TIDMBRK
RNS Number : 0471M
Brooks Macdonald Group PLC
12 September 2019
12 September 2019
BROOKS MACDONALD GROUP PLC
Final Results for the year ended 30 June 2019
Record level of funds under management, increased underlying
profit margin, strategy on track
Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group"),
the AIM listed wealth management group, today announces its audited
results for the year ended 30 June 2019.
Year ended Year ended Change
30.06.2019 30.06.2018
Total discretionary funds under
management ("FUM") continuing operations GBP13.2bn GBP12.3bn 6.8%
Revenue, continuing operations GBP107.3m GBP99.9m 7.3%
Underlying Results(1)
Underlying profit before tax GBP21.0m GBP18.8m 11.8%
Underlying profit margin 19.6% 18.8% +0.8ppt
Underlying earnings per share(2) 125.9p 123.2p 2.2%
Statutory Results
Statutory profit before tax GBP8.2m GBP6.7m 22.4%
Statutory earnings per share(2) 41.7p 39.4p 5.8%
Net cash GBP34.6m GBP30.9m 11.8%
Dividends
Proposed final dividend 32.0p 30.0p 6.7%
Total dividend 51.0p 47.0p 8.5%
1 The underlying figures represent the results for the Group's
continuing activities excluding certain adjusting items as listed
on page 11. A reconciliation between the Group's statutory and
underlying profit before tax is also included on page 11.
Comparative results have been restated to exclude discontinued
operations and present a more appropriate year-on-year
comparison
2 Lower improvement in underlying and statutory earnings per
share due to FY18 tax credit not recurring in FY19
Caroline Connellan, Chief Executive of Brooks Macdonald,
commented:
"I am delighted that we continue to make good progress on our
strategy, with underlying profit margin increased to 19.6%
reflecting our commitment to improve margins in the medium-term.
The actions we announced in January have started to streamline the
business, deliver efficiencies and make Brooks Macdonald easier to
do business with. Looking ahead, we expect to deliver improved
margins in the medium term by investing in our talent and
capabilities to drive growth while continuing to exercise tight
cost discipline.
"Our net new business of 5.4% in UK Investment Management is
again one of the best in the sector, reflecting the strength of our
client and adviser relationships. This, coupled with robust
investment performance, drove FUM to a new record of GBP13.2
billion at the year end.
"We remain cautious about the short-term outlook given the
backdrop of political and macroeconomic uncertainty and its
continuing effect on client sentiment. Nonetheless, the fundamental
opportunity for Brooks Macdonald remains strong, and we are
confident in our positioning and our continued ability to drive
sustainable value-enhancing growth over the medium term."
Financial highlights
-- Underlying profit margin up from 18.8% to 19.6%, reflecting
the Group's commitment to increase profit margins in the medium
term
-- Positive organic growth (net new business) of 3.3% (GBP0.4
billion) and robust investment performance contributing to an
increase of 6.8% (GBP0.8 billion) in FUM to a new record GBP13.2
billion, reflecting strength of offering and relationships:
o Net flows of 5.4% in UK Investment Management ("UKIM"),
remaining among the best in the sector
- BPS and MPS grew strongly, up 7.2% and 14.6% respectively
- Double-digit growth in Funds, up 10.9% to GBP1.6 billion FUM
(FY18: GBP1.5 billion) with the Defensive Capital Fund now up to
GBP0.7 billion based on net flows of 17.7%
o International FUM down 5.2% to GBP1.6 billion (FY18 FUM:
GBP1.7 billion) due to client attrition following the previously
disclosed loss of a client-facing team in summer 2018
-- Total dividend increased by 8.5% to 51.0p (FY18: 47.0p)
reflecting the Board's continued confidence in the strength of the
underlying business and commitment to a progressive dividend
policy
Strategic progress
-- Strategy execution on track:
o Successful completion of first phase of our strategy,
strengthening the foundations of the business and focusing on our
core offering through sale of the Employee Benefits business to
Brunsdon and exiting Investment Management Agreement for the Ground
Rent Income Fund
o Now in the second phase, investing in our talent at all levels
to drive growth, while enhancing our proposition to clients and
advisers with a pipeline of innovative products and services
(revamped Court of Protection product and new Responsible
Investment Service and Decumulation offerings)
-- Decisive action taken in January 2019 to streamline the
organisation and eliminate duplication, driving efficiency and
effectiveness in support of our commitment to continue to improve
profit margins in the medium term, underpinned by ongoing strong
cost discipline against a backdrop of weaker market conditions
-- New CEO of International appointed in April to reinvigorate
the business and drive medium-term growth and margin
improvement
-- Resolution of Channel Islands legacy issues progressing, with
shareholders of Dublin-based fund voting unanimously to approve our
goodwill offer. Working with all stakeholders, including relevant
regulators
Analysis of discretionary fund flows over the year
Full Year to 30 June 2019
GBPm Opening Net new Performance Closing Net new Total growth
FUM business FUM business (%)
(%)
-------- ---------- ------------ -------- ---------- -------------
BPS 7,699 303 251 8,254 3.9 7.2
-------- ---------- ------------ -------- ---------- -------------
MPS 1,488 161 56 1,705 10.8 14.6
-------- ---------- ------------ -------- ---------- -------------
UKIM discretionary 9,187 465 307 9,959 5.1 8.4
-------- ---------- ------------ -------- ---------- -------------
Funds 1,428 107 49 1,584 7.5 10.9
-------- ---------- ------------ -------- ---------- -------------
UKIM total 10,615 572 356 11,543 5.4 8.7
-------- ---------- ------------ -------- ---------- -------------
International 1,693 (163) 74 1,604 (9.6) (5.2)
-------- ---------- ------------ -------- ---------- -------------
Non-core
funds 4 0 0 4 0.0 (9.6)
-------- ---------- ------------ -------- ---------- -------------
Total 12,312 409 430 13,151 3.3 6.8
-------- ---------- ------------ -------- ---------- -------------
An analyst meeting will be held at 9.15 for 9.30am on Thursday,
12 September at the offices of MHP Communications, 6 Agar Street,
London, WC2N 4HN.
Please contact Ailsa Prestige on
020 3128 8147 or e-mail brooks@mhpc.com for further details.
Enquiries to:
Brooks Macdonald Group plc
Caroline Connellan, Chief Executive
Ben Thorpe, Finance Director 020 7499 6424
Peel Hunt LLP (Nominated Adviser and Broker)
Guy Wiehahn / John Welch 020 7418 8900
MHP Communications 020 3128 8540
Reg Hoare / Simon Hockridge / Charlie Barker brooks@mhpc.com
/ Robert Collett-Creedy
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries,
provides leading investment management services in the UK and
internationally. The Group, which was founded in 1991 and began
trading on AIM in 2005, had Discretionary Funds under Management of
GBP13.2 billion as at 30 June 2019.
Brooks Macdonald offers a range of investment management
services to private high net worth individuals, pension funds,
institutions, and trusts. The Group also provides financial
planning as well as offshore investment management and acts as fund
manager to a regulated OEIC providing a range of risk-managed
multi-asset funds and a specialised absolute return fund.
The Group has thirteen offices across the UK and the Channel
Islands including London, East Anglia, Hampshire, Leamington Spa,
Leeds, Manchester, Taunton, Tunbridge Wells, Scotland, Wales,
Jersey, and Guernsey.
www.brooksmacdonald.com / @BrooksMacdonald
LEI: 213800WRDF8LB8MIEX37
Chairman's statement
Introduction
This is my first Chairman's statement since taking over from
Christopher Knight in March and, before discussing the Group's
continuing progress, I would like to reiterate my thanks to Chris
for his service to Brooks Macdonald. He completed 17 years on the
Board and 14 as Chairman, all conducted with diligence and
distinction, and handed over to me a company with an increasingly
robust risk management and operating platform, a continuing track
record of growth and a strong management team.
FY19 was Caroline Connellan's second full year as Chief
Executive, and Caroline and her team have continued to drive the
business forward. We have maintained strong commercial performance,
increasing underlying profit margin and growing funds under
management, despite a backdrop of macroeconomic and political
uncertainty, weaker client sentiment and lower flows. As part of
our drive to deliver improvement in profit margin in the medium
term, we announced in January measures to streamline our processes
and eliminate duplication, driving efficiency and effectiveness
through the business. These changes helped us deliver continued
profit growth despite the more difficult economic conditions.
Shifting focus in our strategy
We have continued to implement the strategy defined by Caroline
and her team in 2017. During the year, we completed the first phase
of reinforcing the foundations of the business and took decisive
action to improve margins. We also moved into the second phase
where we are increasing value by enhancing what we do and how we do
it, across three main areas.
First, we have maintained focus on our clients and advisers,
including most recently starting to roll out our new adviser and
client portal, giving advisers and clients a significant upgrade in
prompt and rapid access to data on their investments. Second, as
discussed above, we have driven greater efficiency and
effectiveness, capturing economies of scale and making us easier to
deal with. Third, we have continued to invest in our talent and
capability, with new development programmes at leadership and
management levels.
Our culture is to support our clients throughout their
investment journey, giving access to information and making it easy
for them to do business with us, all in support of our mission to
protect and enhance their wealth and helping them to realise their
ambitions. Our culture is underpinned by our guiding
principles:
-- We do the right thing
-- We are connected
-- We care
-- We make a difference
Our Centralised Investment Process continues to drive robust
performance, even in difficult market conditions, underpinning our
mission to protect and enhance our clients' wealth. Our investment
performance continues to be ahead of the Asset Risk Consultants
("ARC") Private Client Index benchmarks across all risk mandates
over three and five years.
Performance overview
The Group continues to make strong progress - our funds under
management increased during the financial year from GBP12.3 billion
to GBP13.2 billion, an increase of 6.8%. Our rate of organic net
flows (3.3% at Group level, 5.4% for UK Investment Management)
continues to be among the highest in the sector, although below
levels of recent years, reflecting weak client sentiment, driven by
elevated macroeconomic and political uncertainty.
Our revenue has grown by 7.3% in line with funds under
management ("FUM") , bringing the full year total to GBP107.3
million. The increase we have reported in underlying profit before
tax, at 11.8%, is well ahead of both FUM and revenue growth,
resulting in a figure of GBP21.0 million, up from last year's
GBP18.8 million. Underlying profit margin has risen from 18.8% to
19.6%, reflecting our commitment to increased margins in the medium
term, and underlying earnings per share have risen 2.2% from 123.2
pence to 125.9 pence.
Statutory profit from continuing operations rose 22.4% to GBP8.2
million (FY18: GBP6.7 million). Statutory earnings per share rose
5.8% to 41.7 pence (FY18: 39.4 pence).
Dividend
The Board has recommended a final dividend of 32.0 pence (FY18:
30.0 pence) which, subject to approval by shareholders, will result
in total dividends for the year of 51.0 pence (FY18: 47.0 pence).
This represents an increase of 8.5% on the previous year and
reaffirms the Board's confidence in the strength of the business
and our commitment to a progressive dividend policy. The final
dividend will be paid on 8 November 2019 to shareholders on the
register at the close of business on 27 September 2019.
Board changes
There have been several changes to the Board during the last
year. Last August, Ben Thorpe arrived as Group Finance Director
from Brewin Dolphin and last September, John Linwood, a former
Chief Technology Officer for the BBC, joined the business as a
Non-Executive Director. In November, we announced that Nicholas
Holmes had decided to leave the business after 22 years to pursue
other opportunities. Nicholas left with the firm's best wishes for
his future career. Finally, on 1 April, when Andrew Shepherd took
over as CEO of our International business in the Channel Islands,
he stepped down from the Group Board to focus on realising the
potential of International.
Governance and regulatory
We have continued to keep abreast of regulatory change. The two
major activities in the year were the completion of work related to
the Second Markets in Financial Instruments Directive ("MiFID II")
with the implementation of the Costs and Charges regulations, and
preparation for the Senior Managers and Certification Regime
("SMCR") which goes live on 9 December. We also continued to embed
the earlier elements of MiFID II and the General Data Protection
Regulation ("GDPR").
Looking ahead
Looking ahead, the macroeconomic and political outlook is highly
uncertain, even in the very short term. The UK's future
relationship with the EU remains unclear and broader global risks,
including the potential for trade wars, are also affecting client
sentiment. While we remain cautious in our external outlook, it is
also true that the fundamental opportunity remains strong, driven
by longer-term demographic and regulatory trends. The Group is well
positioned with a strong balance sheet and supportive shareholders.
Given the fundamental opportunity and the Group's growing
organisational capabilities, we expect to deliver both enhanced
profit margins in the medium term and strong future growth.
Alan Carruthers
Chairman
11 September 2019
Chief Executive's review
Introduction
FY19 was my second full year as CEO of Brooks Macdonald and I am
delighted to report that we have continued to deliver on our
strategic priorities, as well as achieving good financial
performance. In particular, I am pleased with the increase in our
underlying profit margin, up 0.8 points to 19.6% (FY18: 18.8%),
reflecting our commitment to improve profit margins in the medium
term. We have also continued to deliver net new business levels
among the best in the sector which, alongside robust investment
performance, drove funds under management to a new record of
GBP13.2 billion (FY18: GBP12.3 billion).
During the year, we completed the first phase of our strategy,
reinforcing the foundations of the business and taking immediate
action to improve margins, and moved into a second phase of
enhancing what we do and how we do it to deliver further growth and
increased value. This second phase includes initiatives to maintain
and deepen our focus on clients and advisers, to achieve further
improvements in organisational efficiency and effectiveness, and to
invest in our talent and capabilities.
We are now well advanced in the second phase, taking the company
to a position from which we expect to deliver consistently improved
returns from a growing, sustainable and scalable business
model.
Going forward, we will continue to invest in the business,
delivering market-leading products and services for our clients and
advisers, ensuring that our risk management and operating framework
keeps pace with the changing technological and regulatory
environment, and investing in and developing our talent.
