TIDMBRK
RNS Number : 4907H
Brooks Macdonald Group PLC
13 March 2018
13 March 2018
BROOKS MACDONALD GROUP PLC
FINANCIAL REPORT FOR THE SIX MONTHSED 31 DECEMBER 2017
A strong first half with continued growth and investment in our
platform for the future
Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group"),
the AIM listed integrated wealth management group, today announces
its report for the six months ended 31 December 2017.
Financial Highlights
Half year Half year
ended ended
31.12.2017 31.12.2016
Total discretionary funds under GBP11.7bn GBP9.3bn
management ("FUM")
Revenue GBP48.8m GBP44.0m
Underlying(1) results (from continuing operations)
Underlying profit before tax GBP8.5m GBP8.2m
Underlying profit margin 17.4% 18.7%
Underlying earnings per share 47.7p 47.1p
Statutory results (from continuing operations)
Statutory profit before tax GBP0.6m GBP8.1m
Statutory earnings per share -3.5p 48.5p
Cash GBP26.9m GBP20.5m
Dividends
Interim dividend 17p 15p
(1) Adjustments from statutory profit are in respect of the
amortisation of client relationships; finance income / costs and
changes in the fair value of deferred consideration; impairment of
the carrying value of goodwill (Levitas); the provision for legacy
matters (Spearpoint); disposal costs and the profit from
discontinued operations (Property Management).
Business Highlights:
- 25.8% year-on-year increase in total discretionary funds under
management, reaching GBP11.7bn at 31 December, driving a 10.9%
percentage increase in revenue
- 3.2% increase in underlying profit before tax - or 16.2%
excluding the impact of the one-off investment in our risk
management and operating framework - with all four businesses
making good contributions to underlying profit before tax.
- Statutory profit fell due to a GBP5.5m increase in the
provision for resolving legacy matters and a GBP1.0m increase in
fair value of Levitas deferred consideration in light of strong net
inflows into the funds.
- Over GBP1.25bn in discretionary FUM added during the half year:
o Organic growth (net new discretionary business) of GBP0.8bn or
7.7% over the half year, underlining the continuing growth
opportunity in the adviser distribution channel
o Total year on year growth of over GBP2.4bn or 25.8%, including
the benefit of above-benchmark investment performance
o High rates of FUM growth across UK Investment Management
(11.8%), Funds (19.4%) and International (9.1%)
o Decline in revenue yield, driven principally by lower
transactional income due to lower dealing volumes and more clients
choosing flat fees, in line with the industry. Fee income
continuing to grow in line with FUM, rate of yield decline
levelling off and being offset through continued cost
discipline.
- Continued investment and good progress in meeting current and
future regulatory demands, notably MiFID II, GDPR and our risk
management and operational framework.
- Focus now moving to building a sustainable and scalable
operating platform, supporting future growth and delivering
medium-term margin improvement.
- Interim dividend increase of 13.3% to 17p (2017: 15p)
reflecting the Board's continued confidence in the strength of the
underlying business and commitment to a progressive dividend
policy.
Chris Knight, Chairman, commented:
"I am pleased to report continued momentum for the Group in the
period, with strong growth in discretionary funds under management
driving increases in both revenue and underlying profit.
"Chris Macdonald has decided to step down from the Board on 31
March in order to concentrate on his other business interests. We
are grateful for Chris's support in the transition process since
Caroline Connellan took over as CEO last April, and pleased that he
will continue his involvement with Brooks Macdonald as an
adviser.
"As already announced Simon Jackson will leave the Group and
step down from the Board on 30 April. Simon has been with Brooks
Macdonald for 17 years and has been a key member of the leadership
team as Group Finance Director. I would like to take this
opportunity to reiterate my thanks and best wishes to Simon. Ben
Thorpe, most recently Head of Finance at Brewin Dolphin, will join
Brooks Macdonald as Group Finance Director in August.
"The early weeks of the second half have seen momentum
maintained in the underlying business and we remain confident in
our prospects for the full year."
Caroline Connellan, Chief Executive, commented:
"I'm pleased to report a strong half-year with double digit
increases in both funds under management and revenue. We have
maintained organic growth momentum across all our segments,
alongside above-benchmark investment performance, reflecting the
strength of our core offerings and relationships. In the period, we
also completed the sale of Braemar Estates, our Property Management
business, in line with our drive to focus on our core offerings and
to improve the Group's margins.
"We have made good progress with our investment programme to
enable the business to grow sustainably while enhancing efficiency.
Our medium-term focus is on delivering improved operating
margins.
"We have continued to invest in our senior leadership team,
building functional capability to complement our existing client
focused leadership and investment expertise, with a number of new
appointments including that of Ben Thorpe as Group Finance
Director. Today we are announcing the appointment of Priti Verma as
Group Chief Risk Officer and Adrian Keane-Munday as Managing
Director, Financial Planning.
"Last July we announced that we are dealing decisively with
certain legacy matters, upholding our commitment to protect our
clients' best interests and supporting our relationships with key
intermediaries. Today we announced a GBP5.5m increase in the
associated provision. We continue to make all possible efforts to
bring the matter to a conclusion.
"Following an encouraging first half of the year and continued
momentum in the early weeks of the second half, we remain confident
of the significant growth opportunities open to us."
An analyst meeting will be held at 10.45 for 11.00am on Tuesday,
13 March at the offices of MHP Communications, 6 Agar Street,
London, WC2N 4HN. Please contact Robert Collett-Creedy on
020 3128 8147 or e-mail brooks@mhpc.com for further details.
The information communicated in this announcement contains
inside information for the purposes of Article 7 of Regulation
596/2014
LEI: 213800WRDF8LB8MIEX37
Enquiries to:
Brooks Macdonald Group plc www.brooksmacdonald.com
Caroline Connellan, Chief Executive Officer 020 7499 6424
Simon Jackson, Group Finance Director
Peel Hunt LLP (Nominated Adviser and Broker)
Guy Wiehahn / Adrian Haxby 020 7418 8900
MHP Communications
Reg Hoare / Simon Hockridge / Charlie Barker 020 3128 8540
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries,
provides leading investment management services in the UK and
internationally. The Group, which was founded in 1991 and began
trading on AIM in 2005, had discretionary funds under management
(FUM) of GBP11.7bn as at 31 December 2017.
Brooks Macdonald offers a range of investment management
services to private high net worth individuals, pension funds,
institutions, charities and trusts. The Group also provides
financial planning as well as offshore investment management and
acts as fund manager to regulated OEICs providing specialist funds
in the property and structured return sectors.
The Group has twelve offices across the UK and the Channel
Islands including London, Hampshire, Leamington Spa, Manchester,
Taunton, Tunbridge Wells, York, Scotland, Wales, Jersey, and
Guernsey.
Brooks Macdonald Group plc
Chairman's Statement
Introduction
The first six months of our financial year to the end of
December 2017 has seen a period of rising investment markets with
low volatility and a time of significant regulatory changes within
the sector.
The Group has once again achieved strong growth in discretionary
funds under management leading to increases in revenue, underlying
profit and underlying earnings per share.
Our centralised investment process continues to deliver strong
risk adjusted returns for our clients and over the period we have
invested significantly in projects driven both by regulation and
the requirements of the growth of the Group.
Results
Revenues from continuing operations have risen 10.9% to GBP48.8m
(2016: GBP44.0m) and underlying pre-tax profit has increased by
3.2% to GBP8.5m (2016: GBP8.2m), with underlying earnings per share
up 1.4% to 47.7p (2016: 47.1p).
Statutory profit before tax from continuing operations was
GBP0.6m compared to GBP8.1m in the same period last year,
predominantly due to an increase of GBP5.5m in the provision for
resolving legacy matters and an increase of GBP1.0m in the fair
value of deferred consideration payable to the vendors of Levitas
(compared to a reduction of GBP1.3m in the comparable period last
year), driven by strong net inflows in the period.
