TIDMBRK
RNS Number : 9263L
Brooks Macdonald Group PLC
16 September 2021
16 September 2021
BROOKS MACDONALD GROUP PLC
Final results for the year ended 30 June 2021
Strong strategic progress underlined by excellent financial
performance
Return to positive net flows in H2 with momentum growing
Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group")
today announces its audited results for the year ended 30 June
2021.
Financial highlights
-- Group FUM reached record level of GBP16.5 billion (up 20.3% on FY20)
-- Net flows improved each quarter and were positive in H2 at a
Group level, with the core UKIM discretionary business positive for
the full year, demonstrating organic growth momentum which has
continued into FY22 with both months positive
-- Group revenue of GBP118.2 million, up 8.8% on FY20, driven by
FUM growth and the successful integration of the two recently
acquired businesses
-- Underlying profit margin up by 4.7 points to 25.9%, in line
with the Group's commitment to deliver top quartile margin over the
medium term
-- Continued strong investment performance of 15.8% for the
year, well ahead of the 12.9% for the MSCI PIMFA Private Investor
Balanced Index
-- Improved performance and underlying profit margin in both the
UKIM and International business segments, in part boosted by the
contribution of the acquired businesses
-- Total dividend increased by 18.9% to 63.0p (FY20: 53.0p)
reflecting the Board's confidence in the Group's prospects.
Strategic progress
-- Andrew Shepherd appointed as new CEO, bringing unrivalled
experience and knowledge of the industry from his 27-year financial
services career, including 19 years at Brooks Macdonald
-- Successfully completed integration of two high-quality
acquisitions, Cornelian Asset Managers and Lloyds Banking Group's
Channel Islands funds and wealth management business, which have
both delivered above the targeted earnings accretion, underlining
the Group's acquisition capabilities
-- Rapid growth of Brooks Macdonald Investment Solutions
proposition, with strong pipeline for FY22
-- Near 50% increase in FUM for specialised Bespoke Portfolio
Service products - Responsible Investment Service ("RIS"), Court of
Protection, Decumulation, AIM Portfolio Service - underlining
ongoing strong demand as the Group continued to innovate for
clients and advisers
-- Private Clients proposition launched post period end to build
an integrated wealth management service with specialist advice from
internal IFA team, designed to ensure direct clients get the best
possible service, operating alongside core outsourced investment
offering to third party IFAs
-- Material progress on the Group's digital transformation -
partnered with SS&C, the global wealth management technology
and operations company, to deliver best-in-class client and
intermediary experience and service levels. Initial deliveries of
funds business processes and digital onboarding successful.
Expecting SS&C to complete the current phase, which is the
transition of all client- and intermediary-facing processes on to
their platform, by the end of this calendar year.
Outlook
-- Fundamental opportunity remains strong, driven by demographic
and policy trends as well as increasing adviser demand for
outsourced investment management, where the Group aims to be the
partner of choice
-- Well positioned to continue to deliver on ambitious growth
strategy with a strong pipeline and net flows expected to improve
further over FY22, looking to the future with confidence.
Andrew Shepherd, CEO designate of Brooks Macdonald,
commented:
"I am pleased to report that, in a period dominated by the
pandemic, we have not only again delivered strong financial
performance, but we have also made further progress against our
strategic ambitions. FUM reached record levels, we increased our
profit margin and delivered record revenue and underlying profit -
at the same time as successfully integrating two acquisitions to
increase the Group's scale, service offerings, and capabilities.
And all in our 30(th) anniversary year!
"We continued to deliver a high-quality service to clients and
made great progress in our ongoing ambitions to transform client
and intermediary service levels through technology and innovation.
None of this would have been possible without the steadfast
commitment and hard work of our people who have done an exceptional
job during the most unprecedented circumstances.
"I am excited to lead the firm at a time of great opportunity
for Brooks Macdonald, based on our vision as the leading investment
manager for intermediaries. Our strategy is working, grounded in
our purpose of realising ambitions and securing futures. We are in
a strong position, primed to deliver on our ambitious growth
aspirations."
Key financial results
Year ended Year ended Change
30.06.2021 30.06.2020
Funds under management ("FUM") GBP16.5bn GBP13.7bn 20.3%
Revenue GBP118.2m GBP108.6m 8.8%
Underlying results(1)
Underlying profit before tax GBP30.6m GBP23.0m 33.0%
Underlying profit margin before
tax 25.9% 21.2% +4.7ppt
Underlying diluted earnings per
share 155.1p 123.7p 25.4%
Statutory results
Statutory profit before tax GBP25.1m GBP10.0m 151.0%
Statutory profit margin before tax 21.2% 9.2% +12.0ppt
Statutory diluted earnings per share 124.9p 43.1p 189.8%
Net cash GBP54.9m GBP50.2m 9.4%
Dividends
Proposed final dividend 40.0p 32.0p 25.0%
Total dividend 63.0p 53.0p 18.9%
1 The underlying figures represent the results for the Group's
continuing activities excluding certain adjusting items as listed
in the Financial review. These represent an alternative performance
measure for the Group. A reconciliation between the Group's
statutory and underlying profit before tax is also included in the
Financial review.