I would like to take this opportunity to thank everyone who has
contributed to another successful year for Brooks Macdonald.
Without the commitment and hard work of our people, it would not
have been possible for the company to make the progress it has, and
I am grateful to them all.
Financial performance
We are pleased to have maintained positive FUM growth with Group
FUM growing 6.8% over the year, one of the highest growth rates in
the sector.
The increase in FUM was delivered evenly between net new
business and investment performance, with GBP409 million of net
flows, and GBP430 million of investment performance or 3.5% of
performance, compared to 2.2% for the MSCI WMA Private Investor
Balanced Index.
Revenue grew in line with FUM to GBP107.3 million (FY18: GBP99.9
million), up 7.3% on prior year.
Delivering our strategy
Our strategy and our progress in implementing it are dealt with
in the Strategy section later in the document but I would highlight
two key points here. First, in the financial year we completed the
first phase of our strategy, where we reinforced the foundations of
the business and took immediate actions to improve margins.
We continued to focus on our core offering by selling our
Employee Benefits business in December and by exiting our role as
investment manager to the Ground Rent Income Fund in May.
In the second phase, we are making good progress in increasing
value by enhancing what we do and how we do it, to deliver
sustainable, value-enhancing growth.
The second point I wanted to highlight is our improving
underlying profit margin, which increased from 18.8% in FY18 to
19.6% this year. As referenced above, we have made improving
margins in the medium term a central goal of our strategy and I am
especially pleased we have been able to deliver this improvement
against a background of weaker client sentiment driven by political
and macroeconomic uncertainty.
Investment performance and market conditions
Our investment performance over FY19 was robust, maintaining our
position of being ahead of ARC benchmarks for all risk profiles
over 3 and 5 years, despite more difficult markets, especially in
the first half of the financial year. This has further demonstrated
the value of our Centralised Investment Process.
Markets were volatile over the first half of the financial year
although the second half saw a broad recovery in risk assets.
Despite a supportive employment and consumer outlook, a
weakening of inflationary pressures combined with global growth and
trade concerns has encouraged central banks to move to a more
accommodative monetary stance.
This has seen a shift in central bank policy globally, from
expectations of gradual rate tightening to markets now expecting:
(i) a series of rate cuts from the Federal Reserve; (ii) the
possibility of renewed quantitative easing from Europe's ECB; and
(iii) greater accommodation from other developed and emerging
market countries.
We are mindful of the risks to markets, in particular the
expected pace and scale of central banks' easing and geopolitical
factors such as the ongoing US-China trade impasse or UK political
tensions around Brexit. Preparing for such risks, our modest
underweight to equity markets and our modest overweight cash
positions mean we are well-placed to withstand a down-turn in
markets and take advantage of any corrections to increase equity
allocations in line with our longer-term preference for equities
over bonds.
Review of business performance
UK Investment Management ("UKIM"), our largest and most
profitable business, saw the appointment of new Co-Heads in the
year - Robin Eggar and John Wallace were promoted to their new
roles internally, reflecting the depth of talent in the
business.
UKIM delivered net new business flows of 5.4% over the year, a
growth rate among the best in the market. UKIM profit margins
improved over the year, particularly following the actions we took
in January 2019 to drive efficiency and effectiveness through the
business in a more difficult external environment.
Our ability to deliver positive net flows stems from the
strength of our relationships with advisers and we continue to
expand the number of adviser relationships. While the proportion of
advisers who outsource any of their investment management
activities to a discretionary fund manager has continued to edge up
in the past year, driven by both the opportunity for access to
investment expertise and the increasing regulatory burden, it is
still only 39% and less than a third of these outsource more than
half of their client portfolios (source: GlobalData).
Hence, we see a continuing opportunity to go broader, building
relationships with more advisers, and deeper, extending our
relationships with our current advisers.
Our flagship Bespoke Portfolio Service ("BPS") had a strong year
against a more difficult market backdrop with 3.9% net flows and
overall growth of 7.2%. In the year, we revamped our Court of
Protection offering and introduced two new BPS variants, our
Responsible Investment Service and our Decumulation Service.
Alongside our continuing innovation, the need for individuals to
save for retirement, the impact of pension freedoms, and the
growing use of Self-Invested Personal Pensions ("SIPPs") and
Individual Savings Accounts ("ISAs") are all helping support our
continuing growth.
Our Managed Portfolio Service ("MPS") was the fastest growing
element of our discretionary business, particularly MPS sold
through third party platforms which grew over 20% in the year, with
16.9% net flows. Our multi-asset funds and third party investment
solution funds both had positive years. We continue to expect both
our managed portfolio and fund-based solutions to deliver material
growth in the future. The more difficult economic conditions
attracted clients to our Defensive Capital Fund, which continued to
go from strength to strength, up 22.1% (net flows 17.7%) to GBP663
million at the year end.
I am delighted that Group Deputy CEO Andrew Shepherd took on the
role of CEO of International in April. His appointment is central
to our efforts to revitalise International as it comes towards the
conclusion of its Spearpoint legacy issues and after a difficult
year for flows.
In the past year, robust investment performance of 4.4% did not
fully offset negative net flows driven by customer attrition
following the loss of a client-facing team in summer 2018.
Andrew and his team have now mapped out a clear plan to make
International a material contributor to the Group, driving margins
up to the levels of UKIM in the medium term, and the initial steps
are well under way.
Financial Planning, our in-house Independent Financial Adviser,
had a year of transition following the arrival of its new Managing
Director, Adrian Keane-Munday, in July 2018. He has restructured
the business, emphasising the provision of comprehensive
independent financial advice and exceptional client service, as
well as introducing a new pricing framework. While it is still
early days, Adrian and his team are already seeing a positive
client response to their initiatives and we continue to seek new
opportunities to support future growth.
People strategy
We continued rolling out our people strategy initiatives across
the business. During the year, we made material investment in
leadership capability, increasing the diversity of our workforce,
and engaging with our people. The initiatives we announced in
January to streamline processes and eliminate duplication led to
overall headcount reduction, but also created capacity for us to
invest in attracting and retaining the best people to the firm,
building capability in critical areas.
Also in FY19, we completed the transition in compensation
structures resulting from our 2018 compensation and benefits review
- all staff now have an appropriate balance between their fixed and
variable pay and have a discretionary bonus measured against a
balanced scorecard of objectives.
Legacy matters arising from the former Spearpoint business
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 to 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 GBP6.5 million provision in FY17, and a
further GBP5.5 million provision in FY18.
We issued goodwill offer letters to the discretionary clients in
March 2018. The deadline for acceptance of offers has now passed,
with 84% of the clients who received a goodwill offer having
accepted. A small number of clients have rejected their goodwill
offers and some of those clients may take other routes to pursue
their claims. No such claims have been received to date.
In parallel, we have been in extensive discussions with the
Board of the Dublin-based fund, seeking to deal with the matter
proactively. New Directors, who were appointed in November 2018,
agreed our goodwill offer of GBP3.4 million and received unanimous
shareholder approval at an Extraordinary General Meeting in April
2019. Shareholders had until 4 September 2019 to claim their share,
and the company is now going into voluntary liquidation.
Throughout the discussion, our focus has been on treating
customers fairly and seeking to protect the fund's shareholders'
best interests.
As at 1 July 2018, GBP5.8 million of the total GBP12.0 million
provision had been utilised, leaving GBP6.2 million outstanding.
Over the financial year to 30 June 2019, a further GBP5.5 million
was utilised, leaving a balance of GBP0.7 million. The total
expensed provision remains unchanged and we intend to deal with any
residual issues in the ordinary course of business.
We continue to be in discussions with all stakeholders,
including relevant regulators, as we seek to bring these matters to
a conclusion.
Outlook
I am delighted that we have been able to report a year of good
performance despite more challenging conditions. I would like to
thank the advisers we work with and our clients for their
continuing support.
I look forward to continuing to deliver our strategy and build
on the success to date. We will continue to maintain our focus on
serving our clients and advisers, and to drive for greater
efficiency and effectiveness, capturing economies of scale and
making Brooks Macdonald easy to do business with. For example, we
are starting the roll-out of our new client and adviser portal and
recently opened our new office in Leeds.
We remain cautious about the short-term outlook given the
backdrop of political and macroeconomic uncertainty and its
continuing effect on client sentiment. Nonetheless, the fundamental
opportunity for the Group remains strong, and we are confident in
our positioning and our continued ability to drive sustainable
value-enhancing growth over the medium-term.
Our strong foundations also allow us to start looking at
potential high quality acquisitions.
Finally, all that we have achieved over the past year has been
made possible by the hard work of our people at all levels and I
would like to thank them for all they have done for our clients and
the advisers we work with. I look forward to what we can achieve
together as we look to take advantage of the opportunities
ahead.
Caroline Connellan
Chief Executive
11 September 2019
Finance Director's report
Review and results of the year
Over the course of my first year at Brooks Macdonald, we have
taken decisive steps to grow revenue, manage costs and enhance
profitability. The efficiency and effectiveness programme announced
in January 2019 has delivered slightly ahead of plan, resulting in
a material improvement in the Group's underlying profit margin to
19.6%, underpinning our confidence in the Group's medium-term
outlook.
The Group's total revenue for FY19 was GBP107.3 million, up 7.3%
from GBP99.9 million in FY18. The recent trend towards higher
quality fee only income has continued during FY19, with circa 75%
of BPS flows going into our fee-only products. At a divisional
level, BPS, MPS and Funds all recorded an improvement in revenues
during the year. Revenues from our International business were
relatively flat on the prior year largely due to the previously
announced loss of a small client team. Financial Planning has been
impacted by a fall in defined benefit transfers following the
exceptional levels of business written in FY18, and the sale of the
sub scale Employee Benefits business to Brunsdon Employee Benefits
Limited.
Underlying costs for the year increased by 6.4% from GBP81.1
million to GBP86.3 million. Staff costs including variable pay were
flat year-on-year. Average headcount for continuing operations fell
by 2.9% during the year and the headcount at the end of the year
was of 401 down 14.5% on the prior year. The restructuring charge
associated with this reduction of GBP3.3 million has been excluded
from underlying earnings and presented as a one-off item.
Non staff costs including Change spend increased by GBP4.9
million to GBP33.7 million primarily driven by higher spend on IT,
an increase in amortisation in relation to the Group's successfully
completed MiFID II and GDPR programmes and a higher FSCS levy.
The key priority over the year has been reducing the cost growth
trajectory and changing the way the organisation thinks about its
cost base. In addition to the significant savings achieved during
the year in connection with regulatory projects, we have completed
a number of initiatives to address other areas, including a review
of the Group's property portfolio (resulting in the announced
consolidation of the Group's London offices into its new
headquarters at 21 Lombard Street in the city), the rollout of a
new adviser and client portal and the successful implementation of
a new web-based employee expense management system.
Combined, the impact to the Group's underlying profit before tax
has been an increase of 11.8% from GBP18.8 million to GBP21.0
million, accompanied by a significant improvement in the underlying
profit before tax margin from 18.8% to 19.6%. This highlights the
strength of the management team, our functional and business
capabilities and our ability to deliver.
Group financial results summary
FY19 FY18 Change
GBPm GBPm %
--------------------------------------------- ------ ------ -------
Revenue 107.3 99.9 7.3
Underlying costs (86.3) (81.1) 6.4
Underlying profit before tax 21.0 18.8 11.8
Underlying adjustments (12.4) (11.8) 5.1
--------------------------------------------- ------ ------ -------
Profit before tax from continuing operations 8.6 6.9 24.6
Loss from discontinued operations (0.4) (0.2) 100
--------------------------------------------- ------ ------ -------
Statutory profit before tax 8.2 6.7 22.4
Taxation (2.5) (1.3) 92.3
--------------------------------------------- ------ ------ -------
Profit after tax 5.7 5.4 5.6
--------------------------------------------- ------ ------ -------
Underlying profit before tax margin 19.6% 18.8% 0.8ppt
Underlying basic earnings per share 125.9p 123.2p 2.2%
Statutory profit before tax margin 7.6% 6.7% 0.99ppt
Statutory basic earnings per share 41.7p 39.4p 5.8%
Dividends per share 51.0p 47.0p 8.5%
--------------------------------------------- ------ ------ -------
FUM
Amidst the relatively weak market sentiment driven by the global
macroeconomic slowdown, trade tensions and political uncertainty in
the UK, the Group recorded positive net flows (GBP0.4 billion) and
strong investment performance (GBP0.4 billion) resulting in a new
record discretionary FUM total of GBP13.2 billion, an increase of
6.8% over the previous year.
Investment performance continues to be robust at 3.5%, beating
the benchmark MSCI WMA Private Investor Balanced Index which
increased by 2.2% over the same period.
FUM movement in the year
At a divisional level, within UKIM, our onshore business, we
have seen decent net flows across the BPS (3.9%), MPS (10.8%) and
Funds (7.5%) divisions. These were partially offset by negative net
outflows (-9.6%) recorded within our International business, driven
principally by the loss of a client-facing team in the prior
year.
FUM by segment
FY19 FY18 Change
GBPm GBPm %
-------------------------- ------ ------ ------
BPS 8,254 7,699 7.2
MPS 1,705 1,488 14.6
Funds 1,584 1,428 10.9
-------------------------- ------ ------ ------
UKIM total 11,543 10,615 8.7
International 1,604 1,693 (5.2)
Non-core funds (Property) 4 4 -
-------------------------- ------ ------ ------
Total FUM 13,151 12,312 6.8
-------------------------- ------ ------ ------
Revenue by segment
The Group reports its income across three key operating
segments, UK Investment Management, International and Financial
Planning, all of which complement each other:
FY19 FY18 Change
GBPm GBPm %
------------------- ----- ----- ------
BPS 72.1 66.9 7.8
MPS 8.2 7.6 7.9
Funds 8.1 6.8 19.1
Other 0.7 0.5 40.0
------------------- ----- ----- ------
UKIM total 89.1 81.8 8.9
International 14.6 14.2 2.8
Financial Planning 3.6 3.9 (7.7)
------------------- ----- ----- ------
Total revenue 107.3 99.9 7.3
------------------- ----- ----- ------
UKIM continues to make up the bulk of the Group's revenues,
representing 83.0% of total revenues, driven by BPS, MPS on
platforms and the Defensive Capital Fund within our Funds offering.