Reconciliation of underlying profit before tax to profit
before tax from continuing operations
Six months Six months
to 31 December to 31 December
2017 2016*
GBPm GBPm
Underlying** profit before tax from
continuing operations 8.50 8.24
Amortisation of client relationships (1.20) (1.25)
Finance income / (cost) of deferred
consideration (0.08) (0.16)
Changes in fair value of deferred
consideration (0.98) 1.32
Disposal-related costs (0.08) -
Exceptional costs of resolving legacy (5.51) -
matters
Profit before tax from continuing
operations 0.65 8.15
---------------- ----------------
* The comparative results for the six months ended 31 December
2016 have been restated to exclude the results of the discontinued
operation, Property Management, which was sold on 1 December 2017
as per note 10 to the condensed consolidated financial
statements.
** Given ongoing levels of IT investment, we have decided to
include software amortisation in our calculation of underlying
profit from these financial statements onwards and restated
comparative periods accordingly.
Cash resources at the period end amounted to GBP26.9m (2016:
GBP20.5m). The Group had no borrowings as at 31 December 2017
(2016: GBPnil).
Provision for legacy matters
We announced in July 2017 our decision to deal proactively with
certain legacy matters arising from the former Spearpoint business
which we acquired in 2012. These matters relate both to a number of
discretionary portfolios formerly managed by Spearpoint, now
managed by our Jersey office, and a Dublin-based fund, for which
Spearpoint acted as investment manager. While we accept no legal
liability in these matters, we have a deep commitment to treating
customers fairly and seeking to protect our clients' best
interests. We developed a plan to resolve these matters and
accordingly we made a GBP6.5m provision in the financial results
for the year to 30 June 2017.
However, it became apparent that the calculation of the goodwill
offers for the discretionary portfolio clients was affected by
quality issues with data derived from legacy systems. We therefore
initiated a comprehensive review of the data sources, calculations
and methodology, requiring extensive use of third party expertise
to extract the data, and for advice and quality assurance to ensure
that any revision was fair to clients. The review has now concluded
and final goodwill offer letters will be issued by the end of March
2018.
In parallel, we have been in extensive and prolonged discussions
with the Board of the Dublin-based fund, seeking to deal with the
matter proactively. A goodwill proposal was made to the directors
of the fund in October 2017. We have made some progress but we have
been unable to reach agreement with the directors. We remain
committed to reaching a settlement on terms in line with the
initial goodwill proposal and we continue to engage with the
directors. Throughout the discussion, our focus has been on
treating customers fairly and seeking to protect the fund's
shareholders' best interests.
The effect of movements in the expected total cost of goodwill
offers and associated expenses is an increase of GBP5.5m from the
previous provision to GBP12.0m. We have provided for the additional
amount as an exceptional item in the financial report for the six
months to 31 December 2017.
Dividend
The Board has declared an interim dividend of 17p (2016: 15p)
reflecting the Board's continued confidence in the strength of the
underlying business and commitment to a progressive dividend
policy. This represents an increase of 13.3% compared to the
previous year. The interim dividend will be paid on 24 April 2018
to shareholders on the register as at 23 March 2018.
Funds under management
Funds under management ('FUM') grew by GBP1.3bn in the six
months. Our investment businesses all contributed with growth of
11.8% for UK Investment Management, 19.4% for Funds, and 9.1% for
International. Net organic inflows for the Group were GBP808m or
7.7%, underlining the continuing opportunity in the adviser
distribution channel. Market movements and above-benchmark
investment performance contributed GBP474m of the total growth.
As previously announced, the Group's discretionary FUM rose to
GBP11.74bn as at 31 December 2017 (30 June 2017: GBP10.46bn),
representing a rise of 12.3%. This compares to the MSCI WMA Private
Investor Balanced Index, which rose 4.3% over the same six month
period. Over the calendar year our FUM have grown GBP2.41bn,
representing 25.8% growth.
Analysis of discretionary fund flows over the period
Six months Six months
to to Year to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Opening discretionary
FUM 10,456 8,301 8,301
Net new discretionary
business 808 332 951
Investment growth 474 697 1,204
------------- ------------- ---------
Total FUM growth 1,282 1,029 2,155
Closing FUM 11,738 9,330 10,456
Organic growth (net of
markets) 7.7% 4.0% 11.5%
Total growth 12.3% 12.4% 25.9%
Business review
The Group continues to pursue an organic growth strategy based
on three pillars: foundation, focus and growth.
First, we are building on a foundation of success, with a track
record of developing strong relationships with professional
intermediaries and private clients, which has enabled us to achieve
market-leading rates of growth in funds under management.
Second, we are focusing our business to deliver value to our
shareholders, our clients and advisers, and our staff, working to
ensure that our continuing growth is built on a sustainable
platform and that we can deliver improved operating margins in the
medium term.
Third, as we do this, we will continue to drive for growth,
serving our existing clients and advisers with as broad a product
range as possible, while also adding new clients and accessing new
client categories who can benefit from our investment management
expertise.
We have made progress on all three pillars over this period,
across all four of our businesses - UK Investment Management,
Funds, Financial Planning, and International.
Within UK Investment Management we have seen continued traction
across all our client service lines. In particular, we have seen
growth in our Bespoke Portfolio Service ('BPS') for higher net
worth clients, where pension freedoms continue to be supportive. We
have also seen strong growth in our Multi-Asset Funds and our
investment solutions risk-rated funds (including Levitas). Our
Defensive Capital Fund continues to grow rapidly and is now over
GBP500m.
As expected, we have seen pressure on revenue yields,
principally stemming from reduced transactional income against a
background of lower market volatility in the period, as well as the
competitive environment, in particular the move towards all-in
fees, and continued shifts in product mix. Overall, we believe this
gives us higher quality revenue as our fee income continues to grow
rapidly while transactional income and interest turn have been
declining. In UK Investment Management, our fee income in the six
months ended 31 December 2017 increased 24.4% against the same
period in the previous year, in line with the 25.0% increase in
average FUM in the business.
As previously announced, we are now integrating our UK
Investment Management and Funds businesses. The businesses already
work together closely and we are making good progress towards
completing the formal integration. We will move to reporting the
results of the combined business as a single segment in the next
financial year.
International has seen an increase in net new business following
the announcement in July of moves to resolve outstanding legacy
issues related to the Spearpoint acquisition. We believe our
determination to do the right thing for clients and commitment to
reach a conclusion has helped support inflows.
Our Centralised Investment Proposition has continued to perform
well, giving returns ahead of the relevant ARC Private Client Index
across all risk profiles for 1, 3 and 5 years; continued good
performance is critical to medium-term client retention.
The need for advice for high net worth individuals continues to
grow and our Financial Planning business has had a good period as
well as being a significant introducer of investment management
business across the Group.
We are committed to investing in our platform. We have carried
out a range of regulatory improvements, including our MiFID II
development - which launched successfully on time in January - and
the beginning of our work on GDPR, which will continue into the
second half of the financial year. We also made good progress on
our previously announced investment in our operating and risk
management framework, making it ready for our next phase of
growth.
Principal risks and uncertainties
The Group's activities expose it to a variety of financial and
non-financial risks. Our principal risks, which are described in
the Strategic Report and note 31 of the 2017 Annual Report and
Accounts, include:
- loss of clients or reputational damage as a result of poor performance or service;
- regulatory breaches;
- loss of key staff;
- cyber and data security breaches;
- potential service issues with outsourced IT infrastructure;
- operational risk due to failure of internal processes and controls;
- the risk of breaching investment portfolio mandates; and
- financial risks such as liquidity risk, market risk and credit risk.
Board and management changes
After over 26 years on the board Chris Macdonald will be
stepping down on 31 March in order to concentrate on his other
business interests. We are grateful to Chris for his support in the
transition process since Caroline Connellan took over as Chief
Executive Officer last April, and pleased that he will continue his
involvement with Brooks Macdonald as an adviser.
Simon Jackson, Group Finance Director, will leave the Group on
30 April as previously announced. Simon has been at Brooks
Macdonald for 17 years and has been a key member of the leadership
team throughout that time. His role has encompassed the early years
as the business became established, through its float on AIM in
2005, and subsequent acquisitions and fund raisings, helping the
Group grow to its current funds under management of nearly
GBP12bn.
