 - 2020 - 2024 23,449 45,419
2021 - 2021 - 2024 20,626 116,580
2022 - 2022 - 2025 21,870 7,032
2023 - 2023 - 2026 70,796 97,715
2024 - 2024 - 2027 29,112 -
All years 224,521 397,140
b. Long-Term Incentive Scheme ("LTIS")
The Group made no new awards under the LTIS during the year. The conditional
awards, which vest three years after the grant date, are subject to the
satisfaction of specified performance criteria, measured over a three-year
performance period. No awards expired during the year (FY23: none). Off-cycle
awards were made in 2017 to senior executives to replace awards forfeited from
previous employers.
2024 2023
Number of options
Number of options
At 1 July 5,442 5,442
Exercised in the year (4,298) -
At 30 June 1,144 5,442
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date) Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2015 - 2018 495 1,077
2016 - 2019 649 1,416
2017 (off-cycle) - 2020 - 2,949
All years 1,144 5,442
At 30 June 2024, options for schemes up to and including the 2017 scheme have
vested and are able to be exercised.
c. Employee Benefit Trust ("EBT")
Brooks Macdonald Group plc established an Employee Benefit Trust on 3 December
2010 to acquire ordinary shares in the Company to satisfy awards under the
LTIS and LTIP. All finance costs and administration expenses connected with
the EBT are charged to the Consolidated statement of comprehensive income as
they accrue. The EBT has waived its rights to dividends. The following table
shows the number of shares held by the EBT that have not yet vested
unconditionally.
2024 2023
Number of shares
Number of shares
At 1 July 552,633 580,806
Acquired in the year 123,918 140,495
Exercised in the year (254,613) (168,668)
At 30 June 421,938 552,633
d. Company Share Option Plan ("CSOP")
The Company has established a Company Share Option Plan, which was approved by
HMRC in November 2013. The CSOP is a discretionary scheme whereby employees or
Directors are granted an option to purchase the Company's shares in the future
at a price set on the date of the grant. The maximum award under the terms of
the scheme is a total market value of £30,000 per recipient.
2024 2023
Number of options Weighted average exercise price Number of options Weighted average exercise price
£ £
At 1 July 16,955 16.37 18,821 16.32
Exercised in the year (8,554) 15.83 (1,866) 15.89
At 30 June 8,401 16.92 16,955 16.37
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date) Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2013 14.52 2016 - 2,067
2014 13.81 2017 725 2,537
2015 17.19 2018 5,236 9,016
2016 17.25 2019 2,440 3,335
All years 8,401 16,955
At 30 June 2024, all options for the CSOP schemes have vested and are able to
be exercised. No awards expired during the year under the CSOP schemes (FY23:
none).
e. Employee Sharesave Scheme ("SAYE")
Under the scheme, employees can contribute up to £500 a month over a
three-year period to acquire shares in the Company.
At the end of the savings period, employees can elect to receive shares or
receive their savings in cash.
2024 2023
Number of options Weighted average exercise price Number of options Weighted average exercise price
£ £
At 1 July 225,003 15.23 254,111 14.25
Granted in the year 63,603 14.62 161,518 19.35
Exercised in the year (31,958) 15.77 (143,701) 11.85
Forfeited in the year (58,186) 15.51 (46,925) 17.21
At 30 June 198,462 14.87 225,003 15.23
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date) Exercise price Vesting period 2024 2023
£
Number of options
Number of options
2020 11.72 2023 - 7,611
2021 17.04 2024 7,882 36,473
2022 19.88 2025 11,772 21,911
2023 14.34 2026 115,205 159,008
2024 14.62 2027 63,603 -
All years 198,462 225,003
At 30 June 2024, options for the 2021 scheme have vested and are able to be
exercised. No awards under the 2019 scheme expired during the year (FY23: 77).
19. Contingent liabilities and guarantees
In the normal course of business, the Group is exposed to certain legal
issues, which, 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.
20. Related-party transactions
Transactions between the Company and its subsidiaries, which are related
parties, are eliminated on consolidation. The Company's individual financial
statements include the amounts attributable to subsidiaries. These amounts are
disclosed in aggregate in the relevant company financial statements and in
detail in the following table:
Amounts owed by related parties Amounts owed to related parties
2024 2023 2024 2023
£'000
£'000
£'000
£'000
Brooks Macdonald Asset Management Limited - 239 14,654 -
Brooks Macdonald Asset Management (International) Limited 162 83 - -
Brooks Macdonald Funds Limited - - 900 900
Adroit Financial Planning Limited - - 355 -
All of the above amounts are interest-free and repayable on demand.