UKIM overall recorded a year-on-year revenue increase of 8.9%, up
from GBP81.8 million to GBP89.1 million, driven by the continued
strength of our client franchise and the increasing quality of the
business as the average client size increases and clients continue
to move onto fee-only rate cards.
From April 2019, Andrew Shepherd, Group Deputy CEO, took over as
CEO of our International business. Whilst International revenues
grew marginally to GBP14.6 million (FY18: GBP14.2 million), this
move highlights our commitment to International and the important
role it has to play in the future growth of the Group. Going
forward, we will be integrating International more closely into the
Group, including improving access to Group functions and resources,
and working to maximise cross-referral opportunities across our
businesses.
Financial Planning has seen the effects of the industry-wide
reduction in defined benefits transfers. The new Head of Financial
Planning, Adrian Keane-Munday, has started an operating review of
the business and we expect performance to improve markedly over the
medium term.
Group underlying profit before tax ("PBT") and margin
Underlying PBT is considered by the Board to be a more accurate
reflection of the Group's performance when compared to the
statutory results as this excludes income and expense categories
which are deemed of a non recurring nature or a non cash operating
item. Reporting at an underlying basis is also considered more
appropriate for external analyst coverage and peer group
benchmarking allowing a more accurate like to like comparison.
Reconciliation between Underlying and statutory profits
A reconciliation between underlying PBT and statutory PBT for
FY19 with comparatives shown below:
FY19 FY18
GBPm GBPm
------------------------------------------------------------- ----- -----
Underlying profit before tax 21.0 18.8
Goodwill impairment (4.8) -
Restructuring charge (3.3) -
Client relationship contracts impairment (2.3) -
Amortisation of client relationships and contracts acquired
with fund managers (2.2) (2.4)
Changes in fair value of consideration and related disposals 0.2 (1.5)
Exceptional costs of resolving legacy matters - (5.5)
Software impairment - (2.5)
------------------------------------------------------------- ----- -----
Statutory profit before tax from continuing operations 8.6 6.9
Loss from discontinued operations (0.4) (0.2)
------------------------------------------------------------- ----- -----
Statutory profit before tax 8.2 6.7
------------------------------------------------------------- ----- -----
The statutory figures for FY18 have been restated, where
applicable, to adjust for the Group's disposal of the Employee
Benefits business in December 2018 and the termination of the
investment management agreement with the Ground Rents Income Fund
plc in May 2019, so as to ensure a more appropriate like to like
comparison. Refer to Note 5.
Goodwill impairment (GBP4.8 million)
Goodwill is reviewed annually for impairment based on the
carrying value of the asset compared to its expected recoverable
amount. The impairment charge recognised in the year relates to the
Levitas transaction as the Group moves to a new 5-year partnership
that has a lower sponsorship fee on which the associated goodwill
carrying value is based. Refer to Note 8.
Restructuring charge (GBP3.3 million)
This relates to the efficiency and effectiveness programme
announced in January 2019. The Group identified a range of
opportunities to streamline and remove duplication from core
processes. The headcount reduction resulted in redundancy costs,
payment in lieu of notice, settlement and other restructuring
related costs. These have been excluded from underlying earnings in
view of their one-off nature.
Client relationship contracts impairment (GBP2.3 million)
This impairment charge relates to the value of Spearpoint client
relationships following the previously disclosed loss of a client
facing team. Refer to Note 8.
Amortisation of client relationship contracts and contracts
acquired with fund managers (GBP2.2 million)
These intangible assets are created in the course of acquiring
funds under management and are amortised over their useful life,
which has been assessed to range between 15 and 20 years. This
amortisation charge has been excluded from the underlying profit
since it is a significant non-cash item. Refer to Note 8.
Changes in fair value of consideration and related disposals
(GBP0.2 million)
This comprises the fair value remeasurement arising on deferred
payments from previous acquisitions and disposals carried out by
the Group together with their associated net finance costs and
costs of disposals where applicable.
Taxation
The Group's corporation tax charge for FY19 was GBP2.5 million
(FY18: GBP1.3 million), representing an effective tax rate of 30.5%
(FY18: 19.8%). The prior year effective tax rate was lower due to
the recognition of a higher Research & Development ("R&D")
credit covering the prior two financial years, giving rise to an
overall year on year variance of GBP0.7 million. Moreover, this
year's effective tax rate is higher due to the goodwill and
intangible assets impairment charge recognised in the Consolidated
income statement which are disallowable for corporation tax
purposes.
Earnings per share
The Group's basic statutory earnings per share for the year
ended 30 June 2019 were 41.7 pence (FY18: 39.4 pence). On an
underlying basis, earnings per share increased by 2.2% to 125.9
pence (FY18: 123.2 pence).
Dividend
The Group has a progressive dividend policy growing dividends in
line with the Group's underlying earnings. 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 Group is well positioned to continue funding dividend
payments in accordance with its policy. The ability to maintain
future dividends will be influenced by the continued assessment of
the principal risks identified below.
The Board has proposed a final dividend of 32.0 pence per share
(FY18: 30.0 pence). Taking into account the interim dividend of
19.0 pence per share (FY18: 17.0 pence), this results in a total
dividend for the year of 51.0 pence per share (FY18: 47.0 pence),
an increase of 8.5%. The recommended dividend is subject to
shareholder's approval, which will be sought at the Company's
Annual General Meeting on 31 October 2019.
Regulatory capital and cash resources
The Group's financial position remains strong with net assets
remaining flat at GBP87.6 million (FY18: GBP88.0 million) and
tangible net assets (net assets excluding intangibles) up to
GBP37.4 million (FY18: GBP27.4 million). As at 30 June 2019, the
Group had regulatory capital resources of GBP39.0 million (FY18:
GBP30.0 million) after taking into account deductions for current
and non-current deferred tax liabilities of GBP1.6 million (FY18:
GBP2.6 million). The Group continues to be well capitalised with a
capital adequacy ratio of 226% over our Pillar I requirement.
Brooks Macdonald Asset Management Limited, the Group's main
operating subsidiary, is an IFPRU EUR125k Limited Licence Firm
regulated by the Financial Conduct Authority ("FCA"). In view of
this, the Group is classified as a regulated group and subject to
the same regime.
FY19 FY18
GBPm GBPm
----------------------------------------------------------- ------ ------
Share capital 0.1 0.1
Share premium 39.1 38.4
Other reserves 4.6 3.1
Retained earnings 43.8 46.3
----------------------------------------------------------- ------ ------
Total equity 87.6 88.0
Intangible assets (net book value) (50.2) (60.6)
Deferred tax liabilities associated with intangible assets 1.6 2.6
----------------------------------------------------------- ------ ------
Tier 1 capital 39.0 30.0
----------------------------------------------------------- ------ ------
Own funds 39.0 30.0
----------------------------------------------------------- ------ ------
The Group monitors a range of capital and liquidity statistics
on a daily and monthly basis.
As required under FCA rules, and those of both the Jersey and
Guernsey Financial Services Commission, the Group assesses its
regulatory capital and liquidity on an ongoing basis through the
Internal Capital Adequacy Assessment Process ("ICAAP") and Adjusted
Net Liquid Asset ("ANLA") assessments, which include performing a
range of stress tests and scenario analysis to determine the
appropriate level of regulatory capital and liquidity that the
Group needs to hold. Surplus levels of capital and liquidity are
forecast, taking into account known outflows and proposed dividends
to ensure that the Group maintains sufficient capital and liquidity
at all times.
The latest ICAAP review was conducted for the period ended 30
June 2018 and signed off by the Board in January 2019. Regulatory
capital forecasts are performed monthly and take into account
expected dividends and intangible asset acquisitions and disposals
as well as budgeted and forecast trading results.
The Group's Pillar III disclosures are published annually on the
Group's website (www.brooksmacdonald.com) and provide further
details about the Group's regulatory capital resources and
requirements.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation
from continuing operations. Total cash resources at the end of the
year were GBP34.6 million (FY18: GBP30.9 million). The Group had no
borrowings at 30 June 2019 (FY18: GBPnil).
Cash spend on exceptional items was up to GBP7.7 million (FY18:
GBP5.8 million) due to further payment of goodwill offers, the
settlement of the Dublin OEIC issue and the cost of the
restructuring programme. This now means the vast majority of the
Spearpoint legacy matters provision of GBP12.0 million has now been
paid out with only GBP0.7 million remaining.
Capital expenditure was down significantly as we completed our
MiFID II and GDPR projects. We also began to manage dilution more
actively via market purchase of shares for the Employee Benefit
Trust. Tax payments were lower this year due to the receipt of
prior year R&D credits.
Financial outlook
In summary, 2019 has seen good progress across the Group with a
growth in profitability, an improvement in the underlying profit
margin and a more disciplined approach to financial resource
management.
The underlying market trends are positive and the fundamental
opportunity remains strong. IFAs continue to outsource investment
management, driven in part by regulatory and commercial trends and
the need for high quality investment management solutions
underpinned by a robust centralised investment proposition.
However, in the short-term, we see some headwinds on asset flows
given the backdrop of political and macroeconomic uncertainty.
We continue to make good progress in resolving legacy matters in
our International business which coupled with the new senior
leadership team will help drive this important segment of our
business forward. There is also an increasing onus on individuals
to save for retirement, with pensions freedoms driving a greater
need for good quality advice, creating opportunities for our
Financial Planning offering.
While cross business collaboration across our core offerings
will continue to drive organic growth, going forward there will be
additional focus on corporate activity and evaluating accretive,
complimentary acquisitions that enhance our existing offerings or
provide new capabilities to drive growth.
We will continue to simplify the business, focus on our core
offerings across UKIM, International and Financial Planning. Cost
discipline in non-staff costs and focus on efficiency will still be
a priority but is now business as usual. Where required we will
invest to support our growth strategy and resources will be made
available to ensure that we continue to win and deliver industry
leading net flows.
Ben Thorpe
Finance Director
11 September 2019
Risks
Investing in a robust and practical approach to risk
management
Over the past year, the Group delivered the final phase of its
risk transformation project and over the coming years will continue
to invest in embedding the Group risk management framework. Our
approach to risk management combines a top-down strategic
assessment of risk and associated risk appetite, with a bottom-up
operational identification and reporting process which also looks
at the impact of a combination of emerging risks. We have invested
in a risk management system which has been implemented across the
Group and empowers all staff to manage risks as first-line risk
managers. With the implementation of a new centralised incident
management process, our staff are able to more easily raise
potential issues so that prompt action can be taken to minimise any
impact on clients or our wider stakeholders.
How we manage risk
The Group Risk Management Framework ("RMF")
Risk management starts with oversight through an appropriate
governance structure through a board and committee structure, with
individual and collective roles and delegated authorities and a set
of core policies to provide guidance to staff.
Effective risk management relies on insight through robust and
timely management information. We manage our risks by learning
lessons from past events such as errors, breaches, near misses and
complaints, by conducting point in time risk assessments in the
present and attempting to predict what the future risk landscape
might look like through our suite of key indicators.
The risk management methodology within the Group's risk
management framework consists of the following six interlinked
steps:
Risk identification. This is takes place through regular
business monitoring and periodic reviews, including risk mapping
exercises and the risks arising from change or new products and
services.
Risk appetite. Once we have identified risks, we set an appetite
for each material risk. This defines the amount of risk that the
Board is prepared to accept in order to deliver its business
objectives. Risk appetite reflects culture, strategic goals and the
existing operating and control environment.
Risk analysis. Having set the risk appetite, we can assess the
impact and probability of each material risk against the agreed
risk appetite. This can include the quantification of capital risk
as part of the Internal Capital Adequacy Assessment Process
("ICAAP").
Assess controls. We also assess the effectiveness of controls in
reducing the probability of a risk occurring or, should it
materialise, in mitigating its impact.
Additional actions. Where differences exist between our risk
appetite and the current residual risk profile, we take action
either: to accept, avoid or transfer part or all of those risks
which are outside our risk appetite; or to reconsider the risk
appetite.
Reporting. Ongoing reporting of risks to senior management
provides insight to inform decision-making and allocation of
resources to achieve business objectives.
Key risks
We have identified our risks at Group and business line levels
to help manage our key risks in a consistent and uniform way with
oversight from relevant Committees and Boards.
Key risks identified
by risk management
Risk Definition framework Risk movement
------------------ ---------------------- ---------------------------------------------------------- --------------
Group level
------------------ ---------------------- ---------------------------------------------------------- --------------
1 Credit The risk of loss Unchanged Risk
arising from * Cash deposits with external banks
a client or
counterparty failing
to meet their * Client credit risk
financial obligations
to a Brooks Macdonald
entity * Counterparty credit risk
as and when they fall
due.