Ben Thorpe will join the Group in the summer, taking over from
Simon Jackson as Group Finance Director. He has most recently been
Head of Finance at Brewin Dolphin.
We have also invested in the broader leadership team, building
functional capability to complement client focused leadership and
investment expertise. We are today announcing the appointment of
Priti Verma as Group Chief Risk Officer. Priti has most recently
been Chief Risk Officer at Smith & Williamson and will join in
the summer. She has 18 years' experience in financial services, and
has previously held senior risk positions at Pictet Asset
Management, Aviva Investors and Schroders, having started her
career at Deloitte.
Additionally, we also announce the appointment of Adrian
Keane-Munday as Managing Director, Financial Planning to lead the
development of that business. Adrian has most recently been Head of
Premier & Wealth Distribution for the UK at HSBC, where he has
had extensive senior leadership experience within their wealth
management business.
All three appointments - Ben, Priti and Adrian - are subject to
regulatory approval.
Outlook and summary
The Group has made good progress in the first half of the
financial year with substantial growth in discretionary funds under
management and higher earnings, and we remain focused on delivering
strong performance at all levels of the business. We continue to
build on our success to date and invest in a stronger platform to
deliver future growth, while pursuing greater efficiency and
progressively improving our margins.
We have an excellent team and a well established organic growth
strategy. The early weeks of the second half have seen continued
momentum in the underlying business and we remain confident in our
prospects for the full year.
Christopher Knight
Chairman
12 March 2018
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 31 December 2017
Year ended
Six months Six months
ended 31 Dec ended 31 Dec
2017 2016 30 Jun 2017
Note (unaudited) (unaudited)(2) (audited)(2)
GBP'000 GBP'000 GBP'000
Revenue 4 48,795 43,997 88,794
Administrative costs 5 (47,163) (36,947) (80,878)
Realised gains and losses
on investments 6 - 4 4
Other gains and losses 7 (932) 1,234 266
Operating profit 700 8,288 8,186
Finance income 8 36 31 56
Finance costs 8 (88) (159) (263)
Share of results of joint
venture - (15) (45)
Profit before tax 648 8,145 7,934
Taxation 9 (1,129) (1,590) (2,230)
(Loss) / profit for the
period from continuing
operations (481) 6,555 5,704
Profit from discontinued
operations 10 497 16 110
Profit for the period attributable
to equity holders of the
Company 16 6,571 5,814
-------------- ----------------- ---------------
Other comprehensive income:
Items that may be reclassified
subsequently to profit
or loss
Revaluation of available
for sale financial assets 15 (3) - 3
Revaluation reserve recycled
to profit or loss 15 - - 6
Total comprehensive income
for the period 13 6,571 5,823
-------------- ----------------- ---------------
(Loss) / earnings per share
from continuing operations
Basic 11 (3.53p) 48.49p 42.14p
Diluted 11 (3.51p) 48.30p 41.95p
Earnings per share attributable
to equity holders of the
Company
Basic 11 0.12p 48.61p 42.95p
Diluted 11 0.12p 48.42p 42.76p
The accompanying notes on pages 12 to 32 form an integral part
of these condensed consolidated financial statements.
(2) Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period. Refer to note 10 for details of the results of
discontinued operations.
Condensed Consolidated Statement of Financial Position
as at 31 December 2017
31 Dec 2017 31 Dec 2016 30 Jun 2017
Note (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 13 61,464 64,923 62,648
Property, plant and
equipment 14 3,969 3,233 3,203
Available for sale financial
assets 15 1,572 655 658
Deferred tax assets 1,385 664 1,271
------------- ------------- ------------
Total non-current assets 68,390 69,475 67,780
Current assets
Trade and other receivables 25,135 23,092 22,693
Financial assets at
fair value through profit
or loss 16 1,238 1,109 1,185
Cash and cash equivalents 26,909 20,538 32,183
------------- ------------- ------------
Total current assets 53,282 44,739 56,061
Total assets 121,672 114,214 123,841
------------- ------------- ------------
Liabilities
Non-current liabilities
Deferred consideration 17 (1,282) (2,468) (1,720)
Deferred tax liabilities (3,149) (3,624) (3,415)
Other non-current liabilities (88) (199) (157)
------------- ------------- ------------
Total non-current liabilities (4,519) (6,291) (5,292)
Current liabilities
Trade and other payables (19,159) (15,779) (21,169)
Current tax liabilities (2,503) (2,554) (2,082)
Deferred tax liabilities - (74) -
Provisions 18 (12,368) (2,689) (9,592)
------------- ------------- ------------
Total current liabilities (34,030) (21,096) (32,843)
Net assets 83,123 86,827 85,706
------------- ------------- ------------
Equity
Share capital 138 137 138
Share premium account 37,510 36,090 37,101
Other reserves 6,133 5,905 6,480
Retained earnings 39,342 44,695 41,987
------------- ------------- ------------
Total equity 83,123 86,827 85,706
------------- ------------- ------------
The condensed consolidated financial statements were approved by
the Board of Directors and authorised for issue on 12 March 2018,
signed on their behalf by:
C M Connellan S J Jackson
Chief Executive Finance Director
Company registration number: 4402058
The accompanying notes on pages 12 to 32 form an integral part
of these condensed consolidated financial statements.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 December 2017
Share
Share premium Other Retained
capital account reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2016 137 35,997 5,517 41,357 83,008
--------- --------- ---------- ---------- --------
Comprehensive income
Profit for the period - - - 6,571 6,571
Total comprehensive
income - - - 6,571 6,571
Transactions with owners
Issue of ordinary shares - 93 - - 93
Share-based payments - - 641 - 641
Share-based payments
exercised - - (409) 409 -
Purchase of own shares
by employee benefit
trust - - - (541) (541)
Tax on share options - - 156 - 156
Dividends paid (note
12) - - - (3,101) (3,101)
--------- --------- ---------- ---------- --------
Total transactions with
owners - 93 388 (3,233) (2,752)
Balance at 31 December
2016 137 36,090 5,905 44,695 86,827
--------- --------- ---------- ---------- --------
Comprehensive income
Loss for the period - - - (757) (757)
Other comprehensive
income:
Revaluation of available
for sale financial assets
(note 15) - - 3 - 3
Revaluation reserve
recycled - - 6 - 6
--------- --------- ---------- ---------- --------
Total comprehensive
income - - 9 (757) (748)
Transactions with owners
Issue of ordinary shares 1 1,011 - - 1,012
Share-based payments - - 596 - 596
Share-based payments
exercised - - (315) 315 -
Purchase of own shares
by employee benefit
trust - - - (245) (245)
Tax on share options - - 285 - 285
Dividends paid (note
12) - - - (2,021) (2,021)
--------- --------- ---------- ---------- --------
Total transactions with
owners 1 1,011 566 (1,951) (373)
Balance at 30 June 2017 138 37,101 6,480 41,987 85,706
--------- --------- ---------- ---------- --------
Share
Share premium Other Retained
capital account reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 June 2017 138 37,101 6,480 41,987 85,706
--------- --------- ---------- ---------- --------
Comprehensive income
Loss for the period
from continuing operations - - - (481) (481)
Loss for the period
of discontinued operations
(note 10) - - - (326) (326)
Gain on disposal of
discontinued operations
(note 10) - - - 823 823
Other comprehensive
income:
Revaluation of available
for sale financial assets
(note 15) - - (3) - (3)
Total comprehensive
income - - (3) 16 13
Transactions with owners
Issue of ordinary shares - 409 - - 409
Share-based payments - - 820 - 820
Share-based payments
exercised - - (863) 863 -
Tax on share options - - (301) - (301)
Dividends paid (note
12) - - - (3,524) (3,524)
--------- --------- ---------- ---------- --------
Total transactions with
owners - 409 (344) (2,661) (2,596)
Balance at 31 December
2017 138 37,510 6,133 39,342 83,123
--------- --------- ---------- ---------- --------
The accompanying notes on pages 12 to 32 form an integral part
of these condensed consolidated financial statements.