Conference call and investor presentation details
There will be a presentation for analysts and investors at
9:30am today via webcast and conference call. For details please
contact FTI Consulting on +44 (0) 07976 870961 or
brooksmacdonald@fticonsulting.com
Presentation slides will be available from 7:00 a.m. today by
going to the Investor Relations section of Brooks Macdonald's
website using the following link:
https://www.brooksmacdonald.com/investor-relations
Enquiries to:
Brooks Macdonald Group plc www.brooksmacdonald.com
Andrew Shepherd, Group CEO designate 020 7659 3492
Ben Thorpe, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Broker)
Rishi Shah / John Welch 020 7418 8900
FTI Consulting brooksmacdonald@fticonsulting.com
Ed Berry / Laura Ewart / Katherine Bell 07703 330199 / 07711
387085 / 07976 870961
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries,
provides leading investment management services in the UK and
internationally. The Group, which was founded in 1991 and began
trading on AIM in 2005, had discretionary Funds under Management of
GBP16.5 billion as at 30 June 2021.
Brooks Macdonald offers a range of investment management
services to private high net worth individuals, pension funds,
institutions, charities and trusts. The Group also provides
financial planning as well as international investment management,
and acts as fund manager to a range of onshore and international
funds.
The Group has thirteen offices across the UK and the Channel
Islands including London, Cheltenham, East Anglia, Exeter,
Hampshire, Leamington Spa, Leeds, Manchester, Tunbridge Wells,
Scotland, Wales, Jersey and Guernsey.
LEI: 213800WRDF8LB8MIEX37
www.brooksmacdonald.com / @BrooksMacdonald
Chairman's statement
Brooks Macdonald has had a strong year, setting records for FUM
and revenue.
Introduction
I am pleased to report that Brooks Macdonald has had a strong
year, setting records for FUM and revenue. The Group has also
delivered further improvement in underlying profit and underlying
profit margin in line with our medium-term commitments. The closing
FUM figure of GBP16.5 billion was delivered through strong
investment performance and the completion of our acquisition of
Lloyds Banking Group's Channel Islands wealth management and funds
business ("Lloyds Channel Islands"), partially offset by net
outflows over the year. Although net flows for the full year were
negative, they improved each quarter and we were pleased to return
to positive net flows in Q4 and for H2 overall.
Our Centralised Investment Process continues to deliver strong
performance, underpinning our mission to protect and enhance our
clients' wealth. Overall investment performance of 15.8% for the
financial year to June was well ahead of the MSCI PIMFA Private
Investor Balanced Index which was up 12.9%.
In May, I was delighted to announce the appointment of Andrew
Shepherd as our new Group CEO, subject to regulatory approval,
following the resignation of Caroline Connellan. Andrew's
unrivalled knowledge of the industry and commitment to the Group
made him uniquely qualified to build on the significant momentum in
the business and he has certainly hit the ground running since his
appointment.
I would also like to reiterate my thanks to Caroline for her
leadership of Brooks Macdonald over a four-year period, where she
has been central to the transformation of the business, leaving it
in a position of strength and primed for further growth.
Andrew has a strong focus on people and culture and, as we
emerge from the pandemic and associated restrictions, he will
continue to prioritise the wellbeing and safety of our people,
while ensuring that the Group supports its intermediaries and
clients.
Performance overview
Brooks Macdonald continues to grow strongly, driven by our
strategy of focusing on intermediaries, for whom we aim to be
partner of choice. Underlying profit before tax was GBP30.6
million, up 33.0% on the year (FY20: GBP23.0 million), and
underlying diluted earnings per share ("EPS") was up 25.4% to
155.1p (FY20: 123.7p).
Statutory profit before tax rose 151.0% to GBP25.1 million
(FY20: GBP10.0 million), driven mainly by a gain related to the
Lloyds Channel Islands acquisition. Statutory diluted EPS rose
189.8% to 124.9p (FY20: 43.1p).
Dividend
The Board has recommended a final dividend of 40.0p (FY20:
32.0p) which, subject to approval by shareholders, will result in
total dividends for the year of 63.0p (FY20: 53.0p). This
represents an increase of 25.0% in the final dividend and 18.9% in
the total dividend on the previous year and underlines the Board's
confidence in the prospects for the Group, and our commitment to a
progressive dividend policy. The final dividend will be paid on 5
November 2021 to shareholders on the register at the close of
business on 24 September 2021.
Board changes
There have been several changes to the Board during the
financial year and in the post-close period. As mentioned in last
year's Annual Report and Accounts, Dagmar Kershaw and Robert
Burgess joined the Board with effect from 1 July 2020 and 1 August
2020 respectively. Following her resignation as CEO, Caroline
Connellan formally stepped down from the Board with effect from 27
May 2021. Post-close, our new CEO designate, Andrew Shepherd, and
the Group Chief Operating Officer, Lynsey Cross, were appointed to
the Board with effect from 13 July 2021.
Looking ahead
The macroeconomic outlook in the short term remains tightly
linked to progress in moving beyond the pandemic and its impact on
the economy, markets and client sentiment. The fundamental
opportunity for Brooks Macdonald remains strong, driven by
demographic and policy trends as well as increasing adviser demand
for outsourced investment management, where we aim to be the
partner of choice. The Group has a strong balance sheet, supportive
shareholders and an ambitious growth agenda. We look to the future
with confidence.