* Custodian-related credit risk
* Indirect counterparty risk in respect of referrals
------------------ ---------------------- ---------------------------------------------------------- --------------
2 Liquidity The risk that assets Decreasing
are insufficiently * Corporate cash deposited with external banks Risk
liquid and/or Brooks
Macdonald
does not have * Client cash deposited with external banks (CASS
sufficient financial rules)
resources available to
meet liabilities
as they fall due, or * Failed trades
can secure
such resources only at
excessive * Indirect liquidity risk associated with client
cost. Liquidity risk portfolios
also includes
the risk that the
Group is unable * Indirect liquidity risks associated with dealing
to meet regulatory
prudential
liquidity ratios. * 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 The risk that arises Increasing
from fluctuations * Failed trades Risk
in the value of, or
income arising
from, movements in * Indirect market risk associated with advising on
equity, bonds, client portfolios
or other traded
markets, interest
rates or foreign * Indirect market risks associated with dealing
exchange rates
that has a financial
impact. * Indirect market risk associated with managing client
portfolios
------------------ ---------------------- ---------------------------------------------------------- --------------
Business level
------------------ ---------------------- ---------------------------------------------------------- --------------
4 Business and The risk of having an Unchanged Risk
strategic risk inadequate * Brexit
business model or
making strategic
decisions that may * Business growth
result in
lower than anticipated
profit * Extreme market events
or losses or exposes
the Group
to unforeseen risks. * Investment performance
* Product governance
------------------ ---------------------- ---------------------------------------------------------- --------------
5 Conduct risk The risk of causing Decreasing
detriment * Client service Risk
to clients,
stakeholders or the
integrity of the wider * Investment performance
market
because of
inappropriate * Suitability and conduct risk
execution
of Brooks Macdonald's
business
activities.
------------------ ---------------------- ---------------------------------------------------------- --------------
6 Operational The risk of loss Unchanged Risk
risk arising from * Data security
inadequate or failed
internal
processes, people and * Cyber
systems,
or from external
events. It includes * Resilience and BCP
legal and fraud risk
but not
strategic, * IT infrastructure and capability
reputational and
business
risks. * Key suppliers and outsourcing
* Operational errors
* People
------------------ ---------------------- ---------------------------------------------------------- --------------
7 Prudential The risk of adverse Decreasing
risk business * Prudential requirements Risk
and/or client impact
resulting
from breaching
regulatory capital/
liquidity
requirements, or
market/credit
risk internal limits.
------------------ ---------------------- ---------------------------------------------------------- --------------
8 Legal and Legal and regulatory Unchanged Risk
regulatory risk risk is * Financial crime
defined as the risk of
exposure
to legal or regulatory * Governance
penalties,
financial forfeiture
and material * Regulatory, tax and legal compliance
loss due to failure to
act in
accordance with * Idiosyncratic reputational risk
industry laws
and regulations.
------------------ ---------------------- ---------------------------------------------------------- --------------
Emerging level
------------------ ---------------------- ---------------------------------------------------------- --------------
9 Cyber and The potential With cyber security Increasing
data security financial, being a heightened Risk
reputational, and evolving risk
operational and for the industry and
client-related wider economy, there
risks arising from a has been an increased
data protection, focus this year on
information security understanding our
or cyber-related cyber security landscape
breach. The additional whilst also taking
risks measures to strengthen
associated with our core IT management
non-compliance team.
with relevant rules
and regulations.
------------------ ---------------------- ---------------------------------------------------------- --------------
10 Consolidation The potential There has been an Increasing
of the investment financial, increase in the M&A Risk
management market reputational, activity in the financial
operational and planning and wealth
client-related management sectors.
risks arising from a If this continues,
consolidation it may impact the
in the market either Brooks Macdonald operating
amongst model.
peer wealth managers
or the professional
advisers that Brooks
Macdonald
partners with.
------------------ ---------------------- ---------------------------------------------------------- --------------
Viability statement
In accordance with the UK Corporate Governance Code, the Board
has assessed the Group's viability over a five-year period from
FY19 through to FY23. The decision to do so over this period is
aligned with the Group's strategy, its budgeting process and the
scenarios set out in the Internal Capital Adequacy Assessment
Process.
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 ICAAP and an
evaluation of the Group's principal risks, as outlined previously
and in the Risk and Compliance Committee Report.
In assessing the future viability of the overall business, the
Board has considered the current and future strategy as well as any
significant business restructuring and legacy issues. 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.
The five-year MTP is maintained as part of the Group's annual
corporate 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 an holistic and transparent view
of the forward-looking financial prospects of the Group. The Board
reviews and challenges the Group's MTP annually.
The Group undertakes an ICAAP as required by our UK regulator,
the Financial Conduct Authority ("FCA"), which documents a range of
stress tests, including a reverse stress test. These are all
designed to assess the Group's ability to withstand a market-wide
stress, a Group-specific stress and a combination of both. The
tests documented within the ICAAP are scenarios designed by senior
management to assess the Group's exposure to a range of extreme,
but plausible, situations, as well as an assessment of the cost to
the Group of a wind-down in the event of a non-recoverable shock to
the operating model. These scenarios are refreshed at least
annually to ensure they remain relevant and continue to be a
suitable tool for developing our controls and mitigating
actions.
Following consideration and assessment of the above factors,
including the results of the latest ICAAP and the risk management
controls and procedures 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 of their
assessment. Accordingly, the Board continues to adopt the going
concern basis in the preparation of these financial statements.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law the Directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by the European Union and have elected to
prepare the Parent Company financial statements on the same
basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period. In preparing the financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with
applicable IFRSs as adopted by the European Union;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group and Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that the financial statements comply with the Companies
Act 2006.
The Directors are also responsible for such internal controls as
they determine are necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors' report,
Directors' remuneration report and Corporate governance report that
comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors' responsibility statement
We confirm that to our knowledge:
-- the Group and Parent Company financial statements, which have
been prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit and loss of the Company and the
undertakings included in the consolidation taken as a whole;
and
-- the Strategic Report and financial statements include a fair
review of the development and performance of the business and the
position of the Group and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
We consider the Report and accounts taken as a whole, are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the Group's position and performance,
business model and strategy.
By order of the Board
Caroline Connellan
Chief Executive
11 September 2019
Consolidated statement of comprehensive income
For the year ended 30 June 2019
2019 2018
Restated*
Note GBP'000 GBP'000
------------------------------------------------------ ---- -------- -----------
Revenue 3 107,270 99,941
Administrative costs (91,835) (89,335)
Other losses (6,928) (3,643)
------------------------------------------------------ ---- -------- -----------
Operating profit 8,507 6,963
Finance income 227 128
Finance costs (94) (152)
------------------------------------------------------ ---- -------- -----------
Profit before tax from continuing operations 8,640 6,939
Taxation on continuing operations 4 (2,517) (1,328)
------------------------------------------------------ ---- -------- -----------
Profit for the period from continuing operations 6,123 5,611
Loss from discontinued operations 5 (395) (217)
Profit for the period attributable to equity holders
of the Company 5,728 5,394
Other comprehensive expense:
Items that may be reclassified subsequently to profit
or loss
Revaluation of available for sale financial assets - (2)
------------------------------------------------------ ---- -------- -----------
Total other comprehensive expense - (2)
------------------------------------------------------ ---- -------- -----------
Total comprehensive income for the year 5,728 5,392
------------------------------------------------------ ---- -------- -----------
Earnings per share
Basic 6 41.7p 39.4p
Diluted 6 41.7p 39.3p
------------------------------------------------------ ---- -------- -----------
* Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period. Refer to Note 5 for details of the results of
discontinued operations.
Consolidated statement of financial position
As at 30 June 2019
2019 2018
Note GBP'000 GBP'000
----------------------------------------------------------- ---- -------- --------
Assets
Non-current assets
Intangible assets 8 50,167 60,556
Property, plant and equipment 3,177 3,996
Available for sale financial assets - 1,578
Financial assets at fair value through other comprehensive
income 500 -
Other receivable 94 -
Deferred tax assets 9 1,223 1,176
----------------------------------------------------------- ---- -------- --------
Total non-current assets 55,161 67,306
Current assets
Trade and other receivables 26,732 26,019
Financial assets at fair value through profit or
loss 613 1,267
Cash and cash equivalents 34,590 30,939
----------------------------------------------------------- ---- -------- --------
Total current assets 61,935 58,225
Total assets 117,096 125,531
----------------------------------------------------------- ---- -------- --------
Liabilities
Non-current liabilities
Deferred consideration (380) (1,479)
Provisions 10 (278) -
Deferred tax liabilities 9 (2,278) (2,990)
Other non-current liabilities (714) (157)
----------------------------------------------------------- ---- -------- --------
Total non-current liabilities (3,650) (4,626)
Current liabilities
Trade and other payables (20,788) (23,291)
Current tax liabilities (2,350) (1,325)
Provisions 10 (2,736) (8,332)
----------------------------------------------------------- ---- -------- --------
Total current liabilities (25,874) (32,948)
Net assets 87,572 87,957
----------------------------------------------------------- ---- -------- --------
Equity
Share capital 139 138
Share premium account 39,068 38,404
Other reserves 4,575 3,114
Retained earnings 43,790 46,301
----------------------------------------------------------- ---- -------- --------
Total equity 87,572 87,957
----------------------------------------------------------- ---- -------- --------
Approved by the Board of Directors and authorised for issue on
11 September 2019.
Signed on its behalf by:
Caroline Connellan
Chief Executive
Ben Thorpe
Finance Director
Consolidated statement of changes in equity
For the year ended 30 June 2019
Share premium Retained Total
Share capital account Other reserves earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Balance at 1 July 2017 138 37,101 6,480 41,987 85,706
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Comprehensive income
Profit for the year from continuing
operations - - - 5,611 5,611
Loss for the year from discontinued
operations 5 - - - (1,079) (1,079)
Gain on disposal of discontinued
operations 5 - - - 862 862
Other comprehensive expense:
Revaluation of available
for sale financial assets - - (2) - (2)
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Total comprehensive income - - (2) 5,394 5,392
Transactions with owners
Issue of ordinary shares - 1,303 - - 1,303
Share-based payments - - 1,669 - 1,669
Share-based payments exercised - - (4,763) 4,763 -
Tax on share options - - (270) - (270)
Dividends paid 7 - - - (5,843) (5,843)
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Total transactions with owners - 1,303 (3,364) (1,080) (3,141)
Balance at 30 June 2018 138 38,404 3,114 46,301 87,957
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Adjustment on initial application
of IFRS 9 - - (1) - (1)
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Adjusted balance at 1 July
2018 138 38,404 3,113 46,301 87,956
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Comprehensive income
Profit for the year from continuing
operations - - - 6,123 6,123
Loss for the year from discontinued
operations 5 - - - (724) (724)
Gain on disposal of discontinued
operations 5 - - - 329 329
Other comprehensive income - - - - -
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Total comprehensive income - - - 5,728 5,728
Transactions with owners
Issue of ordinary shares 1 664 - - 665
Share-based payments - - 2,634 - 2,634
Share-based payments exercised - - (1,123) 1,123 -
Purchase of own shares by
Employee Benefit Trust - - - (2,648) (2,648)
Tax on share options - - (49) - (49)
Dividends paid 7 - - - (6,714) (6,714)
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Total transactions with owners 1 664 1,462 (8,239) (6,112)
Balance at 30 June 2019 139 39,068 4,575 43,790 87,572
------------------------------------ ------ ------------- ------------- -------------- --------- ---------
Consolidated statement of cash flows
For the year ended 30 June 2019
2019 2018
Note GBP'000 GBP'000
----------------------------------------------------- ---- -------- --------
Cash flows from operating activities
Cash generated from operations 11 15,553 13,610
Taxation paid (2,301) (2,673)
----------------------------------------------------- ---- -------- --------
Net cash generated from operating activities 13,252 10,937
Cash flows from investing activities
Purchase of property, plant and equipment (572) (1,829)
Purchase of intangible assets 8 (1,106) (5,069)
Deferred consideration paid (1,251) (1,852)
Proceeds from sale of discontinued operations 5 593 1,005
Finance income received 198 102
Proceeds of sale of financial assets at fair value
through profit or loss 1,234 -
Cash flows from investing activities of discontinued
operations 5 - 2
----------------------------------------------------- ---- -------- --------
Net cash used in investing activities (904) (7,641)
Cash flows from financing activities
Proceeds of issue of shares 665 1,303
Purchase of own shares by Employee Benefit Trust (2,648) -
Dividends paid to shareholders 7 (6,714) (5,843)
----------------------------------------------------- ---- -------- --------
Net cash used in financing activities (8,697) (4,540)
Net increase/(decrease) in cash and cash equivalents 3,651 (1,244)
Cash and cash equivalents at beginning of year 30,939 32,183
----------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of year 34,590 30,939
----------------------------------------------------- ---- -------- --------
Notes to the consolidated financial statements
For the year ended 30 June 2019
1. General information
Brooks Macdonald Group plc 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 and trusts. The Group also provides financial
planning as well as offshore investment management and acts as fund
manager to a regulated OEIC providing a range of risk-managed
multi-asset funds and a specialised absolute return fund.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom under the Companies Act 2006 and
listed on AIM. The address of its registered office is 72 Welbeck
Street, London, W1G 0AY.
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 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
financial statements have been prepared on the historical cost
basis, except for the revaluation of financial assets at fair value
through other comprehensive income, financial assets and financial
liabilities at fair value through profit or loss and deferred
consideration such that they are measured at their fair value.
During the year, the Group disposed of its Employee Benefits
business within the Financial Planning segment and Brooks Macdonald
Funds Limited, a subsidiary within the Group, resigned as
investment manager of the Ground Rents Income Fund plc ("GRIF"). As
a result, the prior year has been restated to separate the results
of discontinued operations, consistent with the presentation in the
current year. Refer to Note 5 for details of discontinued
operations.
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.
b. Basis of consolidation
The Group's financial statements are a consolidation of the
financial statements of the Company and its subsidiaries. The
underlying financial statements of the subsidiaries are prepared
for the same reporting year as the Company, using consistent
accounting policies. Subsidiaries and structured entities are all
entities controlled by the Company, deemed to exist where the
Company is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements
of the subsidiaries are included from the date on which control is
transferred to the Group to the date that control ceases.
All intercompany transactions and balances between Group
companies are eliminated on consolidation.
c. Changes in accounting policies
The Group's accounting policies that have been applied in
preparing these financial statements are consistent with those
disclosed in the Annual Report and Accounts for the year ended 30
June 2018, except as explained below.