Condensed Consolidated Statement of Cash Flows
for the six months ended 31 December 2017
Six months Six months
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
Note (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Cash generated from operations 19 2,954 7,774 24,521
Taxation paid (1,388) (1,469) (3,186)
Net cash generated from
operating activities 1,566 6,305 21,335
Cash flows from investing
activities
Purchase of intangible
assets 13 (1,699) (943) (2,651)
Purchase of property, plant
and equipment 14 (1,174) (440) (892)
Purchase of available for
sale financial assets 15 - (5) (5)
Deferred consideration
paid 17 (1,852) (1,580) (1,580)
Proceeds from sale of subsidiaries 10 966 - -
Finance income received 8 32 31 56
Proceeds of sales of property,
plant and equipment - 13 13
Proceeds of sale of available
for sale financial assets 15 - 1,219 1,219
Investment in joint venture - (1) (1)
Cash flows from investing
activities of discontinued
operations 10 2 12 14
------------- ------------- -------------
Net cash used in investing
activities (3,725) (1,694) (3,827)
Cash flows from financing
activities
Proceeds of issue of shares 409 91 1,105
Purchase of own shares
by employee benefit trust - (541) (786)
Dividends paid to shareholders 12 (3,524) (3,101) (5,122)
------------- ------------- -------------
Net cash used in financing
activities (3,115) (3,551) (4,803)
Net (decrease) / increase
in cash and cash equivalents (5,274) 1,060 12,705
Cash and cash equivalents
at beginning of period 32,183 19,478 19,478
------------- ------------- -------------
Cash and cash equivalents
at end of period 26,909 20,538 32,183
------------- ------------- -------------
The accompanying notes on pages 12 to 32 form an integral part
of these condensed consolidated financial statements.
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2017
1. General information
Brooks Macdonald Group plc ('the Company') is the parent company
of a group of companies ('the Group'), which offers a range of
investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts. The
Group also provides financial planning as well as offshore
investment management and acts as fund manager to regulated OEICs,
providing specialist funds in the property and structured return
sectors. The Group's primary activities are set out in its Annual
Report and Accounts for the year ended 30 June 2017.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom under the Companies Act 2006 and is
listed on AIM. The address of its registered office is 72 Welbeck
Street, London, W1G 0AY.
The half yearly financial report was approved for issue on 12
March 2018. The condensed consolidated financial statements have
been independently reviewed but are not audited.
2. Accounting policies
a) Basis of preparation
The Group's condensed consolidated financial statements are
prepared and presented in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union. They have been
prepared on a going concern basis with reference to the accounting
policies and methods of computation and presentation set out in the
Group's consolidated financial statements for the year ended 30
June 2017, except as stated below. The condensed consolidated
financial statements should be read in conjunction with the Group's
audited financial statements for the year ended 30 June 2017, which
have been prepared in accordance with International Financial
Reporting Standards ('IFRS') and IFRS Interpretations Committee
('IFRS IC') interpretations, as adopted by the European Union and
the Companies Act 2006 applicable to companies reporting under
IFRS.
The information in this announcement does not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. The Group's accounts for the year ended 30 June 2017 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified
and did not draw attention to any matters by way of emphasis. It
contained no statement under section 498(2) or (3) of the Companies
Act 2006.
b) Changes in accounting policies
The Group's accounting policies that have been applied in
preparing these condensed consolidated financial statements are
consistent with those disclosed in the Annual Report and Accounts
for the year ended 30 June 2017, except as described below.
New accounting standards, amendments and interpretations adopted
in the period
In the six months ended 31 December 2017, the Group did not
adopt any new standards or amendments issued by the International
Accounting Standards Board ('IASB') or interpretations issued by
the IFRS IC that have had a material impact on the condensed
consolidated financial statements.
Other new standards, amendments and interpretations listed in
the following table were newly adopted by the Group but have not
had a material impact on the amounts reported in these condensed
consolidated financial statements. They may, however, impact the
accounting for future transactions and arrangements.
Standard, Amendment or Interpretation Effective
date
-------------------------------------------------- ----------
Recognition of deferred tax assets for unrealised 1 January
losses (amendments to IAS 12) 2017
-------------------------------------------------- ----------
Disclosure initiative (amendments to IAS 7) 1 January
2017
-------------------------------------------------- ----------
Annual improvements to IFRS standards 2014-2016 1 January
cycle (IFRS 12) 2017
-------------------------------------------------- ----------
New accounting standards, amendments and interpretations not yet
adopted
A number of new standards, amendments and interpretations, which
have not been applied in preparing these condensed consolidated
financial statements, have been issued and are effective for annual
and interim periods beginning after 1 July 2017:
Standard, Amendment or Interpretation Effective
date
-------------------------------------------------------- ----------
Annual improvements to IFRS standards 2014-2016 1 January
cycle (IFRS 1 and IAS 28) 2018
-------------------------------------------------------- ----------
Revenue from Contracts with Customers (IFRS 15) 1 January
2018
-------------------------------------------------------- ----------
Clarifications to IFRS 15 'Revenue from Contracts 1 January
with Customers' 2018
-------------------------------------------------------- ----------
Financial Instruments (IFRS 9) 1 January
2018
-------------------------------------------------------- ----------
Foreign Currency Transactions and Advance Consideration 1 January
(IFRIC 22) 2018
-------------------------------------------------------- ----------
Classification and measurement of share-based 1 January
payment transactions (amendments to IFRS 2) 2018
-------------------------------------------------------- ----------
Leases (IFRS 16) 1 January
2019
-------------------------------------------------------- ----------
Annual improvements to IFRS standards 2015-2017 1 January
cycle (IFRS 3, IFRS 11, IAS 12, IAS 23) 2019
-------------------------------------------------------- ----------
Not yet endorsed for use in the EU
The impact of these changes is currently being reviewed and
there is no intention to early adopt. During the six months ended
31 December 2017, IFRS 16 was endorsed for use in the EU.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 could change how and when revenue is recognised. The
primary impact is expected to be around the recognition of
performance fees. Under IFRS 15, the Group will be required to make
an assessment as to whether the work performed to earn such fees
constitutes the transfer of services and, therefore, fulfils any
performance obligation(s). If so, these fees can be recognised when
charged; if not, the fees can only be recognised in the period the
services are provided.
The Group currently recognises these when the probability of
meeting the performance criteria is virtually certain. Some client
agreements may need to be amended to ensure that any performance
criteria are fully documented, but based upon a preliminary
assessment the Group does not expect a material change to the
recognition of its revenue arising from these revenue streams.
The Group is still in the process of making an impact assessment
and as yet any further impact has not been quantified.
IFRS 9 'Financial Instruments'
IFRS 9 changes the classification and measurement of financial
assets. Financial assets will be classified into one of three
categories: amortised cost, fair value through profit or loss
(FVTPL) or fair value through other comprehensive income (FVOCI).
The held to maturity, loans and receivables and available for sale
categories available under IAS 39 have been removed. In addition,
the classification criteria for allocating financial assets between
categories are different under IFRS 9. There is no material change
to the classification of financial liabilities.
The Group does not expect the new classification bases to have a
material impact on its financial assets. Those currently carried at
amortised cost (including cash and cash equivalents, trade and
other receivables) will continue to be classified as such. Some of
the Group's available for sale assets may be reclassified as FVTPL
under IFRS 9 where the Group does not collect all contractual cash
flows. Other available for sale assets comprise preference share
holdings and these will likely be classified as FVOCI as the
Group's intention is to collect all contractual cash flows, being
solely payments of principal and interest.
IFRS 16 'Leases'
IFRS 16 will require the recognition of a right-of-use asset and
associated lease liability for the office premises that are leased
by the Group. The asset would be depreciated over the lease term
and the liability would accrue interest, resulting in a
front-loaded expense profile.
This accounting treatment contrasts with the current treatment
for operating leases, where no asset or liability is recognised and
the lease payments are charged to the Condensed Consolidated
Statement of Comprehensive Income on a straight line basis over the
term of the lease. The total cost of the lease over the lease term
is expected to be unchanged under the new standard.
3. Segmental information
For management purposes the Group's continuing activities are
organised into four operating divisions: UK Investment Management,
Funds, Financial Planning 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's 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
which the Board 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.