Alan Carruthers
Chairman
15 September 2021
CEO's review
Another year when Brooks Macdonald delivered strong financial
performance.
Introduction
Having taken over as CEO of Brooks Macdonald in May, I am
delighted to present my first report covering another year when we
delivered strong financial performance, despite pandemic-related
restrictions persisting throughout the year. Under the leadership
of my predecessor, Caroline Connellan, the business has emerged
stronger from a period of change followed by the rigours of
lockdown. I am excited to take over a business primed for growth
with exceptional opportunities and I am grateful to Caroline for
the work she has done in her four years as CEO. While this was a
turbulent time for both the economy and wider society, with the
impact of Brexit and the pandemic, the Group has been able to trade
largely as normal, deliver robust financial results and support our
clients and intermediaries.
Nonetheless, it has been a challenging year in many ways and I
would like to thank several groups of people without whom this
performance would not have been possible. Our first priority is our
clients and I am pleased that we have been able to continue to
protect and enhance their wealth with strong investment performance
and high levels of service, and I thank them for their confidence
in our business and our people. Likewise, I thank the
intermediaries we work with for their continuing support, which is
critical to our continued success. However, most of all, I want to
thank all the people who work for Brooks Macdonald. Their hard work
and commitment to our clients and intermediaries has been
unwavering despite the challenging context, and I am enormously
grateful to them.
Delivering our strategy
Brooks Macdonald has been through a period of change, building
the foundations for our future success. Our strategy is clear,
founded on the three value drivers of organic growth, service and
operational excellence, and selective high-quality
acquisitions.
Our vision for Brooks Macdonald is as the leading investment
manager for intermediaries and we are working with our intermediary
network - present and future - to ensure we understand what they
need from us. We continue to look to deliver further improvements
in returns, delivering consistently top quartile underlying profit
margins, through building on the sustainable and scalable business
model we are putting in place. We are making substantial progress,
ready to capitalise on the growth opportunities we see ahead.
A core element of our strategy, alongside our robust Centralised
Investment Process and our compelling investment proposition, is to
transform our intermediary experience and client service levels to
be best-in-class. Our digital experience for intermediaries and
clients - complementing our face-to-face relationships - will be
market-leading, including automated onboarding, full intermediary
and client portal functionality, and bespoke reporting. We are
partnering with SS&C Technologies ("SS&C"), the leading
wealth management technology and services company, to deliver this
transformation. We expect SS&C to complete the current phase of
the transformation, transition of all client- and
intermediary-facing processes on to their platform, by the end of
this calendar year.
Financial performance
Brooks Macdonald had another year of strong financial
performance in FY21, delivering on our medium-term commitment to
improve profit margins with underlying profit margin up 4.7 points
to 25.9%. We also delivered record revenue and underlying profit
levels of GBP118.2 million and GBP30.6 million respectively.
Our year-end closing FUM also increased sharply to GBP16.5
billion, up 20.3% on the FY20 figure of GBP13.7 billion. The
biggest contributor was strong investment performance, delivering
GBP2.2 billion of growth, supported by GBP0.9 billion from the
acquisition of the Lloyds Channel Islands business (which completed
in November 2020), partially offset by GBP0.3 billion of net
outflows over the year. Net flows improved every quarter over the
year, with positive flows of GBP0.1 billion in H2 overall, and we
have a strong pipeline going into FY22.
Investment performance and market conditions
Our investment performance through FY21 was strong at 15.8%,
well ahead of the 12.9% recorded by the MSCI PIMFA Private Investor
Balanced Index. We were also ahead of the ARC benchmark for all our
risk profiles over the year, as well as, over the last 5 and 10
years.
Investment markets in FY21 were complicated by the significant
sector rotation at the start of calendar 2021, as cyclical and
value sectors recovered after the growth and defensive dominance of
2020. Despite the challenging conditions, we navigated this market
well, outperforming in the first half of the financial year and
bringing more balance to client portfolios in the second half.
Looking ahead, we expect equities to continue to outperform
bonds due to the strong relative valuation preference for equity
markets. We also expect higher inflation levels in 2021 to
encourage investors still in cash to deploy these funds into risk
assets to seek an above inflation return. This scenario would
support our overweight equity portfolio positioning, as well as,
improving flows into asset management in general.
Review of business performance
Robin Eggar, our Head of UK Investment Management ("UKIM"), and
his team have continued to serve clients and intermediaries across
the UK, providing outstanding levels of service. We have seen a
steady improvement in flows throughout the year, with particularly
strong performance from Brooks Macdonald Investment Solutions,
Platform Managed Portfolio Service ("PMPS"), and our specialist
Bespoke Portfolio Service ("BPS") offerings. Investment Solutions
is a more business-to-business offering, where we work with an
adviser firm to provide a tailored investment proposition, in
either model portfolio or fund format, to meet the needs of their
clients. This has been highly successful in the past year with
several material deals agreed. PMPS is the platform version of our
traditional custody Managed Portfolio Service ("MPS") and we have
continued to increase the number of platforms where it is
available, now up to 20 of the most popular platforms, and this has
helped drive strong growth in the year.