New accounting standards, amendments and interpretations adopted
in the year
In the year ended 30 June 2019, the Group adopted two new
standards being IFRS 9 'Financial instruments' and IFRS 15 'Revenue
from contracts with customers'. The Group did not adopt any other
new standards and amendments issued by the International Accounting
Standards Board ("IASB") or interpretations issued by the IFRS IC
in the year ending 30 June 2019.
IFRS 9 'Financial instruments'
IFRS 9 governs the accounting treatment for the classification
and measurement of financial instruments and the timing and extent
of credit provisioning, replacing the previously adopted IAS 39
'Financial instruments: recognition and measurement'. The standard
concerns guidance for the classification and measurement of
financial assets by introducing a fair value through other
comprehensive income category for certain financial assets. It also
contains a new impairment model which intends to result in earlier
recognition of losses.
Transition
The Group has taken advantage of the exemption per paragraph
5.6.1 of IFRS 9, regarding restated comparative information for
prior years with respect to classification, measurement and
impairment requirements. Where differences arise in the carrying
amounts of financial assets and financial liabilities resulting
from the adoption of IFRS 9, they are to be recognised in retained
earnings as at 1 July 2018. Accordingly, the information presented
for the year ended 30 June 2018 will not reflect the requirements
of IFRS 9 but will be presented in line with IAS 39.
Classification and measurement of financial assets and financial
liabilities
IFRS 9 requires the Group to hold its financial assets and
liabilities at amortised cost, fair value through profit or loss
("FVPL") or fair value through other comprehensive income
("FVOCI"). The categorisation of assets as 'held to maturity'
("HTM") and 'available for sale' ("AFS") are no longer recognised
under IFRS. The classification criteria for designating financial
assets between the categories under IFRS 9 require the Group to
assess and document the business models under which the assets are
actually managed. Consideration needs to be given to management of
the asset in terms of if the asset is held for contractual cash
flow, if the contractual cash flow represents solely payment of
principal and interest and if the asset is held for selling
purposes.
The effect of adopting IFRS 9 on the carrying amounts of
financial assets at 1 July 2018 has resulted in a change of
classification on the Consolidated statement of financial position,
however has not impacted the Consolidated statement of
comprehensive income or Consolidated statement of cash flows.
The following table summarises the original measurement
categories under the previously adopted IAS 39 and the new
measurement categories and carrying amount under IFRS 9 for each of
the Group's financial assets at 1 July 2018.
Previous IAS
39 carrying New IFRS 9
Previous IAS 39 amount New IFRS 9 carrying amount
Financial asset classification GBP'000 classification GBP'000
------------------------------- ---------------------- ------------ --------------- ----------------
Unlisted redeemable preference
shares AFS 650 FVOCI 650
Contingent consideration
receivable AFS 923 FVPL 923
Offshore bond AFS 5 FVPL 5
Trade and other receivables Loans and receivables 26,019 Amortised cost 26,019
Financial assets at FVPL FVPL 1,267 FVPL 1,267
------------------------------- ---------------------- ------------ --------------- ----------------
Total financial assets 28,864 28,864
------------------------------------------------------- ------------ --------------- ----------------
The basis of classification for financial liabilities under IFRS
9 remains unchanged from IAS 39. There remains two categories being
amortised cost or FVPL. The Group has assessed its financial
liabilities at 1 July 2018 and concluded that no change in
classification is required. Therefore there has been no impact on
the Consolidated statement of financial position, Consolidated
statement of comprehensive income or Consolidated statement of cash
flows as a result of IFRS 9 in relation to financial
liabilities.
Impairment of financial assets
Under IFRS 9, an expected credit loss ("ECL") model is used to
measure the impairment of financial assets. Under an ECL model a
credit loss provision is recognised once a loss is expected to
arise, instead of when it occurs as previously required under IAS
39. The objective of the impairment requirements is to recognise
lifetime expected credit losses for all financial instruments,
considering all reasonable information, including that which is
forward-looking. The Group applies the simplified lifetime expected
credit loss model. This requires an assessment of the total amount
of credit losses expected over the lifetime of the asset and is
performed on an asset by asset basis. As a result, the Group has
determined that the application of IFRS 9's impairment requirements
has not had a material impact on the financial statements.
IFRS 15 'Revenue from contracts with customers'
IFRS 15 governs the accounting treatment of revenue recognition
from contracts with customers which replaces the existing IFRS
revenue guidance adopted previously, in particular IAS 18
'Revenue'. IFRS 15 creates a single model for revenue recognition
from contracts with customers and aims to provide greater
consistency and comparability across industries by linking revenue
to the fulfilment of identified performance obligations that are
detailed in the customer contract. The core principle underlying
the new recognition is that an entity should recognise revenue in a
manner that depicts the pattern of transfer of goods and services
to customers. It also requires that the incremental cost of
obtaining a customer contract should be capitalised if that cost is
expected to be recovered.
Transition
The Group has taken advantage of the exemption per Appendix C of
IFRS 15 regarding restated comparative information for prior years
with respect to revenue recognition. Where differences arise
resulting from the adoption of IFRS 15, they are to be recognised
in retained earnings as at 1 July 2018. Accordingly, the
comparative information presented for the year ended 30 June 2018
will not reflect the requirements of IFRS 15 but will be presented
in line with previous revenue recognition from contracts with
customers.
Impact of IFRS 15 on financial statements for the year ended 30
June 2019
The Group has reviewed IFRS 15 and its impact on its existing
revenue streams, as well as on its policy of capitalising the cost
of obtaining customer contracts. As described below, the adoption
of IFRS 15 has not had a significant impact on the Group's revenue
recognition accounting policy.
Portfolio management fee income and fund management fees
The core portfolio management fee income is contracted with
customers and is in relation to the continued management of their
portfolio during a defined period. As a result, the performance
obligation is ongoing over the contract resulting in no impact on
revenue recognition as a result of IFRS 15.
Portfolio management fee income includes income earned on
supporting activities and revenues that are part of the overall
service provided, and as a result do not present a separate and
stated performance obligation. These supporting activities are for
one-off services and revenue is recognised once the service has
occurred, therefore IFRS 15 has no impact on the supporting
activities for portfolio management fee income.
Financial services commission
The revenue is earned as a result of the core services provided
in the Financial Planning segment through advisory fees (see
below). The revenue is earned as a result of a past service being
satisfied resulting in no impact to revenue recognition due to IFRS
15.
Advisory fees
Advisory fees are subject to client agreements to provide
financial advice and assistance. Clients are charged based on an
agreed rate of funds under advice, invoiced over the period the
service is provided. Under IFRS 15 the Group is required to
identify distinct performance conditions in order to recognise
'work in progress' relating to unbilled revenue earned by an
advisor. The client contracts do not include any distinct
performance conditions meaning this work in progress revenue cannot
be recognised under IFRS 15. The work in progress balance and
movement from year to year is consistently immaterial, and
therefore the adoption of IFRS 15 has not had a material impact on
advisory fee revenue.
Costs of obtaining or fulfilling a contract
Under IFRS 15 the scope requirements for recognising an asset in
relation to costs of obtaining or fulfilling a contract are broader
such that costs to obtain any contract with a customer should be
capitalised if those costs are incremental and the Group expects to
recover them. Amortisation should then be charged on a basis that
is consistent with the transfer to the customer of the services to
which the capitalised costs relate.
The Group's policy for capitalising contract costs currently
recognises the fair value of the future benefits accruing to the
Group from the 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 of 15 to 20 years. The Group has
assessed the impact of IFRS 15 on these and concluded that the
current policies in place are sufficient and therefore will remain
unchanged.
Other new standards, amendments and interpretations listed in
the table below were newly adopted by the Group but have not had a
material impact on the amounts reported in these financial
statements. They may however impact the accounting for future
transactions and arrangements.
Standard, Amendment or Interpretation Effective date
-------------------------------------------------------------------- --------------
Recognition of deferred tax assets for unrealised losses (amendments
to IAS 12) 1 January 2018
Disclosure initiative (amendments to IAS 7) 1 January 2018
Annual improvements to IFRS standards 2014-2016 cycle (IFRS
12) 1 January 2018
-------------------------------------------------------------------- --------------
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 financial statements, have
been issued and are effective for annual years beginning after 1
July 2018:
Standard, Amendment or Interpretation Effective date
------------------------------------------------------------ --------------
Leases (IFRS 16) 1 January 2019
Uncertainty over Income Tax Treatments (IFRIC 23) 1 January 2019
Annual improvements to IFRS standards 2015-2018 cycle (IFRS
3, IFRS 11, IAS 12, IAS 23) 1 January 2019
Amendments to IAS 28: Long-term Interest in Associates and
Joint Ventures 1 January 2019
Amendments to References to the Conceptual Framework in IFRS
Standards 1 January 2020
Amendment to IFRS 3 Business Combinations 1 January 2020
Amendments to IAS 1 and IAS 8: Definition of Material 1 January 2020
Insurance Contracts (IFRS 17) 1 January 2021
------------------------------------------------------------ --------------
Not yet endorsed by the EU.
The impact of these changes is currently being reviewed and
there is no intention to early adopt.
IFRS 16 'Leases'
IFRS 16 is effective for years commencing on or after 1 January
2019. The standard was endorsed by the EU during 2017. Under the
previous treatment, operating leases had lease payments charged to
the Consolidated statement of comprehensive income over the life of
the lease and no recognition on the Consolidated statement of
financial position. Finance leases created a lease liability on the
statement of financial position using the present value of lease
payments and amortised over the life of the lease to the statement
of comprehensive income. The change to IFRS 16 removes the
classification of leases as either operating or finance leases for
lessees and introduces a single, on-balance sheet accounting model,
which requires:
-- the recognition of a right-of-use asset and corresponding
lease liability with respect to all lease arrangements in which the
Group is the lessee, except for leases that have a period less than
12 months and low value leases;
-- depreciation charge on the right-of-use asset on a
straight-line basis over the lease term, with the lease term
duration dictated by management's intentions of the lease and
underlying asset; and
-- a finance cost arising from the implied interest expense
unwinding of the discounted lease liability over the lease term
using the effective interest rate method.
Transition
The Group has decided not to early adopt this standard and as a
lessee, the Group will apply IFRS 16 initially with effect from 1
July 2019, using the modified retrospective approach with optional
practical expedients. Therefore the cumulative effect of adopting
IFRS 16 will be recognised as an adjustment to the opening
Statement of Financial Position at 1 July 2019, with no restatement
of comparative information. As a result of using the modified
retrospective approach, the Group will apply IFRS 16 to all lease
arrangements entered into before 1 July 2019 and identified as
leases in accordance with IAS 17.
Lessee accounting
The Group has assessed the impact of adopting the new standard
based on its existing lease arrangements at 30 June 2019. The
Group's total assets and total liabilities will be increased by the
recognition of right-of-use assets and lease liabilities. The
right-of-use assets will be depreciated over the lease term and the
lease liability will be reduced by lease payments, offset by the
implied interest expense, unwinding the liability over the lease
term which will be recognised in finance costs in the Consolidated
statement of comprehensive income.
Based on the available information at 30 June 2019, IFRS 16
impacts the recognition of the Group's office lease arrangements.
The Group estimates that it will recognise lease liabilities of
approximately GBP2,070,000 at 1 July 2019 and right-of-use assets
with also an approximate value of GBP2,070,000. There is an
estimated increase of equity by GBP300,000 due to the impact of
accrued lease incentives at 30 June 2019. The impact on the
Consolidated statement of comprehensive income will see lease costs
accelerated as the implied interest charge is higher in the early
years of a lease term as the discount rate unwinds over the life of
the discount period.
The total cost and cash outflow of the lease over the lease term
is not expected to change. In addition to the above impacts,
recognition of lease assets will increase the Group's regulatory
capital requirement.
d. Critical accounting estimates and judgements
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 judgement is
necessarily applied are those that relate to the measurement of
intangible assets, deferred consideration, contingent consideration
receivable, the estimation of the fair value of share-based
payments and client compensation provisions.
There have been no critical judgements required in applying the
Group's accounting policies in this period, apart from those
involving estimations which are detailed separately below.
The underlying assumptions made 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 contracts as part of business combinations,
through separate purchase or with newly employed teams of fund
managers (as described in Note 8). 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. Contracts acquired with fund managers and acquired
client relationship contracts are amortised on a straight-line
basis over their estimated useful lives, ranging from 5 to 20
years.
Goodwill recognised as part of a business combination is
reviewed annually for impairment, or when a change in circumstances
indicates that it might be impaired. The recoverable amounts of
cash generating units 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 are given in Note 8.
Deferred consideration
The Group has a deferred consideration balance in respect of the
acquisition of Levitas Investment Management Services Limited in
July 2014. Deferred consideration is recognised at its fair value,
being an estimate of the amount that will ultimately be payable in
future periods. The outstanding deferred consideration liability at
30 June 2019 relates entirely to the present value of fixed amounts
owed to the vendors of Levitas.
Contingent consideration
The Group has a contingent consideration balance in respect of
the disposal of Braemar Estates (Residential) Limited in December
2017 and the disposal of the Employee Benefits business in December
2018. Contingent consideration is recognised at its fair value,
being an estimate of the amount that will ultimately be receivable
in future periods. This has been calculated from forecast revenue
of the business disposed, discounted by the estimated interest
rate.
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. 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.
Provisions
The Group may receive complaints from clients in relation to the
services provided. Complaints are assessed on a case-by-case basis
and provisions are made where it is judged to be likely that
compensation will be paid. The accounting policy for provisions and
contingent liabilities is outlined in Note 10.