Revenues and expenses are allocated to the business segment that
originated the transaction. Revenues and expenses that are not
directly originated by a particular business segment are reported
as 'group and consolidation adjustments'. Sales between segments
are carried out at arm's length. Centrally incurred expenses are
allocated to business segments on an appropriate pro-rata
basis.
Group
Six months ended UK Investment Financial & consolidation
31 Dec 2017 (unaudited) Management Funds Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 36,576 3,675 2,639 6,720 - 49,610
Inter segment revenue (642) - (173) - - (815)
-------------- -------- ---------- -------------- ----------------- --------
External revenues 35,934 3,675 2,466 6,720 - 48,795
-------------- -------- ---------- -------------- ----------------- --------
Underlying profit
before tax 9,437 710 292 539 (2,478) 8,500
Finance cost of deferred
consideration - - - - (88) (88)
Finance income from
deferred consideration 4 4
Changes in fair value
of deferred consideration - - - - (985) (985)
Disposal costs - - - - (82) (82)
Exceptional costs
of resolving legacy
matters - - - (5,506) - (5,506)
Amortisation of client
relationships and
contracts with fund
managers (453) - - (210) (532) (1,195)
--------
Profit / (loss) before
tax 8,984 710 292 (5,177) (4,161) 648
Taxation (1,129)
--------
Loss for the period from continuing operations (481)
--------
Profit from discontinued operations 497
--------
Profit for the period attributable to equity holders of the
Company 16
--------
Group
Six months ended UK Investment Financial & consolidation
31 Dec 2016 (unaudited) Management Funds Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenues 32,932 2,415 2,365 6,526 - 44,238
Inter segment revenues (143) - (98) - - (241)
-------------- -------- ---------- -------------- ----------------- --------
External revenues 32,789 2,415 2,267 6,526 - 43,997
-------------- -------- ---------- -------------- ----------------- --------
Underlying profit
before tax(3) 10,333 (32) 177 601 (2,843) 8,236
Finance cost of deferred
consideration - - - - (159) (159)
Changes in fair value
of deferred consideration - - - - 1,318 1,318
Amortisation of client
relationships and
contracts with fund
managers (582) - - (263) (405) (1,250)
--------
Profit / (loss) before
tax 9,751 (32) 177 338 (2,089) 8,145
Taxation (1,590)
--------
Profit for the period from continuing operations 6,555
--------
Profit from discontinued operations 16
Profit for the period attributable to equity holders of the
Company 6,571
--------
(3) Underlying profit before tax has been restated to include
software amortisation, consistent with the treatment in the current
period.
Group
Year ended UK Investment Financial & consolidation
30 Jun 2017 (audited) Management Funds Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenues 66,038 5,505 5,211 12,583 - 89,337
Inter segment revenues (321) - (222) - - (543)
-------------- -------- ---------- -------------- ----------------- --------
External revenues 65,717 5,505 4,989 12,583 - 88,794
-------------- -------- ---------- -------------- ----------------- --------
Underlying profit
before tax(3) 19,903 459 269 379 (4,022) 16,988
Finance cost of deferred
consideration - - - - (263) (263)
Changes in fair value
of deferred consideration - - - - 2,230 2,230
Goodwill impairment - - - - (1,986) (1,986)
Exceptional costs
of resolving legacy
matters - - - (6,500) - (6,500)
Amortisation of client
relationships and
contracts with fund
managers (1,004) - - (433) (1,098) (2,535)
--------
Profit / (loss) before
tax 18,899 459 269 (6,554) (5,139) 7,934
Taxation (2,230)
--------
Profit for the period from continuing operations 5,704
--------
Profit from discontinued operations 110
--------
Profit for the period attributable to equity holders of the
Company 5,814
--------
(3) Underlying profit before tax has been restated to include
software amortisation, consistent with the treatment in the current
period.
a) Geographic analysis of revenue
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 entity providing
the service.
Six months
ended Year ended
Six months
31 Dec 2017 ended 30 Jun 2017
31 Dec 2016
(unaudited) (unaudited)(4) (audited)(4)
GBP'000 GBP'000 GBP'000
United Kingdom 42,075 37,471 76,211
Channel Islands 6,720 6,526 12,583
Total revenue from continuing
operations 48,795 43,997 88,794
------------- ----------------- --------------
(4) Restated to exclude revenue from discontinued operations
(note 10).
b) Major clients
The Group is not reliant on any one client or group of connected
clients for the generation of revenues.
4. Revenue
Six months Six months Year ended
ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
(unaudited)(4)
(unaudited) (audited)(4)
GBP'000 GBP'000 GBP'000
Portfolio management fee
income 42,075 38,808 77,352
Financial services commission 85 65 94
Advisory fees 2,960 2,709 5,843
Fund management fees 3,675 2,415 5,505
Total revenue from continuing
operations 48,795 43,997 88,794
------------- ----------------- --------------
(4) Restated to exclude revenue from discontinued operations
(note 10).
5. Administrative costs
The following items are included within administrative costs in
the Condensed Consolidated Statement of Comprehensive Income.
Financial Services Compensation Scheme levies
A charge of GBP3,000 was incurred in respect of Financial
Services Compensation Scheme ('FSCS') levies in the six months
ended 31 December 2017 (six months ended 31 December 2016: GBPnil;
year ended 30 June 2017: GBP459,000).
Disposal costs
Legal and professional costs of GBP82,000 were incurred in
relation to the disposal of Braemar Estates (Residential) Limited
and Braemar Facilities Management Limited in the six months ended
31 December 2017 (six months ended 31 December 2016: GBPnil; year
ended 30 June 2017: GBPnil). Details of the disposal are set out in
note 10.
6. Realised gains and losses on investments
During the six months ended 31 December 2017, the Group realised
no gains on disposal of investments (six months ended 31 December
2016: GBP4,000; year ended 30 June 2017: GBP4,000). The GBP4,000
gain in the six months ended 31 December 2016 and the year ended 30
June 2017 comprised a gain of GBP13,000 on the investment in the
Braemar Group PCC Limited Student Accommodation Cell and a loss of
GBP9,000 on the investment in GLI Finance Limited redeemable
preference shares.
7. Other gains and losses
Other gains and losses represent the net changes in the fair
value of the Group's financial instruments recognised in the
Condensed Consolidated Statement of Comprehensive Income.
Six months Six months
ended ended
31 Dec 2017 31 Dec 2016 Year ended
30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Impairment of goodwill
(note 13) - - (1,986)
Impairment of investment
in joint venture - (193) (163)
Gain from changes in fair
value of financial assets
at fair value through profit
or loss (note 16) 53 109 185
(Loss) / gain from changes
in fair value of deferred
consideration (note 17) (985) 1,318 2,230
------------- ------------- -------------
Other gains and losses (932) 1,234 266
------------- ------------- -------------
8. Finance income and finance costs
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited)(5) (audited)(5)
GBP'000 GBP'000 GBP'000
Finance income
Dividends on preference
shares 20 23 43
Bank interest on deposits 12 8 13
Finance income from deferred 4 - -
consideration
Total finance income 36 31 56
------------- ----------------- ---------------
Finance costs
Finance cost of deferred
consideration 88 159 263
------------- ----------------- ---------------
Total finance costs 88 159 263
------------- ----------------- ---------------
(5) Restated to exclude finance income from discontinued
operations (note 10).
9. Taxation
The current tax expense for the six months ended 31 December
2017 was calculated based on the estimated average annual effective
tax rate.
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
UK Corporation Tax 1,808 1,924 3,648
Under provision in prior
years - 75 167
------------- -------------- -------------
Total current taxation 1,808 1,999 3,815
Deferred tax credits (679) (282) (1,026)
Research and development
tax credit - - (433)
Effect of change in tax
rate on deferred tax - (127) (126)
Total income tax expense 1,129 1,590 2,230
------------- -------------- -------------
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
On 1 April 2017, the standard rate of Corporation Tax in the UK
was reduced to 19%. As a result the effective rate of Corporation
Tax applied to the taxable profit for the period ended 31 December
2017 is 19.00% (six months ended 31 December 2016: 19.75%; year
ended 30 June 2017: 19.75%).