In our flagship BPS product, we have continued to see good
growth in our specialist offerings - the AIM Portfolio Service, the
Responsible Investment Service, our Decumulation Service, and our
Court of Protection service. The success of these more specialised
offerings underlines the importance of our focus on client
needs.
The Funds business has experienced net outflows in each quarter,
particularly in our Defensive Capital Fund ("DCF") which has been
affected by a downturn in sentiment in the Investment Association's
Targeted Absolute Return sector. DCF did have strong investment
performance for the year at 14.4% for the main institutional share
class, well ahead of the sector. For Funds overall, the quarterly
trend showed declining outflows so we are optimistic for FY22.
We have integrated our Financial Planning business with our
existing UKIM direct client activities, which were boosted by the
Cornelian acquisition, into a new Private Clients arm within UKIM
designed to ensure our direct clients receive the best possible
service.
We have continued to take action to position the business for
future success. As examples, during the year we opened offices in
Exeter and Cheltenham, replacing our office in Taunton, and moved
premises in Edinburgh, Manchester, Leeds and Jersey, to improve
facilities for clients and staff, and to access a larger group of
intermediaries and greater pools of wealth.
In International, Richard Hughes took over from me as CEO
International when I took the Group role, and I am delighted to
leave the business in such capable hands, having worked closely
with him as my deputy for the past two years. We continued to
improve International's commercial performance, with the underlying
profit margin before tax up six points, now just short of 25% and
materially closing the gap to UKIM. International was reinforced by
the completion in November of the acquisition of the Lloyds Channel
Islands business and we are delighted with the quality of people we
brought in, all allowing us to accelerate the margin improvement.
We will also shortly be opening an Isle of Man office, subject to
regulatory approval. Over the year, solid investment performance
was largely outweighed by net outflows, driven in particular by a
number of larger, low margin mandates, with overall FUM growth in
International being mainly driven by the Lloyds addition.
Client need and demand for the benefits provided by the
combination of high-quality financial planning and investment
management remain strong, driven by underlying demographics and
increasing policy onus on the individual to save for retirement. We
continue to see a strong opportunity both to build relationships
with more intermediaries and to extend our relationships with our
current intermediaries, as well as, building our new Private
Clients unit.
People
People and culture are high priorities for me and I am pleased
to report that we have continued to invest in our people throughout
the year, supporting the talent we have in the business, as well
as, bringing in new, high-quality hires. I am particularly pleased
that we have been able to promote two more of our most talented
internal leaders to the Executive Committee: Richard Hughes, who
replaced me in International, and Edward Park, who took over as
Chief Investment Officer last October when co-founder Richard
Spencer decided to step down from the role. Richard Spencer's
decision was made all the easier by having a strong deputy in place
to take up the reins, and Richard remains very much a presence in
the business, looking after his clients and acting as senior
adviser to the Investment Committee.
We communicate frequently with our people and also gather their
feedback through town halls, more informal sessions and Group-wide
employee engagement surveys. We continue to see strong engagement
metrics as we emerge from lockdown and we continue to explore ways
to improve Brooks Macdonald's proposition to our people.
Outlook
I am hugely excited by our ambitious vision for the Group as the
leading investment manager for intermediaries. We will build on our
success to date:
-- Driving organic growth, both through intermediaries and among
private clients, with strong investment performance;
-- Ensuring service and operational excellence, particularly
through our partnership with SS&C to transform the intermediary
experience and client service levels; and
-- Seeking selective high-quality acquisitions.
We will also continue to strive to deliver strong financial
performance with improving returns, targeting consistent top
quartile profit margins.
The fundamental potential for Brooks Macdonald remains strong.
The disruption caused by COVID-19 has reinforced the importance of
high-quality financial planning and investment management and we
are well positioned to help clients and intermediaries realise
their ambitions and secure their futures.
I would like to finish by reiterating my thanks to the
intermediaries we work with and our clients for their continuing
support, as well as - most importantly - to our people. I am
delighted to have been invited to take on the role of CEO for many
reasons but, above all else, for the opportunity to lead these
people at a time of great excitement and opportunity for the
Group.
Andrew Shepherd
CEO designate
15 September 2021
Our strategy
Brooks Macdonald has emerged a stronger business after a period
of change, building the foundations for our future success,
followed by the rigours of lockdown. Our strategy is clear and we
are making substantial progress, ready to capitalise on the growth
opportunities we see ahead.
Looking forward
Our vision for Brooks Macdonald is as the leading investment
manager for intermediaries, both in the UK and internationally. Our
strategy also includes a strong and growing Private Clients
business providing financial planning and investment management -
an integrated wealth management offering.