As described in Note 10, the Group has recognised a provision in
respect of exceptional costs of resolving legacy matters. The Group
has a present obligation relating to a number of discretionary
portfolios formerly managed by Spearpoint which was acquired by the
Group in 2012 and the provision has been reliably measured at the
value of expenditures expected to be required to settle the
obligation.
e. Exceptional items
Exceptional items are disclosed and described separately in the
financial statements where it is necessary to do so to provide
further understanding of the underlying financial performance of
the Group. These include material items of income or expense that
are shown separately due to the significance of their nature and
amount.
f. Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured at the fair value of
the aggregate amount of the consideration transferred at the
acquisition date, irrespective of the extent of any minority
interest. Acquisition costs are charged to the Consolidated
statement of comprehensive income in the year of acquisition.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions at the acquisition date. If
the business combination is achieved in stages, the fair value of
the Group's previously held equity interest is remeasured at the
acquisition date and the difference is credited or charged to the
Consolidated statement of comprehensive income. Identifiable assets
and liabilities assumed on acquisition are recognised in the
Consolidated statement of financial position at their fair value at
the date of acquisition.
Any contingent consideration to be paid by the Group to the
vendor is recognised at its fair value at the acquisition date, in
accordance with IAS 39. Subsequent changes to the fair value of
contingent consideration are recognised in accordance with IFRS 9
in the Consolidated statement of comprehensive income.
Goodwill is initially measured at cost, being the excess of the
consideration transferred over the acquired company's net
identifiable assets and liabilities assumed. If the consideration
is lower than the fair value of the net assets acquired, the
difference is recognised as a gain on a bargain purchase in the
Consolidated statement of comprehensive income.
Impairment
Goodwill and other intangible assets with an indefinite life are
tested annually for impairment. For the purposes of impairment
testing, goodwill acquired in a business combination is allocated
to each of the Group's cash generating units ("CGU") that are
expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquisition are assigned to
those units. The carrying amount of each CGU is compared to its
recoverable amount, which is determined using a discounted future
cash flow model.
Where goodwill forms part of a CGU and part of the operation
within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the
portion of the CGU retained.
g. Revenue
Portfolio management fees and financial services commission
Portfolio management and other advisory and custody services are
billed in arrears but are recognised over the period the service is
provided. Fees are calculated on the basis of a percentage of the
value of the portfolio over the period. Dealing charges are levied
at the time a deal is placed for a client. Fees are only recognised
when the fee amount can be estimated reliably and it is probable
that the fee will be received. Amounts are shown net of rebates
paid to significant investors.
Performance fees are earned from some clients when contractually
agreed performance levels are exceeded within specified performance
measurement periods. They are only recognised at the end of these
performance periods, when a reliable estimate of the fee can be
made and is virtually certain that it will be received.
Advisory fees
Advisory fees are charged to clients using an hourly rate or by
a fixed fee arrangement and are recognised over the period the
service is provided. Commissions receivable and payable are
accounted for in the period in which they are earned.
Fund management fees
Where amounts due are conditional on the successful completion
of fundraising for investment vehicles, revenue is recognised
where, in the opinion of the Directors, there is reasonable
certainty that sufficient funds have been raised to enable the
successful operation of that investment vehicle. Amounts due on an
annual basis for the management of third party investment vehicles
are recognised on a time apportioned basis.
Interest
Interest receivable is recognised on an accruals basis.
h. Cash and cash equivalents
Cash comprises cash in hand and call deposits held with banks.
Cash equivalents comprise short-term, highly liquid investments,
with a maturity of less than three months from the date of
acquisition.
i. Share-based payments
Equity-settled schemes
The Group engages in equity-settled share-based payment
transactions in respect of services received from certain
employees. The fair value of the services received is measured by
reference to the fair value of the shares or share options on the
grant date. This cost is then recognised in the Consolidated
statement of comprehensive income over the vesting period, with a
corresponding credit to equity.
The fair value of the options granted is determined using option
pricing models, which take into account the exercise price of the
option, the current share price, the risk free rate of interest,
the expected volatility of the Company's share price over the life
of the award and other relevant factors.
j. Segmental reporting
The Group determines and presents operating segments based on
the information that is provided internally to the Group Board of
Directors, which is the Group's chief operating decision-maker.
k. Fiduciary activities
The Group commonly acts as trustee and in other fiduciary
capacities that result in the holding or placing of assets on
behalf of individuals, trusts, retirement benefit plans and other
institutions. These assets and income arising thereon are excluded
from these financial statements, as they are not assets of the
Group.
The Group holds money on behalf of some clients in accordance
with the client money rules of the Financial Conduct Authority
("FCA"). Such monies and the corresponding liability to clients are
not included within the Consolidated statement of financial
position as the Group is not beneficially entitled thereto.
l. Property, plant and equipment
All property, plant and equipment is included in the
Consolidated statement of financial position at historical cost
less accumulated depreciation and impairment. Costs include the
original purchase cost of the asset and the costs attributable to
bringing the asset into a working condition for its intended
use.
Provision is made for depreciation to write off the cost less
estimated residual value of each asset, using a straight-line
method, over its expected useful life as follows:
Leasehold improvements - over the lease term
Motor vehicles - 4 years
Fixtures, fittings and
office equipment - 5 years
IT equipment - 4 or 5 years
The assets' residual values and useful economic lives are
reviewed, and adjusted if appropriate, at the end of each reporting
period. Gains and losses arising on disposal are determined by
comparing the proceeds with the carrying amount. These are included
in the Consolidated statement of comprehensive income.
During the year, property, plant and equipment non-current
assets were reviewed in terms of useful economic life and
classification of assets.
m. Intangible assets
Amortisation of intangible assets is charged to administrative
expenses in the Consolidated statement of comprehensive income on a
straight-line basis over the estimated useful lives of the assets
(4 to 20 years).
Acquired client relationship contracts and contracts acquired
with fund managers
Intangible assets are recognised where client relationship
contracts are either separately acquired or acquired with
investment managers who are employed by the Group. These are
initially recognised at cost and are subsequently amortised on a
straight-line basis over their estimated useful economic life.
Separately acquired client relationship contracts are amortised
over 15 to 20 years and those acquired with investment managers
over 5 years. Both types of intangible asset are reviewed annually
to determine whether there exists an indicator of impairment or an
indicator that the assumed useful economic life has changed.
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. Initial research costs and
planning prior to a decision to proceed with development of
software are recognised in the Consolidated statement of
comprehensive income when incurred.
Goodwill
Goodwill arising as part of a business combination is initially
measured at cost, being the excess of the fair value of the
consideration transferred over the Group's interest in the net fair
value of the separately identifiable assets, liabilities and
contingent liabilities of the subsidiary at date of acquisition. In
accordance with IFRS 3 'Business Combinations', goodwill is not
amortised but is reviewed annually for impairment and is therefore
stated at cost less any provision for impairment of value. Any
impairment is recognised immediately in the Consolidated statement
of comprehensive income and is not subsequently reversed. Gains and
losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold. On acquisition, any goodwill
acquired is allocated to CGUs for the purposes of impairment
testing. If the cost of the acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly in the Consolidated statement of comprehensive
income.
n. Financial investments
The Group classifies financial assets in the following
categories: fair value through profit or loss; fair value through
other comprehensive income; and amortised cost. The classification
is determined by management on initial recognition of the financial
asset, which depends on the purpose for which it was acquired.
Fair value through profit or loss
Financial instruments are classified as fair value through
profit or loss if they are either held for trading or specifically
designated in this category on initial recognition. Assets in this
category are initially recognised at fair value and subsequently
re-measured, with gains or losses arising from changes in fair
value being recognised in the Consolidated statement of
comprehensive income.
Fair value through other comprehensive income
Financial instruments are classified as fair value through other
comprehensive income if the objective of the business model is
achieved by both collecting contractual cash flows and selling
financial assets and that the asset's contractual cash flows
represents solely payment of principal and interest. Assets in this
category are initially recognised at fair value and subsequently
remeasured, with gains or losses arising from changes in fair value
being recognised in the other comprehensive income.
Amortised cost
Financial instruments are classified as amortised cost if the
asset is held to collect contractual cash flows and the asset's
contractual cash flows represents solely payment of principal and
interest.
o. Provisions and contingent liabilities
Provisions are recognised when the Group has a present
obligation as a result of a past event, where it is probable that
it will result in an outflow of economic benefits and can be
reliably estimated. Provisions are measured at the present value of
the expenditures expected to be required to settle the obligation
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the obligation.
Where the outflow is not probable or cannot be reliably
measured, the potential obligation is disclosed as a contingent
liability in the financial statements.
Insurance recoveries relating to legal fees are recognised when,
and only when, it is virtually certain that reimbursement will be
received if the corresponding obligation is settled. Reimbursements
received are disclosed net in the Consolidated statement of
comprehensive income and gross in the Consolidated statement of
financial position.
Client compensation
Complaints are assessed on a case-by-case basis and provisions
for compensation are made where it is judged necessary.
p. Foreign currency translation
The Group's functional and presentational currency is the Pound
Sterling. Foreign currency transactions are translated using the
exchange rate prevailing at the transaction date. At the reporting
date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the prevailing rates on that
date. Foreign exchange gains and losses resulting from settlement
of such transactions and from the translation of period-end
monetary assets and liabilities are recognised in the Consolidated
statement of comprehensive income.
q. Retirement benefit costs
Contributions in respect of the Group's defined contribution
pension scheme are charged to the Consolidated statement of
comprehensive income as they fall due.
r. Taxation
Tax on the profit for the year comprises current and deferred
tax. Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the Group's financial
statements. Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period when the asset
is realised or the liability settled based on tax rates (and laws)
that have been enacted or substantively enacted at the reporting
date.
Deferred 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.
s. Trade receivables
Trade receivables represent amounts due for services performed
in the ordinary course of business. They are recognised in trade
and other receivables and if collection is expected within one year
they are recognised as a current asset and if collection is
expected in greater than one year, they are recognised as a
non-current asset. Trade receivables are measured at amortised cost
less any provision for impairment.
t. Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. These are classified as current liabilities if payment
is due within one year or less (or in the normal operating cycle of
the business if longer). Otherwise, they are presented as
non-current liabilities in the Consolidated statement of financial
position.
Trade payables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method.
u. Operating lease payments
Rent payments due under operating leases are charged to the
Consolidated statement of comprehensive income on a straight-line
basis over the term of the lease. Where leases include lease
incentives such as rent-free periods, the benefit of these
incentives is recognised over the lease term as a reduction in the
rental expense.
v. Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised in the Consolidated statement of financial position at
fair value when the Group becomes a party to the contractual
provisions of the instrument.
w. Employee Benefit Trust ("EBT")
The Company provides finance to an EBT to purchase the Company's
shares on the open market in order to meet its obligation to
provide shares when an employee exercises certain options or awards
made under the Group's share-based payment schemes. The
administration and finance costs connected with the EBT are charged
to the Consolidated statement of comprehensive income. The cost of
the shares held by the EBT is deducted from equity. A transfer is
made between other reserves and retained earnings over the vesting
periods of the related share options or awards to reflect the
ultimate proceeds receivable from employees on exercise. The
trustees have waived their rights to receive dividends on the
shares.
The EBT is considered to be a structured entity. In substance,
the activities of the trust are being conducted on behalf of the
Group according to its specific business needs, in order to obtain
benefits from its operation. On this basis, the assets held by the
trust are consolidated into the Group's financial statements.
x. Share capital
Ordinary share capital is classified as equity. Incremental
costs directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds.
Where the Company purchases its own equity share capital
(treasury shares) the consideration paid, including any directly
incremental costs (i.e. net of income taxes) is deducted from
equity attributable to the Company's equity holders until the
shares are cancelled or reissued. Where such ordinary shares are
subsequently reissued, any consideration received (net of any
directly attributable incremental transaction costs and the related
income tax effects) is included within equity attributable to the
Company's equity holders.
y. Dividend distribution
The dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividend is authorised and no longer at the
discretion of the Company. Final dividends are recognised when
approved by the Company's shareholders at the Annual General
Meeting and interim dividends are recognised when paid.
3. Segmental information
For management purposes the Group's activities are organised
into three operating divisions: UK Investment Management, 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 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 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.
Revenues and expenses are allocated to the business segment that
originated the transaction. Revenues and expenses that are not
directly originated by a particular operating business segment are
reported as 'all other segments and consolidation adjustments.'
Sales between segments are carried out at arm's length. Centrally
incurred expenses are allocated to business segments on an
appropriate prorata basis. Segmental assets and liabilities
comprise operating assets and liabilities, those being the majority
of the Consolidated statement of financial position.
All other
segments
UK Investment Financial and consolidation
Management Planning International adjustments Total
Year ended 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Total segment revenue 89,369 3,556 14,609 28 107,562
Inter segment revenue (292) - - - (292)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
External revenues 89,077 3,556 14,609 28 107,270
Underlying administrative costs (45,121) (2,926) (9,247) (28,996) (86,290)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Operating contribution 43,956 630 5,362 (28,968) 20,980
Allocated costs (19,171) (2,469) (3,180) 24,820 -
Underlying other gains and losses,
finance income and finance costs 18 - (37) 28 9
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Underlying profit/(loss) before tax 24,803 (1,839) 2,145 (4,120) 20,989
Goodwill impairment - - - (4,756) (4,756)
Restructuring charge (1,764) - (739) (762) (3,265)
Client relationship contracts impairment - - - (2,328) (2,328)
Amortisation of client relationships
and contracts acquired with fund
managers (787) - (420) (1,039) (2,246)
Changes in fair value of deferred
consideration - - - 419 419
Finance cost of deferred consideration - - - (94) (94)
Changes in fair value of contingent
consideration - - - (75) (75)
Disposal costs - (21) - (12) (33)
Finance income from contingent consideration - 5 - 24 29
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Profit/(loss) before tax 22,252 (1,855) 986 (12,743) 8,640
Taxation (2,517)
Loss from discontinued operations (395)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Profit for the year attributable
to equity holders of the Company 5,728
--------------------------------------------- ------------- --------- ------------- ------------------ --------
The below segmental analysis has been restated to reflect the
previously reported Funds segment which was integrated into UK
Investment Management on 1 July 2018. Property Funds have been
included in 'all other segments and consolidation adjustments'
along with the non-reportable Group segment. The analysis has also
been restated to reflect the additional discontinued operations
recognised during the year (Note 5) and a change in presentation to
disclose administrative expenses, allocated costs and underlying
other gains and losses, finance income and finance costs by
segment.