In addition to the change in the rate of UK Corporation Tax
disclosed above, the Finance (No.2) Act 2015, which was
substantively enacted in October 2015, will further reduce the main
rate to 17% in 2020. Deferred tax assets and liabilities are
calculated at the rate that is expected to be in force when the
temporary differences unwind, but limited to the extent that such
rates have been substantively enacted. The tax rate used to measure
the deferred tax assets and liabilities of the Group is therefore
17.00% (six months ended 31 December 2016: 18.70%; year ended 30
June 2017: 17.00%) and will be reviewed in future years subject to
new legislation.
During the year ended 30 June 2017, the Group made a claim for
research and development tax relief in relation to qualifying
expenditure on software development incurred in the years ended 30
June 2014 and 30 June 2015. This resulted in a reduction in the
Corporation Tax liabilities of the respective years, and a
repayment of GBP433,000 from HMRC. The Group will consider whether
further claims can be made for qualifying expenditure in the year
ended 30 June 2016 and thereafter in due course.
10. Discontinued operations
On 1 December 2017, the Group disposed of its Property
Management division, comprising the wholly owned subsidiaries
Braemar Estates (Residential) Limited and Braemar Facilities
Management Limited ('the disposal group'). Profit from discontinued
operations is disclosed separately in the Condensed Consolidated
Statement of Comprehensive Income, being the results of the
disposal group to 1 December 2017 and the gain on disposal.
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
(Loss) / profit of discontinued
operations (326) 16 110
Gain on disposal of discontinued 823
operations - -
Profit from discontinued
operations 497 16 110
------------- -------------- -------------
a) Profit or loss of discontinued operations
The results of discontinued operations for the period prior to
disposal on 1 December 2017 are shown below.
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Revenue 1,195 1,339 2,922
Administrative costs (1,523) (1,335) (2,826)
------------- -------------- -------------
Operating profit (328) 4 96
Finance income 2 12 14
(Loss) / profit before
tax (326) 16 110
Taxation - - -
(Loss) / profit of discontinued
operations (326) 16 110
------------- -------------- -------------
b) Gain on disposal of discontinued operations
The gain on disposal of discontinued operations is the total
consideration received or receivable less the fair value of the net
assets of the disposal group. The gain is recognised in the
Condensed Consolidated Statement of Comprehensive Income during the
six months ended 31 December 2017.
GBP'000 GBP'000
Consideration received or receivable
Initial consideration received 966
Fair value of contingent consideration
(note 15) 913
Total disposal consideration 1,879
Fair value of net assets (459)
Fair value of goodwill (230)
Fair value of acquired client
relationship contracts (367)
--------
Total net assets on disposal (1,056)
Gain on disposal of discontinued
operations 823
--------
Initial cash consideration of GBP966,000 was received on
completion. Additional cash consideration will also be receivable,
contingent on the disposal group generating revenue equal to or in
excess of a 'target' revenue amount during the period 1 July 2017
to 30 June 2019. On disposal, all conditions were expected to be
met and therefore the maximum contingent consideration of
GBP966,000 was recognised at its fair value of GBP913,000 based on
the discounted forecast cash flows. This gain is presented within
profit from discontinued operations in the Condensed Consolidated
Statement of Comprehensive Income for the six months ended 31
December 2017.
There has been no change in the fair value of contingent
consideration since the disposal date as the target revenue is
still expected to be achieved. Finance income of GBP4,000 was
recognised in the period ended 31 December 2017 in relation to the
discounting of the contingent consideration receivable (note
15).
Disposal costs of GBP82,000 were incurred during the six months
ended 31 December 2017 in relation to the sale.
11. Earnings per share
The directors believe that underlying earnings per share provide
a truer reflection of the Group's performance in the period.
Underlying earnings per share are calculated based on 'underlying
earnings', which are defined as post-tax profit for the period
attributable to equity holders of the Company ('earnings') before
the finance income and costs of deferred consideration, changes in
fair value of deferred consideration, amortisation of client
relationship contracts and contracts acquired with fund managers,
impairment of goodwill, the exceptional costs of resolving legacy
matters, business disposal costs and profit or loss from
discontinued operations. The tax effect of these adjustments is
also considered and the tax charge is adjusted accordingly.
Earnings for the period used to calculate earnings per share as
reported in these condensed consolidated financial statements were
as follows:
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
(Loss) / earnings from continuing
operations (481) 6,555 5,704
Profit from discontinued operations 497 16 110
Earnings attributable to ordinary
shareholders 16 6,571 5,814
Goodwill impairment (note
13) - - 1,986
Disposal costs (note 5) 82 - -
Finance income from deferred
consideration (note 15) (4) - -
Finance cost of deferred consideration
(note 17) 88 159 263
Changes in fair value of deferred
consideration (note 17) 985 (1,318) (2,230)
Amortisation of acquired client
relationship contracts (note
13) 1,084 1,099 2,200
Amortisation of contracts
acquired with fund managers
(note 13) 111 167 335
Exceptional costs of resolving
legacy matters 5,506 - 6,500
Tax impact of adjustments (864) (284) (525)
Underlying profit from discontinued
operations (497) (32) (110)
------------- -------------- -------------
Underlying earnings for the
period(6) 6,507 6,362 14,233
(6) Underlying earnings for comparative periods have been
restated to include software amortisation, consistent with the
treatment in the current period.
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. 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 weighted average number of shares in issue during the period
was as follows:
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
Number of Number of Number of
shares shares shares
Weighted average number of
shares in issue 13,641,290 13,518,502 13,537,222
Effect of dilutive potential
shares issuable on exercise
of employee share options 58,046 53,095 59,872
------------- -------------- -------------
Diluted weighted average number
of shares in issue 13,699,336 13,571,597 13,597,094
------------- -------------- -------------
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
p p p
Based on reported earnings:
Basic (loss) / earnings per
share from:
- Continuing operations (3.53) 48.49 42.14
- Discontinued operations 3.65 0.12 0.81
------------- -------------- -------------
Total basic earnings per share 0.12 48.61 42.95
Diluted (loss) / earnings
per share from:
- Continuing operations (3.51) 48.30 41.95
- Discontinued operations 3.63 0.12 0.81
------------- -------------- -------------
Total diluted earnings per
share 0.12 48.42 42.76
Based on underlying earnings(7)
:
Basic earnings per share 47.70 47.06 105.14
Diluted earnings per share 47.50 46.88 104.68
(7) Underlying earnings per share for comparative periods have
been restated to include software amortisation, consistent with the
treatment in the current period.
12. Dividends
Six months Six months
ended ended
31 Dec 2017 31 Dec 2016 Year ended
30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Final dividend paid on ordinary
shares 3,524 3,101 3,101
Interim dividend paid on ordinary
shares - - 2,021
Total dividends 3,524 3,101 5,122
------------- ------------- -------------
An interim dividend of 17.0p (six months ended 31 December 2016:
15.0p) per share was declared by the Board of Directors on 12 March
2018. It will be paid on 24 April 2018 to shareholders who are on
the register at the close of business on 23 March 2018. In
accordance with IAS 10, this dividend has not been included as a
liability in the condensed consolidated financial statements at 31
December 2017.
A final dividend for the year ended 30 June 2017 of 26.0p (year
ended 30 June 2016: 23.0p) per share was paid on 27 October
2017.