Our Purpose
Realising ambitions and securing futures
Our Vision
To be the leading investment manager for intermediaries
Our Mission
To protect and enhance our clients' wealth through the provision
of investment management and advice underpinned by excellent client
service
Our strategy
1. Market-leading organic growth
Best-in-class adviser experience and excellent client service,
rigorous Centralised Investment Process, compelling investment
proposition
2. Service and operational excellence
Easy to do business with, digital enhancement, margin growth
through efficiency and scalability resilience
3. Agile, high-quality M&A
Strict criteria, delivery of benefits
Committed to top quartile underlying profit margin over the
medium-term
Value drivers
Our strategy is based on the three value drivers of strong
organic growth, service and operational excellence, and selective
high-quality acquisitions. We will deliver further improvements in
returns, committing to top quartile margins over the medium term,
by building on the sustainable and scalable business model we are
putting in place.
Organic growth
-- Maintain and enhance our Centralised Investment Process,
delivering consistent robust investment returns for clients
-- Continue to add to our compelling investment proposition in
specialised bespoke portfolios, model portfolios and fund/unitised
solutions, and in business-to-business solutions for advisers, all
supported by a high-impact strategy for how we take these products
and services to market
-- Deliver market-leading adviser experience and client service
levels, through our partnership with SS&C, the world-class
wealth management technology and service company
Service and operational excellence
-- Continue high levels of cost discipline, freeing up investment into service differentiators
-- Benefit from efficiencies of new technology and services partnership
Selective high-quality acquisitions
-- Continue to observe our published criteria for acquisition
targets - high-quality businesses that are a good strategic and
cultural fit and who bring compelling economics
-- Leverage the scalability of the digital solutions we are putting in place
This is all underpinned by our investment in people and culture
with the objective of attracting, engaging and retaining the best
talent in the industry.
Delivering our strategy
We announced our new strategy in our annual results presentation
last year, since then we have made material progress on all three
value drivers.
Value driver Progress in FY21
Organic growth
* Secured a series of strong business-to-business
mandates through Brooks Macdonald Investment
Solutions
* Grew our Platform MPS further, making it available on
a wider range of leading platforms
* Continued to grow our specialist products -
Responsible Investment Service, Decumulation, Court
of Protection, and the AIM Portfolio Service
* Returned to positive net flows of client assets in
the second half of the financial year, as forecast to
the market a year ago
------------------- -------------------------------------------------------------
Service and
operational * Transferred administrative processes to our partner
excellence SS&C
* Moved funds administration and portfolio management
to SS&C platform
* Digital onboarding live with internal IFA, to be
rolled out to intermediaries soon. Expecting to
complete this calendar year the current phase, which
is the transition of all client- and
intermediary-facing processes on to the SS&C platform,
including an adviser and client portal with
comprehensive functionality
------------------- -------------------------------------------------------------
Agile, high-quality
M&A * Completed acquisition of Lloyds Banking Group's
Channel Islands funds and wealth management business
* Completed integration of Lloyds business and
Cornelian Asset Managers
* Continued to review a range of potential targets
------------------- -------------------------------------------------------------
Financial review
In FY21, the Group reported strong strategic and financial
progress, delivering record underlying profit and margin, returning
to positive organic net flows and successfully integrated the
Lloyds Channel Islands business.
Review of results for the year
The Group delivered a strong set of results for FY21 as we
entered the next phase of our strategy announced in September 2020.
Despite the year under review still being characterised by periods
of national lockdown, economic uncertainly and market volatility
arising from the COVID-19 pandemic, the Group continued to operate
resiliently and emerged as a stronger business. The acquisition of
the Lloyds Channel Islands business was completed at the end of
November 2020 with the business and our new colleagues successfully
integrated within our International division, now led by Richard
Hughes. We have also seen growing momentum in our organic business,
particularly within our discretionary specialised products and
Investment Solutions offering. In addition, our disciplined
management of the Group's financial resources and focus on
operational efficiency contributed to a record underlying profit
and underlying profit margin, which increased from 21.2% to
25.9%.
The table below shows the Group's financial performance for the
year ended 30 June 2021 with the comparative period and provides a
reconciliation between the underlying results, which the Board
considers to be an appropriate reflection of the Group's
performance, and the statutory results. A breakdown of the
underlying adjustments is shown further below in the Financial
review.
Group financial results summary
FY21 FY20 Change
GBPm GBPm %
-------------------------------------- ------ ------ -------
Revenue 118.2 108.6 8.8
Fixed staff costs (40.0) (39.8) 0.5
Variable staff costs (13.2) (10.8) 22.2
-------------------------------------- ------ ------ -------
Total staff costs (53.2) (50.6) 5.1
FSCS levy (2.2) (2.2) -
Non-staff costs (32.2) (32.8) (1.8)
-------------------------------------- ------ ------ -------
Total non-staff costs (34.4) (35.0) (1.7)
-------------------------------------- ------ ------ -------
Total underlying costs (87.6) (85.6) 2.3
-------------------------------------- ------ ------ -------
Underlying profit before tax 30.6 23.0 33.0
Underlying adjustments (5.5) (13.0) (57.7)
-------------------------------------- ------ ------ -------
Statutory profit before tax 25.1 10.0 151.0
Taxation (5.5) (3.6) 52.8
-------------------------------------- ------ ------ -------
Statutory profit after tax 19.6 6.4 206.3
-------------------------------------- ------ ------ -------
Underlying profit margin before tax 25.9% 21.2% 4.7ppt
Underlying diluted earnings per share 155.1p 123.7p 31.4p
Statutory profit margin before tax 21.2% 9.2% 12.0ppt
Statutory diluted earnings per share 124.9p 43.1p 81.8p
Dividends per share 63.0p 53.0p 10.0p
-------------------------------------- ------ ------ -------
Revenue
The Group's total revenue for FY21 increased by 8.8% to GBP118.2
million (FY20: GBP108.6 million). This was due to higher average
FUM levels driven by strong investment performance, particularly in
H2, and the contribution from the two recent acquisitions. The
Cornelian business contributed an additional GBP6.5 million
compared to the prior year, given completion part way through FY20,
and the Lloyds Channel Islands business boosted revenue by GBP5.3
million during the latter seven months of the financial year.