All other
segments
UK Investment Financial and consolidation
Management Planning International adjustments Total
Year ended 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Total segment revenue 82,593 4,226 14,170 98 101,087
Inter segment revenue (832) (314) - - (1,146)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
External revenues 81,761 3,912 14,170 98 99,941
Underlying administrative costs (44,583) (2,156) (10,373) (24,242) (81,354)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Operating contribution 37,178 1,756 3,797 (24,144) 18,587
Allocated costs (15,347) (1,974) (2,400) 19,721 -
Underlying other gains and losses,
finance income and finance costs 6 - 54 124 184
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Underlying profit/(loss) before tax 21,837 (218) 1,451 (4,299) 18,771
Exceptional costs of resolving legacy
matters - - (5,531) - (5,531)
Software impairment (2,518) - - - (2,518)
Amortisation of client relationships
and contracts acquired with fund
managers (890) - (420) (1,052) (2,362)
Changes in fair value of deferred
consideration - - - (1,191) (1,191)
Finance cost of deferred consideration - - - (152) (152)
Disposal costs - - - (88) (88)
Finance income from contingent consideration - - - 26 26
Changes in fair value of contingent
consideration - - - (16) (16)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Profit/(loss) before tax 18,429 (218) (4,500) (6,772) 6,939
Taxation (1,328)
Loss from discontinued operations (217)
--------------------------------------------- ------------- --------- ------------- ------------------ --------
Profit for the year attributable
to equity holders of the Company 5,394
--------------------------------------------- ------------- --------- ------------- ------------------ --------
4. Taxation
The tax charge on profit for the year was as follows:
2019 2018
GBP'000 GBP'000
-------------------------------------- -------- --------
UK Corporation Tax at 19% (FY18: 19%) 4,069 3,396
Over provision in prior years (419) (613)
-------------------------------------- -------- --------
Total current tax 3,650 2,783
Deferred tax credits (808) (600)
Research and development tax credit (325) (855)
-------------------------------------- -------- --------
Income tax expense 2,517 1,328
-------------------------------------- -------- --------
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:
2019 2018
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Profit before taxation from continued operations 8,640 6,939
Loss before taxation from discontinued operations (395) (217)
-------------------------------------------------------- -------- --------
Profit before taxation 8,245 6,722
-------------------------------------------------------- -------- --------
Profit multiplied by the standard rate of tax in the UK
of 19% (FY18: 19%) 1,567 1,277
Tax effect of:
Overseas tax losses not available for UK tax purposes (56) 453
Disallowable expenses 178 468
Share-based payments 327 23
Depreciation and amortisation (25) 48
Impairment charges 1,346 535
Non-taxable income (76) (8)
Research and development tax credit (325) (855)
Over provision in prior years (419) (613)
-------------------------------------------------------- -------- --------
Tax charge for the year 2,517 1,328
-------------------------------------------------------- -------- --------
Non-taxable income includes the gain from changes in fair value
of deferred consideration.
During the year, the Group made a claim for research and
development tax relief in relation to qualifying expenditure on
software development incurred in the year ended 30 June 2018. This
resulted in a reduction in the Corporation Tax liabilities in the
respective years, and a repayment of GBP325,000 (FY18: GBP855,000)
is due from HM Revenue and Customs. The Group will consider whether
claims can also be made for qualifying expenditure incurred in the
year ended 30 June 2019 and thereafter in due course.
The deferred tax credits for the year arise from:
2019 2018
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Share option reserve 6 1
Accelerated capital allowances 96 8
Amortisation of acquired client relationship contracts 712 425
Unused overseas trading losses (6) 166
------------------------------------------------------- -------- --------
Deferred tax credits 808 600
------------------------------------------------------- -------- --------
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 year ended 30 June 2019
is 19% (FY18: 19%).
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
determine the deferred tax assets and liabilities is therefore 17%
(FY18: 17%) and will be reviewed in future years subject to new
legislation.
5. Discontinued operations
On 10 May 2019, Brooks Macdonald Funds Limited, a subsidiary
within the Group, resigned as investment manager of the Ground
Rents Income Fund plc ("GRIF"). The fund management of GRIF was
classed as Property Funds within internal management information
and was managed separately to the other funds managed within the
Group. As a result the operations were classified as discontinued
operations upon resignation. Disposal costs of GBP12,000 were
incurred by the Group in relation to the resignation.
On 31 December 2018, the Group disposed of its Employee Benefits
business within the Financial Planning segment. Profit from
discontinued operations is disclosed separately in the Consolidated
statement of comprehensive income, being the results of the
disposal to 31 December 2018 and the gain on disposal. Initial cash
consideration of GBP50,000 was received on completion. Additional
cash consideration will also be receivable in the first calendar
quarter of 2020, being a multiple of revenue earned by the disposed
business for the year ended 31 December 2019. On disposal the
contingent consideration receivable was estimated at GBP282,000,
which was recognised at its fair value of GBP219,000 based on the
discounted forecast cash flows.
This gain is presented within profit from discontinued
operations in the Consolidated statement of comprehensive income
for the year ended 30 June 2019. Disposal costs of GBP21,000 were
incurred by the Group in relation to the sale.
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. Profit from discontinued operations is
disclosed separately in the Consolidated statement of comprehensive
income, being the results of the disposal group to 1 December 2017
and the gain on disposal. Full details of this disposal are
disclosed in Note 11 of the 2018 Brooks Macdonald Group plc Annual
Report and Accounts. During the year ended 30 June 2019 the Group
received GBP483,000 of contingent consideration and a further
GBP60,000 as additional post-completion consideration.
The presentation of the prior year below has been restated to
separate the results of the additional discontinued operations,
consistent with the presentation in the current period. The
previously reported discontinued operations recognised the
operations of Braemar Estates (Residential) Limited and Braemar
Facilities Management Limited; however, the Employee Benefits and
GRIF operations have now been included.
2019 2018*
GBP'000 GBP'000
----------------------------------------------- -------- --------
Loss for the year from discontinued operations (724) (1,079)
Gain on disposal of discontinued operations 329 862
----------------------------------------------- -------- --------
Loss before tax from discontinued operations (395) (217)
Taxation - -
----------------------------------------------- -------- --------
Loss from discontinued operations (395) (217)
----------------------------------------------- -------- --------
* The prior year figures have been restated to separate the
results of discontinued operations, consistent with the
presentation in the current year.
a. Loss of discontinued operations
2019 2018*
GBP'000 GBP'000
--------------------- -------- --------
Revenue 920 2,810
Administrative costs (1,644) (3,891)
--------------------- -------- --------
Operating loss (724) (1,081)
Finance income - 2
--------------------- -------- --------
Loss before tax (724) (1,079)
--------------------- -------- --------
* The prior year figures have been restated to separate the
results of discontinued operations, consistent with the
presentation in the current year.
b. Gain on disposal of discontinued operations
2019 2018
GBP'000 GBP'000
------------------------------------------------- -------- --------
Initial consideration received 50 966
Additional consideration received 60 39
Fair value of contingent consideration (Note 16) 219 913
------------------------------------------------- -------- --------
Total disposal consideration 329 1,918
Net assets on disposal - (1,056)
Gain on disposal of discontinued operations 329 862
------------------------------------------------- -------- --------
6. Earnings per share
The Directors believe that underlying earnings per share provide
a truer reflection of the Group's performance in the year.
Underlying earnings per share are calculated based on 'underlying
earnings', which is an alternative performance measure and is
defined as earnings before finance costs of deferred consideration,
finance income of contingent consideration, changes in the fair
value of deferred consideration, changes in fair value of
contingent consideration, goodwill impairment, client relationship
contracts impairment, amortisation of client relationships and
contracts acquired with fund managers, finance income from
contingent consideration, restructuring charge, business disposal
costs and profit or loss from discontinued operations. The tax
effect of these adjustments has also been considered.
Earnings for the year used to calculate earnings per share as
reported in these consolidated financial statements were as
follows:
2019 2018*
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Earnings from continued operations 6,123 5,611
Loss from discontinued operations (395) (217)
------------------------------------------------------------- -------- --------
Earnings attributable to ordinary shareholders 5,728 5,394
Goodwill impairment (Note 8) 4,756 -
Restructuring charge 3,265 -
Client relationship contracts impairment (Note 8) 2,328 -
Amortisation of acquired client relationship contracts (Note
8) 2,144 2,156
Changes in fair value of deferred consideration (419) 1,191
Amortisation of contracts acquired with fund managers 102 206
Finance cost of deferred consideration 94 152
Disposal costs (Note 5) 33 88
Finance income of contingent consideration (29) (26)
Changes in fair value of contingent consideration 75 16
Exceptional costs of resolving legacy matters (Note 10) - 5,531
Software impairment (Note 8) - 2,518
Loss from discontinued operations (Note 5) 395 217
Tax impact of adjustments (1,185) (587)
------------------------------------------------------------- -------- --------
Underlying earnings attributable to ordinary shareholders 17,287 16,856
------------------------------------------------------------- -------- --------
*The prior year figures have been restated to separate the
results of discontinued operations, consistent with the
presentation in the current year.
Basic earnings per share is calculated by dividing earnings
attributable to ordinary shareholders by the weighted average
number of shares in issue throughout the year. 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 year
was as follows:
2019 2018
Number Number
of shares of shares
--------------------------------------------------------- ---------- ----------
Weighted average number of shares in issue 13,730,530 13,677,910
Effect of dilutive potential shares issuable on exercise
of employee share options 6,211 28,318
--------------------------------------------------------- ---------- ----------
Diluted weighted average number of shares in issue 13,736,741 13,706,228
--------------------------------------------------------- ---------- ----------
Earnings per share for the year attributable to equity holders
of the Company were:
2019 2018*
p p
--------------------------------- ----- -----
Based on reported earnings:
Basic earnings per share from:
Continuing operations 44.6 41.0
Discontinued operations (2.9) (1.6)
--------------------------------- ----- -----
Total basic earnings per share 41.7 39.4
Diluted earnings per share from:
Continuing operations 44.6 40.9
Discontinued operations (2.9) (1.6)
--------------------------------- ----- -----
Total diluted earnings per share 41.7 39.3
Based on underlying earnings:
Basic earnings per share 125.9 123.2
Diluted earnings per share 125.8 123.0
--------------------------------- ----- -----
*The prior year have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current year.
7. Dividends
Amounts recognised as distributions to equity holders of the
Company in the year were as follows:
2019 2018
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Final dividend paid for the year ended 30 June 2018 of 30.0p
(FY17: 26.0p) per share 4,123 3,524
Interim dividend paid for the year ended 30 June 2019 of
19.0p (FY18: 17.0p) per share 2,591 2,319
------------------------------------------------------------- -------- --------
Total dividends 6,714 5,843
------------------------------------------------------------- -------- --------
Final dividend proposed for the year ended 30 June 2019
of 32.0p (FY18: 30.0p) per share 4,378 4,116
------------------------------------------------------------- -------- --------
The interim dividend of 19.0p (FY18: 17.0p) per share was paid
on 23 April 2018.
A final dividend for the year ended 30 June 2019 of 32.0p (FY18:
30.0p) per share was declared by the Board of Directors on 11
September 2019 and is subject to approval by the shareholders at
the Company's Annual General Meeting. It will be paid on 8 November
2019 to shareholders who are on the register at the close of
business on 27 September 2019. 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 financial statements.
8. Intangible assets
Contracts
Acquired acquired
client with
Computer relationship fund
Goodwill software contracts managers Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- --------- ------------- --------- --------
Cost
At 1 July 2017 36,006 7,732 32,745 3,521 80,004
Additions - 5,069 - - 5,069
Disposals (230) (77) (584) - (891)
Reclassification to property, plant
and equipment - (943) - - (943)
Impairment - (4,013) - - (4,013)
---------------------------------------- -------- --------- ------------- --------- --------
At 30 June 2018 35,776 7,768 32,161 3,521 79,226
Additions - 1,106 - - 1,106
---------------------------------------- -------- --------- ------------- --------- --------
At 30 June 2019 35,776 8,874 32,161 3,521 80,332
---------------------------------------- -------- --------- ------------- --------- --------
Accumulated amortisation and impairment
At 1 July 2017 1,986 1,858 10,315 3,197 17,356
Amortisation charge - 1,518 2,156 206 3,880
Disposals - (63) (217) - (280)
Reclassification to property, plant
and equipment - (791) - - (791)
Impairment - (1,495) - - (1,495)
---------------------------------------- -------- --------- ------------- --------- --------
At 30 June 2018 1,986 1,027 12,254 3,403 18,670
Amortisation charge - 2,165 2,144 102 4,411
Impairment 4,756 - 2,328 - 7,084
---------------------------------------- -------- --------- ------------- --------- --------
At 30 June 2019 6,742 3,192 16,726 3,505 30,165
---------------------------------------- -------- --------- ------------- --------- --------
Net book value
At 1 July 2017 34,020 5,874 22,430 324 62,648
At 30 June 2018 33,790 6,741 19,907 118 60,556
---------------------------------------- -------- --------- ------------- --------- --------
At 30 June 2019 29,034 5,682 15,435 16 50,167
---------------------------------------- -------- --------- ------------- --------- --------
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:
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Funds
Braemar Group Limited ("Braemar") 3,320 3,320
Levitas Investment Management Services Limited ("Levitas") 4,471 9,227
----------------------------------------------------------- -------- --------
7,791 12,547
International
Brooks Macdonald Asset Management (International) Limited
and Brooks Macdonald Retirement Services (International)
Limited (collectively "Brooks Macdonald International") 21,243 21,243
----------------------------------------------------------- -------- --------
Total goodwill 29,034 33,790
----------------------------------------------------------- -------- --------
Goodwill is reviewed annually for impairment and its
recoverability has been assessed at 30 June 2019 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 approved by the relevant
subsidiary company boards of directors, covering a period of five
years. Cash flows are then extrapolated beyond the forecast period
using an expected long-term growth rate.