21. Events since the end of the year
On 11 September 2024, the Group determined the sale of its International
business (the International segment in Note 3) was highly probable following
the previously announced strategic review. The Group have exchanged contracts
for the sale of Brooks Macdonald Asset Management (International) Limited, and
its wholly owned subsidiaries for estimated gross proceeds of £50,850,000,
inclusive of total deferred contingent consideration amounts, with completion
expected by March 2025. The Group and Parent Company expects to make a gain on
disposal and no impairment is required. As at 30 June 2024, the sale of the
International business was not deemed as highly probable and did not meet the
criteria for reclassification to assets held for sale under IFRS 5 as the sale
was at its early stages.
Post 30 June 2024, the Group received confirmation from HMRC that its AIM
Portfolio Service could be treated as exempt from VAT. As a result, the Group
is awaiting a refund from HMRC in respect of VAT arising on those services
during the period from 31 December 2019 to 30 September 2023 of £2,249,000.
This is being treated as a non-adjusting post balance sheet event.
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 exclude
income and expense categories, which 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.
The Group follows a rigorous process in determining whether an adjustment
should be made to present an alternative performance measure compared to IFRS
measures. For an adjustment to be excluded from underlying profit as an
alternative performance measure 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 an acquisition, disposal or a
company restructure process.
The Group uses the below APMs:
APM Equivalent IFRS measure Definition and purpose
Underlying profit before tax Statutory profit before tax Calculated as profit before tax excluding income and expense categories, which
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 reconciliation between underlying and statutory
profits section 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 of the Consolidated
financial statements.
Underlying earnings/ Underlying profit after tax Total comprehensive income Calculated as underlying profit before tax less the underlying tax charge.
See Note 7 of the Consolidated financial statements for a reconciliation of
underlying profit after tax and statutory profit after tax.
Underlying profit margin before tax Statutory profit margin before tax Calculated as underlying profit before tax over revenue for the year. This is
another key metric assessed by the Board and appropriate for external analyst
coverage and peer group benchmarking.
EBITDA/Underlying EBITDA N/A Earnings before interest, tax, depreciation and amortisation ("EBITDA").
Underlying EBITDA is EBITDA excluding income and expense categories, which are
deemed of a non-recurring nature or a non-cash operating item.
Underlying basic earnings per share Statutory basic earnings per share Calculated as underlying profit after tax divided by the weighted average
number of shares in issue during the year. This is a key management incentive
metric and is a measure used within the Group's remuneration schemes. See Note
7 of the Consolidated financial statements for the earnings per share.
Underlying diluted earnings per share Statutory diluted earnings per share Calculated as underlying profit after tax divided by the weighted average
number of shares in issue during the year, 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 7 of the
Consolidated financial statements for the 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, which
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.
Segmental underlying profit before tax Segmental statutory profit before tax Calculated as profit before tax, excluding income and expense categories,
which are deemed of a non-recurring nature or a non-cash operating item for
each segment. See Note 3 of the Consolidated financial statements for the
segmental information.
Segmental underlying profit before tax margin Segmental statutory profit before tax margin Calculated as segmental underlying profit before tax over segmental revenue.
Own Funds Capital Adequacy Ratio N/A Calculated as the Group's total regulatory resources relative to its Fixed
Overhead requirement.
Finance information
The financial information contained within this preliminary announcement has
been extracted from the Group's Financial statements, which have been approved
by the Board of Directors and agreed with the Company's auditors'.
The financial information set out above does not constitute the Group's
statutory financial statements for the years ended 30 June 2024 or 2023.
Statutory financial statements for 2023 have been delivered to the Registrar
of Companies. Statutory financial statements for 2024 will be delivered to the
Registrar of Companies following the Company's Annual General Meeting. The
auditor has reported on both the 2024 and 2023 financial statements. Their
reports were unqualified.
Forward looking statements
This announcement has been prepared to provide information to shareholders to
assess the current position and future potential of Brooks Macdonald Group. It
contains certain forward-looking statements with respect to the Group's
financial condition, operations, and business opportunities. Forward looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause actual results to differ materially from what is
expressed or implied by the statements. Any forward-looking statement is made
in good faith based on information available to the Directors as of the date
of the statement. Past performance cannot be relied on as a guide to future
performance.
Financial calendar
Results announcement 12 September 2024
Ex-dividend date for final dividend 19 September 2024
Record date for final dividend 20 September 2024
Annual General Meeting 24 October 2024
Final dividend payment date 1 November 2024
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