FUM-related revenue overall increased by 10.1%, whilst
non-FUM-related revenue dropped by 10.4% to GBP6.0 million (FY20:
GBP6.7 million). The rise in fee income during the year, was offset
by a reduction in interest turn of GBP4.3 million or 72.9% driven
by the fall in the Bank of England base rate. The reduction in
non-FUM-related revenue was principally due to a decline in other
income including the termination of the third-party administration
business at the start of the year, as the focus is directed on the
core offering.
Revenue, yields and average FUM
Revenue Yield Average FUM
-------------------- ------------------ ----------------------
FY21 FY20 Change FY21 FY20 Change FY21 FY20 Change
GBPm GBPm % bps bps bps GBPm GBPm %
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
BPS fees 58.7 53.8 9.1 67.3 67.8 (0.5)
BPS non-fees (transactional) 14.5 14.6 (0.7) 16.6 18.4 (1.8)
BPS non-fees (interest
turn) 1.4 4.4 (68.2) 1.6 5.5 (3.9)
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
Total BPS 74.6 72.8 2.5 85.5 91.8 (6.3) 8,722 7,932 10.0
MPS 8.3 8.0 3.8 40.1 46.8 (6.7) 2,069 1,709 21.1
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
UKIM discretionary 82.9 80.8 2.6 76.8 83.8 (7.0) 10,791 9,641 11.9
Funds 12.2 8.7 40.2 55.3 52.4 2.9 2,207 1,659 33.0
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
Total UKIM 95.1 89.5 6.3 73.2 79.2 (6.0) 12,998 11,300 15.0
International fees 8.9 8.5 4.7 54.4 54.2 0.2 1,636 1,569 4.3
International non-fees 2.9 3.9 (25.6) 17.7 24.9 (7.2) - - -
Lloyds Channel Islands(1) 5.3 - N/A 98.1 - N/A 540 - N/A
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
Total International 17.1 12.4 37.9 78.6 79.0 (0.4) 2,176 1,569 38.7
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
Total FUM-related
revenue 112.2 101.9 10.1 73.9 79.2 (5.3) 15,174 12,869 17.9
Financial Planning
- UK 3.7 3.8 (2.6)
Financial Planning
- International 1.0 1.0 -
Other income 1.3 1.9 (31.6)
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
Total non-FUM-related
revenue 6.0 6.7 (10.4)
Total Group revenue 118.2 108.6 8.8
----------------------------- ----- ----- ------ ---- ---- ------ ------ ------ ------
1. Average FUM for Lloyds Channel Islands time weighted to seven
months for the purposes of the yield calculation.
The yield on BPS fees for UKIM decreased marginally by 0.5bps to
67.3bps (FY20: 67.8bps) driven by the attrition seen in H1 and
phasing of inflows in H2. The BPS non-fee income yield also
declined, primarily due to the decrease in interest turn revenue
noted above, resulting in a yield of 1.6bps compared to 5.5bps
reported for FY20.
MPS recorded a decline in fee yield of 6.7bps to 40.1bps
compared to the prior year. This was principally driven by a change
in mix with Platform MPS growing more rapidly than custody MPS. The
Platform MPS service includes our BM Investment Solutions,
business-to-business offering that generates a relatively lower
yield. Moreover, as announced to the market on 7 January 2021, the
standard fee rate for MPS fees has reduced in view of the removal
of the application of VAT to this service.
The Funds fee yields rose by 2.9bps to 55.3bps in FY21 due to a
change in mix reflecting the outflows seen during the period in the
Defensive Capital Fund and other BM funds relative to the higher
yielding Cornelian Risk Managed Funds range.
International fee-income yields were up marginally by 0.2bps to
54.4bps whilst non-fee income yield declined by 7.2bps driven by a
decrease in interest and FX income during the period. The acquired
Lloyds Channel Islands assets generated a yield of 98.1bps based on
time weighted FUM for seven months of the year.
Underlying costs
Total underlying costs have increased by 2.3% to GBP87.6 million
(FY20: GBP85.6 million) mainly due to the incremental costs arising
from the two recent acquisitions of GBP4.2 million and higher
variable staff costs.
Staff costs
Total staff costs increased by 5.1% to GBP53.2 million. Fixed
staff costs increased marginally by 0.5% from GBP39.8 million to
GBP40.0 million. The incremental cost from the two acquired
businesses amounted to GBP1.7 million whilst the Group's core
operations recorded a net decrease of GBP1.5 million in the year.