At 31 December 2018, there were some impairment indicators
present for the Levitas CGU and based on a value-in-use
calculation, the recoverable amount as at 31 December 2018 was
GBP5,152,000. This was lower than the carrying amount of the CGU,
reflecting both a reduction in forecast revenue growth and an
increase in the discount rate applied, indicating that it should be
impaired. An impairment loss of GBP4,756,000 has been recognised
against the goodwill attributable to the CGU and is shown in the
Consolidated statement of comprehensive income within other
losses.
The key underlying assumptions of the calculation were the
discount rate, the growth in funds under management of the Levitas
funds and the long-term growth rate of the business. A pre-tax
discount rate as at 31 December 2018 of 12% (FY18: 11%) was used,
based on the Group's assessment of the risk-free rate of interest
and specific risks pertaining to Levitas. Annual funds under
management growth rates of between 8% and 36% were forecast in the
following four financial years, the period covered by the most
recent forecasts, which reflected historic actual growth and
planned management activities, and were considered to be achievable
at 31 December 2018. A 2% long-term growth rate was applied to cash
flows beyond the forecast period and is considered prudent in the
context of the long-term average growth rate for the funds industry
in which the CGU operates.
The value-in-use calculation was performed at 30 June 2019 in
relation to the Levitas CGU, and the recoverable amount was
GBP5,374,000, indicating that there is no further impairment
required. The key underlying assumptions of the calculation are the
discount rate, the growth in funds under management of the Levitas
funds and the long-term growth rate of the business. A pre-tax
discount rate of 12% (FY18: 11%) has been used, based on the
Group's assessment of the risk-free rate of interest and specific
risks relating to Levitas. Annual funds under management growth
rates of between 24% and 37% are forecast in the next five
financial years, the period covered by the most recent forecasts,
which reflect historic actual growth and planned management
activities and are considered to be achievable given current market
and industry trends. 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.
At 30 June 2019, the Levitas CGU had limited headroom due to the
impairment recognised at 31 December 2018. The impairment was
driven by the reduced sponsorship fee earned by the Levitas CGU,
but management remain focussed on the recently agreed 5-year
partnership in driving higher FUM flows. Given the limited
headroom, the Group has performed the following sensitivity
analysis on the Levitas CGU at 30 June 2019:
-- A 1% increase in the pre-tax discount rate would result in a
decrease of GBP561,000 in the recoverable amount and an impairment
of the goodwill balance by GBP453,000.
-- A 10% decrease in the revenue growth would result in a
GBP715,000 reduction of the recoverable amount and an impairment of
the goodwill balance by GBP607,000.
Based on a value-in-use calculation, the recoverable amount of
the Brooks Macdonald International CGU at 30 June 2019 was
GBP28,780,000, indicating that there is no impairment. The key
underlying assumptions of the calculation are the discount rate,
the short-term growth in earnings and the long-term growth rate of
the business. A pre-tax discount rate of 12% (FY18: 10%) has been
used, based on the Group's assessment of the risk-free rate of
interest and specific risks relating to Brooks Macdonald
International. Annual cash inflow growth rates of up to 65% are
forecast over the next five financial years, the period covered by
the most recent forecasts, which reflect historic actual growth and
planned management actions and are considered to be achievable
given current market and industry trends. 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.
Based on a value-in-use calculation, the recoverable amount of
the Braemar CGU at 30 June 2019 was GBP55,688,000, indicating that
there is no impairment. A pre-tax discount rate of 13% (FY18: 12%)
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 funds under management of the funds business and the
long-term growth rate. Annual funds under management growth rates
of between 8% and 37% for the various funds are forecast in the
next five financial years, the period covered by the most recent
forecasts, which reflect historic actual growth and planned
management activities and are considered to be achievable given
current market and industry trends. 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.
At 30 June 2019 headroom exists in the calculations of the
respective recoverable amounts of these CGUs over the carrying
amounts of the goodwill allocated to them. On this basis, the
Directors have concluded that there is no further impairment
required in addition to the impairment recognised at 31 December
2018 in relation to the Levitas CGU.
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.
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 (15 to 20 years).
During the year ended 30 June 2019, an impairment charge of
GBP2,328,000 was recognised in relation to one of the Group's
acquired relationship contracts due to a reduction in the expected
useful economic life from 15 to 12 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 an estimated useful life of
five years.
9. Deferred income tax
Deferred income tax assets are only recognised to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. An
analysis of the Group's deferred assets and deferred tax
liabilities is shown below.
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Deferred tax assets
Deferred tax assets to be settled after more than one year 524 444
Deferred tax assets to be settled within one year 699 732
----------------------------------------------------------- -------- --------
Total deferred tax assets 1,223 1,176
----------------------------------------------------------- -------- --------
Deferred tax liabilities
Deferred tax liabilities to be settled after more than one
year (1,566) (2,565)
Deferred tax liabilities to be settled within one year (712) (425)
----------------------------------------------------------- -------- --------
Total deferred tax liabilities (2,278) (2,990)
----------------------------------------------------------- -------- --------
The gross movement on the deferred income tax account during the
year was as follows:
2019 2018
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
At 1 July (1,814) (2,144)
Credit to the Consolidated statement of comprehensive income 808 600
Charge recognised in equity (49) (270)
------------------------------------------------------------- -------- --------
At 30 June (1,055) (1,814)
------------------------------------------------------------- -------- --------
The change in deferred income tax assets and liabilities during
the year was as follows:
Trading
losses Accelerated
Share-based carried capital
payments forward allowances Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- -------- ----------- --------
Deferred tax assets
At 1 July 2017 932 339 - 1,271
Credit to the Consolidated statement of comprehensive
income 1 166 8 175
Charge to equity (270) - - (270)
------------------------------------------------------ ----------- -------- ----------- --------
At 30 June 2018 663 505 8 1,176
Credit to the Consolidated statement of comprehensive
income 6 (6) 96 96
Charge to equity (49) - - (49)
------------------------------------------------------ ----------- -------- ----------- --------
At 30 June 2019 620 499 104 1,223
------------------------------------------------------ ----------- -------- ----------- --------
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.
Intangible
asset amortisation
GBP'000
------------------------------------------------------------- -------------------
Deferred tax liabilities
At 1 July 2017 3,415
Credit to the Consolidated statement of comprehensive income (425)
------------------------------------------------------------- -------------------
At 30 June 2018 2,990
Credit to the Consolidated statement of comprehensive income (712)
------------------------------------------------------------- -------------------
At 30 June 2019 2,278
------------------------------------------------------------- -------------------
10. Provisions
Exceptional
costs of
resolving
Client legacy Deferred Leasehold
compensation matters consideration FSCS levy dilapidations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
At 1 July 2017 807 6,500 1,664 621 - 9,592
(Credit)/charge to the Consolidated
statement of comprehensive
income (407) 5,531 - 627 - 5,751
Transfer from non-current
liabilities - - 1,584 - - 1,584
Utilised during the year (378) (5,806) (1,852) (559) - (8,595)
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
At 30 June 2018 22 6,225 1,396 689 - 8,332
Charge to the Consolidated
statement of comprehensive
income 100 - - 1,036 416 1,552
Transfer from non-current
liabilities - - 774 - - 774
Utilised during the year (22) (5,524) (1,251) (797) (50) (7,644)
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
At 30 June 2019 100 701 919 928 366 3,014
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
Analysed as:
Amounts falling due within
one year 100 701 919 928 88 2,736
Amounts falling due after
more than one year - - - - 278 278
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
Total provisions 100 701 919 928 366 3,014
------------------------------------ ------------- ----------- -------------- --------- -------------- --------
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. 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 was recognised for costs of resolving these including
associated expenses in the years ended 30 June 2017 and 30 June
2018. 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. During the year
ending 30 June 2019 no further provisions were made (FY18:
GBP5,531,000). The amount utilised during the period of
GBP5,524,000 represented goodwill payments made to clients of
GBP4,418,000, legal fees of GBP936,000 and related expenses of
GBP170,000. During the period, a contingent liability was
recognised in relation to potential claims related to the legacy
matters (Note 12).
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. The amount outstanding at 30 June
2019 was GBP919,000 (FY18: GBP1,396,000) and relates entirely to
the Levitas acquisition. The amount of deferred consideration
included within provisions is due to be settled in November 2019. A
final annual payment has now been calculated and is due in November
2020.
An amount of GBP774,000 (FY18: GBP1,584,000) was transferred
from non-current liabilities, representing payments made during the
year and provisions for amounts falling due within one year of the
reporting date. Provisions of GBP1,251,000 (FY18: GBP1,852,000)
were utilised during the year on payment to the vendors of
Levitas.
d. FSCS levy
Following confirmation by the FSCS in April 2019 of its final
industry levy for the 2019/20 scheme year, the Group has made a
provision of GBP928,000 (FY18: GBP689,000) for its estimated
share.
e. 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.
11. Reconciliation of operating profit to net cash inflow from
operating activities
2019 2018
GBP'000 GBP'000
---------------------------------------------- -------- --------
Operating profit/(loss)
Continuing operations 8,507 6,963
Discontinued operations (Note 5) (724) (1,081)
---------------------------------------------- -------- --------
Operating profit 7,783 5,882
Adjustments for:
Depreciation of property, plant and equipment 1,391 1,186
Amortisation of intangible assets 4,411 3,880
Other losses 6,928 3,643
Increase in receivables (807) (3,323)
(Increase)/decrease in payables (2,503) 2,122
Decrease in provisions (4,841) (992)
Increase in other non-current liabilities 557 -
Discontinued operations - (457)
Share-based payments charge 2,634 1,669
---------------------------------------------- -------- --------
Net cash inflow from operating activities 15,553 13,610
---------------------------------------------- -------- --------
12. Guarantees and contingent liabilities
In the normal course of business the Group is exposed to certain
legal and tax issues which, in the event of a dispute, could
develop into litigious proceedings and in some cases may result in
contingent liabilities.
A claim for unspecified losses has been made by a client against
Brooks Macdonald Financial Consulting Limited, a subsidiary of the
Group, in relation to alleged negligent financial advice. The
claimant has not yet advised the quantum of their claim so it is
not possible to reliably estimate the potential impact of a ruling
in their favour. There remains significant uncertainty surrounding
the claim and the Group's legal advice indicates that it is not
probable that the claim will be upheld, therefore no provision for
any liability has been recognised at this stage.
Brooks Macdonald Asset Management Limited, a subsidiary company
of the Group, has an agreement with the Royal Bank of Scotland plc
to guarantee settlement for trading with CREST stock on behalf of
clients. The Group holds client assets to fund such trading
activity.
Additional levies by the Financial Services Compensation Scheme
may give rise to further obligations based on the Group's income in
the current or previous years. Nevertheless, the ultimate cost to
the Group of these levies remains uncertain and is dependent upon
future claims resulting from institutional failures.
During the year, the Group discovered a possible liability to HM
Revenue and Customs in relation to a PAYE settlement agreement. The
Group has been working with HM Revenue and Customs to resolve the
matter but have yet to conclude on the final liability. The Group
has estimated an expected liability of GBP700,000, which is
recognised in trade and other payables at 30 June 2019.
During the year, a small number of clients rejected goodwill
offers made by Brooks Macdonald Asset Management (International)
Limited in connection with the exceptional costs of resolving
legacy matters, see Note 10b, which have been released from the
provision. It is possible that one or more of these clients might
issue claims against Brooks Macdonald Asset Management
(International) Limited but no such claims have been issued as at
30 June 2019. As a result, it is not possible to estimate the
potential outcome of claims or to assess the quantum of any
liability with any certainty at this stage.
13. 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 Amounts owed to
related parties related parties
--------------------------------------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Braemar Group Limited 661 - - 2,339
Brooks Macdonald Asset Management Limited - - 6,993 6,615
Brooks Macdonald Asset Management (International)
Limited - - 24 4
Brooks Macdonald Financial Consulting Limited - - 11,918 4,322
Brooks Macdonald Funds Limited - - 4,786 3,986
Brooks Macdonald Nominees Limited - - 2,583 2,583
Levitas Investment Management Services Limited 9 9 - -
-------------------------------------------------- -------- -------- -------- --------
All of the above amounts are interest-free and are repayable on
demand.
The Group manages a number of collective investment funds that
are considered related parties. During the year the Group disposed
of their 563,689 class A units in the IFSL Brooks Macdonald
Balanced Fund. These transactions were conducted on an arm's length
basis.
14. Events since the end of the year
On 17 July 2019, the Group announced that it had signed an
agreement to lease a new London office at 21 Lombard Street. The
lease is for six years with relocation to the new premises in the
second half of the Group's financial year ending 30 June 2020. The
Group's two current London offices at Welbeck Street in the West
End and Bevis Marks in the City will consolidate into the new
central location. For the period of the fit out, the Group will
incur additional costs of circa GBP1,200,000 from running multiple
sites, and the intention is to exclude this from underlying profit
in the year ending 30 June 2020. No amounts in relation to these
costs have been included in these Consolidated financial
statements.
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 auditor.
The financial information set out above does not constitute the
Group's statutory financial statements for the years ended 30 June
2019 or 2018. Statutory financial statements for 2018 have been
delivered to the Registrar of Companies. Statutory financial
statements for 2019 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditor has
reported on both the 2019 and 2018 financial statements. Their
reports were unqualified and did not draw attention to any matters
by way of emphasis.
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 2019
------------------------------ -----------------
Ex-dividend date for final
dividend 26 September 2019
------------------------------ -----------------
Record date for final dividend 27 September 2019
------------------------------ -----------------
Annual General Meeting 31 October 2019
------------------------------ -----------------
Final dividend payment date 8 November 2019
------------------------------ -----------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFDEFFFUSEEU
(END) Dow Jones Newswires
September 12, 2019 02:01 ET (06:01 GMT)
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