13. Intangible assets
Contracts
Acquired acquired
client with
relationship fund
Goodwill Software contracts managers Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July 2016 36,006 5,081 32,747 3,522 77,356
Additions - 943 - - 943
At 31 December
2016 36,006 6,024 32,747 3,522 78,299
Additions - 1,708 - - 1,708
Disposals - - (2) (1) (3)
At 30 June 2017 36,006 7,732 32,745 3,521 80,004
Additions - 1,699 - - 1,699
Disposals (230) (77) (584) - (891)
Reclassification
to Property, Plant
and Equipment - (943) - - (943)
At 31 December
2017 35,776 8,411 32,161 3,521 79,869
--------- --------- -------------- ---------- --------
Accumulated amortisation
At 1 July 2016 - 530 8,115 2,862 11,507
Amortisation charge - 603 1,099 167 1,869
--------- --------- -------------- ---------- --------
At 31 December
2016 - 1,133 9,214 3,029 13,376
Amortisation charge - 725 1,101 168 1,994
Impairment 1,986 - - - 1,986
At 30 June 2017 1,986 1,858 10,315 3,197 17,356
Amortisation charge - 923 1,084 111 2,118
Disposals - (61) (217) - (278)
Reclassification
to Property, Plant
and Equipment - (791) - - (791)
--------- --------- -------------- ---------- --------
At 31 December
2017 1,986 1,929 11,182 3,308 18,405
--------- --------- -------------- ---------- --------
Net book value
At 1 July 2016 36,006 4,551 24,632 660 65,849
At 31 December
2016 36,006 4,891 23,533 493 64,923
At 30 June 2017 34,020 5,874 22,430 324 62,648
--------- --------- -------------- ---------- --------
At 31 December
2017 33,790 6,482 20,979 213 61,464
--------- --------- -------------- ---------- --------
a) Goodwill
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units ('CGUs') that are expected
to benefit from that business combination. The carrying amount of
goodwill in respect of these CGUs within the operating segments of
the Group comprises:
31 Dec 2017
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Funds
Braemar Group Limited
('Braemar') 3,320 3,550 3,550
Levitas Investment Management
Services Limited ('Levitas') 9,227 11,213 9,227
------------- ------------- ------------
12,547 14,763 12,777
International
Brooks Macdonald Asset
Management (International)
Limited and Brooks Macdonald
Retirement Services (International)
Limited (collectively
'Brooks Macdonald International') 21,243 21,243 21,243
Total goodwill 33,790 36,006 34,020
------------- ------------- ------------
At the reporting date, there were no indicators that the
carrying amount of goodwill should be impaired.
During the six months ended 31 December 2017, GBP230,000 of
goodwill attributable to the Braemar CGU was disposed of. This
reflects the amount of goodwill within the Braemar CGU that is
attributable to the disposal group, which was previously included
within this CGU. Refer to note 10 for details of the disposal.
b) Computer software
Computer software costs are amortised on a straight line basis
over an estimated useful life of four years. Costs incurred on
internally developed computer software are initially recognised at
cost and when the software is available for use, the costs are
amortised on a straight line basis over an estimated useful life of
four years.
During the six months ended 31 December 2017, two of the Group's
subsidiaries, Brooks Macdonald Asset Management (International)
Limited and Brooks Macdonald Retirement Services International
Limited, reclassified IT equipment that was formerly recognised as
software to equipment and leasehold improvements within property,
plant and equipment. There has been no impact to the amortisation
or depreciation previously charged.
c) Acquired client relationship contracts
This asset represents the fair value of future benefits accruing
to the Group from acquired client relationship contracts. The
amortisation of client relationships is charged to the Condensed
Consolidated Statement of Comprehensive Income on a straight line
basis over their estimated useful lives (15 to 20 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 initially recognised at
cost and amortised on a straight line basis over an estimated
useful life of five years.
14. Property, plant and equipment
During the six months ended 31 December 2017, the Group acquired
assets at a cost of GBP1,174,000 (six months ended 31 December
2016: GBP440,000; year ended 30 June 2017: GBP892,000). The net
book value of fixed assets disposed of in the period was GBP2,000
(six months ended 31 December 2016: GBP9,000; year ended 30 June
2017: GBP9,000), resulting in a gain on disposal of GBPnil (six
months ended 31 December 2016: GBP4,000; year ended 30 June 2017:
GBP4,000). The asset disposal was in relation to the disposal of
Braemar Estates (Residential) Limited and Braemar Facilities
Management (Limited) described in note 10. During the six months
ended 31 December 2017, depreciation of GBP573,000 was charged (six
months ended 31 December 2016: GBP507,000; year ended 30 June 2017:
GBP989,000). During the six months ended 31 December 2017, IT
equipment with a net book value of GBP152,000 was transferred to
equipment and leasehold improvements from intangible assets having
been previously classified as software (note 13).
15. Available for sale financial assets
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of period 658 1,715 1,715
Additions 913 5 5
Finance income from deferred
consideration 4 - -
Reclassification of loan
(non-cash transfer) - 150 150
Net gain / (loss) from
changes in fair value (3) 4 1
Revaluation reserve recycled - - 6
Disposals - (1,219) (1,219)
At end of period 1,572 655 658
------------- -------------- -------------
At 1 July 2017, the Group held an investment of 500,000
redeemable GBP1 preference shares in an unlisted company
incorporated in the UK, GBP150,000 preference share capital in an
unlisted company incorporated in the Channel Islands and an
offshore bond with market value at that date of GBP8,000. The
preference shares carry an entitlement to a fixed preferential
dividend at a rate of eight per cent per annum.
During the six months ended 31 December 2017, the Group disposed
of two subsidiary companies, Braemar Estates (Residential) Limited
and Braemar Facilities Management Limited. The Group recognised a
corresponding contingent consideration receivable in respect of
deferred consideration receivable by the Group from the purchaser
at its fair value of GBP917,000, including finance income from
deferred consideration of GBP4,000. Full details of the disposal
are set out in note 10.
At 31 December 2017, the offshore bond had a market value of
GBP5,000 (at 31 December 2016: GBP5,000; at 30 June 2017:
GBP8,000), with the loss from changes in fair value of GBP3,000 for
the six months ended 31 December 2017 being recognised in other
comprehensive income (six months ended 31 December 2016: nil, year
ended 30 June 2017: GBP3,000 gain).
Available for sale assets at the end of the period consisted of
the following:
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Offshore bond 5 5 8
Unlisted redeemable preference
shares 650 650 650
Contingent consideration 917 - -
receivable
------------- -------------- -------------
Total 1,572 655 658
------------- -------------- -------------
16. Financial assets at fair value through profit or loss
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of period 1,185 1,000 1,000
Gain from change in fair
value 53 109 185
At end of period 1,238 1,109 1,185
------------- -------------- -------------
Financial assets at fair value through profit or loss comprise
investments in equity share capital of publicly listed companies
and Open Ended Investment Companies (OEICs). The market value of
the investments at 31 December 2017 was GBP1,238,000 (at 31
December 2016: GBP1,109,000; at 30 June 2017: GBP1,185,000). These
investments are classified as level 1 within the fair value
hierarchy, as the inputs used to determine the fair value are
quoted prices for the shares in active markets at the measurement
date.
17. Deferred consideration
Deferred consideration is split between non-current liabilities
(see below) and provisions in current liabilities (note 18) to the
extent that it is due to be paid within one year of the reporting
date. It reflects the directors' best estimate of amounts payable
in the future in respect of certain client relationships and
subsidiary undertakings that were acquired by the Group. Deferred
consideration is measured at its fair value based on discounted
expected future cash flows.
The movements in the total deferred consideration balance during
the year were as follows:
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of the period 3,384 6,931 6,931
Finance cost of deferred
consideration 88 159 263
Fair value adjustments 985 (1,318) (2,230)
Payments made during the
period (1,852) (1,580) (1,580)
At end of period 2,605 4,192 3,384
------------- -------------- -------------
Analysed as:
Amounts falling due within
one year 1,323 1,724 1,664
Amounts falling due after
more than one year 1,282 2,468 1,720
At end of period 2,605 4,192 3,384
------------- -------------- -------------
There were no additions to deferred consideration in the period.
Payments totalling GBP1,852,000 (six months ended 31 December 2016:
GBP1,580,000; year ended 30 June 2017: GBP1,580,000) were made
during the period to the vendors of Levitas. Full details of the
Levitas acquisition are disclosed in note 13 of the 2015 Annual
Report and Accounts.
An increase in the fair value of deferred consideration of
GBP985,000 (six months ended 31 December 2016: reduction of
GBP1,318,000; year ended 30 June 2017: reduction of GBP2,230,000)
was recognised during the period, all in respect of Levitas, with a
corresponding loss recognised within other gains and losses in the
Condensed Consolidated Statement of Comprehensive Income. The
amount payable is based on the incremental growth in FUM of the TM
Levitas funds, measured at annual intervals. As forecast growth was
exceeded during the period, the FUM forecast was subsequently
revised and the estimated future deferred consideration payments
increased accordingly. The outstanding deferred consideration
liability at 31 December 2017 relates entirely to amounts owed to
the vendors of Levitas.