This comprised additional payroll costs of GBP2.0 million from net
new hires, primarily within the front office areas, and
inflationary pay rises, offset by savings of GBP1.5 million arising
from the transfer of a number of roles from the Investment Services
and Technology Services departments to SS&C during the year
under the partnership arrangement, and reductions in temporary
staff costs and recruitment fees of GBP2.0 million.
Variable staff costs increased by 22.2% to GBP13.2 million in
FY21. Of this, GBP0.7 million was attributable to the two acquired
businesses. The higher bonus pool accrual for the year reflects the
Group's resilient performance against a challenging macroeconomic
background and our focus on retaining key talent.
Non-staff costs
Non-staff costs amounted to GBP34.4 million representing a
decrease of 1.7% on the prior year. Excluding the additional
acquired costs of GBP1.8 million, non-staff costs for the core
business fell by GBP2.4 million or 7.1%. The bulk of this cost
reduction was seen within Change costs, down GBP2.4 million, as the
Group completed business remediation in FY20 and is now focused on
growth and ongoing client and adviser focused technology
enhancements. Property and office costs decreased by GBP1.0
million, partly driven by the saving achieved from the Group moving
to a single office in London in March 2020 and travel and
entertainment spend was down GBP0.9 million as a result of reduced
travel and client facing activities caused by the COVID-19
pandemic. These reductions were offset by an increase in
operational costs as part of the transformation of our operating
platform, in partnership with SS&C, amounting to GBP1.5 million
and legal and professional fees of GBP0.4 million.
Combined, the above gave rise to an underlying profit before tax
of GBP30.6 million, representing an increase of 33.0% on the
previous year and resulting in a profit margin of 25.9% up 4.7
points on last year (FY20: 21.2%).
On a statutory basis, the profit before tax more than doubled on
the prior year to GBP25.1 million (FY20: GBP10.0 million) partly
due to a GBP5.0 million gain recognised on the Lloyds Channel
Islands acquisition. The other one-off underlying adjustments for
the period are broadly similar in quantum to the prior year,
however, the amortisation of client-relationship intangible assets
has increased from GBP2.9 million to GBP4.9 million due to the
recognition of intangible assets arising on the Cornelian and
Lloyds Channel Islands acquisitions. A breakdown of the underling
adjustments, together with an explanation of each, is included
further below in the Financial review. The statutory profit margin
before tax is of 21.2% compared to 9.2% reported in FY20.
FUM movement in the year
FY21 FY20
GBPm GBPm
---------------------------------------------- ------ ------
Opening FUM 13,685 13,147
Organic net new business (275) (774)
FUM acquired in the year(1) 882 1,181
Investment performance 2,167 131
---------------------------------------------- ------ ------
Total FUM growth 2,774 538
---------------------------------------------- ------ ------
Closing FUM 16,459 13,685
---------------------------------------------- ------ ------
Organic net new business (2.0%) (5.9%)
Total FUM growth 20.3% 4.1%
---------------------------------------------- ------ ------
Investment performance in the year 15.8% 1.0%
MSCI PIMFA Private Investor Balanced Index(2) 12.9% (3.5%)
---------------------------------------------- ------ ------
1. Closing value of the acquired Lloyds Channel Islands FUM at
the completion date, 30 November 2020.
2. Capital-only index.
During FY21, FUM increased by GBP2.8 billion or 20.3%. This
reflects the assets acquired from Lloyds Channel Islands in
November 2020 of GBP0.9 billion and positive investment performance
of GBP2.2 billion, partly offset by organic net outflows of GBP0.3
billion. The net outflows were predominantly seen in the first half
of the financial year, which was impacted by the macroeconomic
uncertainty and market volatility caused by the COVID-19 pandemic.
The Group returned to positive net flows in H2 with growing
momentum seen in the last quarter driven by its strong client and
intermediary relationships.
Overall investment performance for the year to June was 15.8%,
well ahead of the MSCI PIMFA Private Investor Balanced Index which
rose by 12.9% over the same period.
Closing FUM by service and segment
The table below shows the closing FUM broken down by segment and
by our key services within UKIM at 30 June 2021 and the comparative
period.
FY21 FY20 Change
GBPm GBPm %
-------------- ------ ------ ------
BPS 9,460 8,247 14.7
MPS 2,411 1,809 33.3
Funds 2,076 2,051 1.2
-------------- ------ ------ ------
UKIM total 13,947 12,107 15.2
International 2,512 1,578 59.2
-------------- ------ ------ ------
Total FUM 16,459 13,685 20.3
-------------- ------ ------ ------
Within UKIM, the BPS core offering made good progress closing
the year at GBP9.5 billion. We continue to see good growth in our
specialist products - the AIM Portfolio Service, the Responsible
Investment Service, the Decumulation Service, and the Court of
Protection Service - all focused on meeting client needs.
Within MPS, we continue to see good momentum on Platform MPS and
particularly in Brooks Macdonald Investment Solutions, our
business-to-business offering, with several material deals agreed
during the year.
The Funds business has experienced net outflows during the year,
particularly in our Defensive Capital Fund which has been affected
by a downturn in sentiment in the Absolute Return sector. However,
outflows have slowed down during H2.