A range of final outcomes for the expected total deferred
consideration payable cannot be estimated as the future value of
the funds under management is dependent on several unpredictable
variables, including client retention and market movements.
Amounts falling due after more than one year from the reporting
date are presented within non-current liabilities as shown
below:
Six months
ended
Six months
31 Dec 2017 ended Year ended
31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of the period 1,720 5,290 5,290
Finance cost of deferred
consideration 88 - 263
Fair value adjustments 985 (1,318) (2,230)
Transfer to current liabilities (1,511) (1,504) (1,603)
At end of period 1,282 2,468 1,720
------------- -------------- -------------
18. Provisions
Exceptional
costs of
resolving
legacy Deferred
Client compensation matters consideration FSCS levy Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2016 673 - 1,641 470 2,784
Charge to the Statement
of Comprehensive
Income 398 - - - 398
Finance cost of
deferred consideration - - 159 - 159
Transfer from non-current
liabilities - - 1,504 - 1,504
Utilised during
the period (106) - (1,580) (470) (2,156)
-------------------- ------------ --------------- ---------- --------
At 31 December
2016 965 - 1,724 - 2,689
Charge to the Statement
of Comprehensive
Income (190) 6,500 - 621 6,931
Finance cost of
deferred consideration - - (159) - (159)
Transfer from non-current
liabilities - - 99 - 99
Utilised during
the period 32 - - - 32
-------------------- ------------ --------------- ---------- --------
At 30 June 2017 807 6,500 1,664 621 9,592
Charge to the Statement
of Comprehensive
Income (499) 5,506 - 3 5,010
Transfer from non-current
liabilities - - 1,511 - 1,511
Utilised during
the period (107) (1,265) (1,852) (521) (3,745)
-------------------- ------------ --------------- ---------- --------
At 31 December
2017 201 10,741 1,323 103 12,368
-------------------- ------------ --------------- ---------- --------
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.
b) Exceptional costs of resolving legacy matters
Following a review into legacy matters arising from the former
Spearpoint business, which was acquired by the Group in 2012, a
provision of GBP6,500,000 was recognised in the year ended 30 June
2017 for costs of resolving these including associated expenses.
These matters relate to a number of discretionary portfolios
formerly managed by Spearpoint, now managed by Brooks Macdonald
Asset Management (International) Limited, and a Dublin-based fund,
for which Spearpoint acted as investment manager.
Goodwill offers were made to the discretionary portfolio clients
in September 2017 however it became apparent that the calculation
was affected by quality issues with the data derived from legacy
systems. A comprehensive review of the data sources, calculations
and methodology was initiated, requiring extensive use of third
party expertise. The review has now concluded and final goodwill
offer letters will be issued by the end of March 2018.
The Group has also been involved in extensive and prolonged
discussions with to the board of the Dublin-based fund, seeking to
deal with the matter proactively. A goodwill proposal was made to
the directors of the fund in October 2017. Some progress has been
made but it has not been possible to reach an agreement. The Group
remains committed to reaching a settlement on terms in line with
the initial goodwill proposal.
As a result of movements in the expected total cost of the
goodwill offers and associated expenses, the Group has increased
the provision for the exceptional costs of resolving these legacy
matters by GBP5,506,000, which has been recognised in the Condensed
Consolidated Statement of Comprehensive Income.
Amounts of GBP1,265,000 were utilised during the six months
ended 31 December 2017 (six months ended 31 December 2016: GBPnil;
year ended 30 June 2017: GBPnil), comprising goodwill payments and
associated expenses incurred.
c) Deferred consideration
Deferred consideration has been included within provisions as a
current liability to the extent that it is due for payment within
one year of the reporting date. Details of the total deferred
consideration payable are provided in note 17.
d) FSCS levy
At 31 December 2017 provisions include an amount of GBP103,000
(at 31 December 2016: GBPnil; at 30 June 2017: GBP621,000) in
respect of expected levies by the Financial Services Compensation
Scheme. This relates to an anticipated supplementary levy for the
2017/18 scheme year, which is likely to be raised in January 2018.
The expected levy for the 2018/19 scheme year has been announced by
the FSCS but does not yet meet the recognition criteria for a
provision.
19. Reconciliation of operating profit to net cash inflow from
operating activities
Six months Six months
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating profit / (loss)
from:
- Continuing operations 700 8,288 8,186
- Discontinued operations
(note 10) (328) 4 96
------------- ------------- -------------
Operating profit 372 8,292 8,282
Depreciation of property,
plant and equipment 573 507 989
Gain on sale of property,
plant and equipment - (4) (4)
Gain on sale of available
for sale financial assets - (4) (4)
Available for sale reserve
recycled - - 6
Amortisation of intangible
assets 2,118 1,869 3,863
Other losses / (gains) 932 (1,234) (266)
(Increase) / decrease in
trade and other receivables (2,442) 865 1,265
(Decrease) / increase in
trade and other payables (2,010) (3,065) 2,325
(Decrease) / increase in
provisions 3,117 (178) 6,785
(Decrease) / increase in
other non-current liabilities (69) 85 43
Reduction in net assets
due to disposal of discontinued
operations (457) - -
Share-based payments charge 820 641 1,237
------------- ------------- -------------
Net cash inflow from operating
activities 2,954 7,774 24,521
------------- ------------- -------------
20. Related party transactions
At 31 December 2017, none of the Company's directors (at 31
December 2016: none; at 30 June 2017: one) had taken advantage of
the season ticket loan facility that is available to all staff. The
total amount outstanding at the reporting date was GBPnil (at 31
December 2016: GBPnil; at 30 June 2017: GBP6,000).
21. Equity-settled share-based payments
Share options granted during the period under the Group's equity
settled share-based payment schemes were as follows:
Exercise Number of
price Fair value options
p p
Company Share Option Plan 1,966 - 2,023 286 - 287 7,435
Long Term Incentive Scheme nil 1,830 - 1,965 95,857
No options were granted in respect of the Company's other equity
settled share-based payment schemes during the six months ended 31
December 2017. The charge to the Condensed Consolidated Statement
of Comprehensive Income for the six months ended 31 December 2017
in respect of all equity settled share-based payment schemes was
GBP820,000 (six months ended 31 December 2016: GBP641,000; year
ended 30 June 2017: GBP1,237,000).
Statement of directors' responsibilities
The directors confirm that the half yearly financial report has
been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union
and that the interim management report includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The directors of Brooks Macdonald Group plc are listed on page
36.
By order of the Board of Directors
S J Jackson
Finance Director
12 March 2018
Independent review report to Brooks Macdonald Group plc
Report on the condensed consolidated half yearly financial
statements
Our conclusion
We have reviewed Brooks Macdonald Group plc's condensed
consolidated financial statements (the "interim financial
statements") in the Half Yearly Financial Report of Brooks
Macdonald Group plc for the 6 month period ended 31 December 2017.
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 31 December 2017;
-- the Condensed Consolidated Statement of Comprehensive Income for the period then ended;
-- the Condensed Consolidated Statement of Cash Flows for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Yearly
Financial Report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Yearly Financial Report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Half Yearly Financial Report in accordance with the
AIM Rules for Companies which require that the financial
information must be presented and prepared in a form consistent
with that which will be adopted in the company's annual financial
statements.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Yearly Financial Report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the AIM Rules for Companies and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Yearly
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
12 March 2018
Notes:
a) The maintenance and integrity of the Brooks Macdonald Group
plc website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the interim financial
statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGGDXBGBBGIX
(END) Dow Jones Newswires
March 13, 2018 03:01 ET (07:01 GMT)
Brooks (AQSE:BRK.GB)
過去 株価チャート
から 8 2024 まで 9 2024
Brooks (AQSE:BRK.GB)
過去 株価チャート
から 9 2023 まで 9 2024