In addition to the solid investment performance, the FUM growth
in International during the year was principally driven by the
acquisition of the Lloyds Channel Islands business. This was partly
off-set by net outflows in the core business, driven in particular
by a number of larger, low margin mandates. With the acquired
business, now fully integrated, International is best positioned to
continue to grow and attract new business.
Segmental analysis
As previously announced in January 2021, the Financial Planning
division was integrated with the UK Investment Management business
in a move to ensure the Group is best placed to deliver quality
service to both private clients and intermediaries. Accordingly,
going forward, the Group has two distinct business segments; UKIM
and International. The results of Cornelian since acquisition are
included in the UKIM segment, whilst the results of the Lloyds
Channel Islands business since acquisition have been included in
the International segment.
The tables below provide a breakdown of the annual performance
broken down by these segments. Comparative figures have been
presented on the same basis to ensure a like-for-like
comparison.
Group and
UK Investment consolidation
FY21 (GBPm) Management International adjustments Total
---------------------------------------------- ------------- ------------- -------------- ------
Revenue 100.0 18.2 - 118.2
Direct costs (45.7) (10.8) (30.9) (87.4)
---------------------------------------------- ------------- ------------- -------------- ------
Operating contribution 54.3 7.4 (30.9) 30.8
Indirect cost recharges and net finance costs (25.3) (2.9) 28.0 (0.2)
---------------------------------------------- ------------- ------------- -------------- ------
Underlying profit before tax 29.0 4.5 (2.9) 30.6
---------------------------------------------- ------------- ------------- -------------- ------
Underlying profit before tax margin 29.0% 24.7% N/A 25.9%
---------------------------------------------- ------------- ------------- -------------- ------
Group and
UK Investment consolidation
FY20 (GBPm) Management International adjustments Total
---------------------------------------------- ------------- ------------- -------------- ------
Revenue 95.2 13.4 - 108.6
Direct costs (45.2) (8.0) (32.4) (85.6)
---------------------------------------------- ------------- ------------- -------------- ------
Operating contribution 50.0 5.4 (32.4) 23.0
Indirect cost recharges and net finance costs (26.1) (2.9) 29.0 -
---------------------------------------------- ------------- ------------- -------------- ------
Underlying profit before tax 23.9 2.5 (3.4) 23.0
---------------------------------------------- ------------- ------------- -------------- ------
Underlying profit before tax margin 25.1% 18.7% N/A 21.2%
---------------------------------------------- ------------- ------------- -------------- ------
Both business segments delivered an improvement in performance
during the year with increases registered across revenues,
contribution, underlying profit and underlying profit margin.
UKIM reported a 4.8% increase in revenue, driven by a full year
contribution of the Cornelian business and an improvement in flows
seen during the year, particularly within the specialist BPS
products, Platform MPS and Brooks Macdonald Investment Solutions
offerings. The increase in revenue, combined with disciplined cost
management, resulted in a 21.3% rise in underlying profit and an
improvement in underlying profit margin of 3.9 points.
International reported an increase in revenues of 35.8% driven
primarily by the acquisition of the Lloyds Channel business adding
GBP0.9 billion in FUM and GBP5.3 million in revenues during the
year since November 2020. The division's profits almost doubled,
and its underlying profit margin was up by six percentage points on
the prior year.
Reconciliation between underlying and statutory profits
Underlying profit before tax is considered by the Board to be an
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
appropriate for external analyst coverage and peer group
benchmarking. A reconciliation between underlying and statutory
profit before tax for the year ended 30 June 2021 with comparatives
is shown in the table below:
FY21 FY20
GBPm GBPm
----------------------------------------------------------------- ----- ------
Underlying profit before tax 30.6 23.0
Acquisitions related items:
- Gain arising on acquisition 5.0 -
- Deal structuring and legal costs - (2.8)
- Integration and staff retention costs (2.7) (1.4)
Amortisation of client relationships and contracts acquired
with fund managers (4.9) (2.9)
Client relationship contracts impairment (1.5) -
Dual running operating platform costs (1.0) -
Changes in fair value and finance cost of deferred consideration (0.4) (0.2)
Goodwill impairment - (4.5)
Head office relocation costs - (1.2)
----------------------------------------------------------------- ----- ------
Total underlying adjustments (5.5) (13.0)
Statutory profit before tax 25.1 10.0
----------------------------------------------------------------- ----- ------
Acquisition related costs (GBP2.3 million credit)
i. Gain arising on acquisition (GBP5.0 million credit)
A gain on purchase was recognised in respect of the Lloyds
Channel Islands acquisition as the net identifiable assets acquired
were greater than the total purchase consideration paid. Refer to
Note 6 of the Notes to the preliminary announcement further below
for details on the acquisition accounting.
ii. FY20 - Deal structuring and legal costs (GBP2.8 million charge)
These represent costs incurred in relation to the acquisition of
Cornelian Asset Managers Group Limited announced on 22 November
2019 and the acquisition of the Lloyds Channel Islands business
announced on 24 June 2020. The costs incurred included corporate
finance services, legal fees and due diligence fees.
iii. Integration and staff retention costs (GBP2.7 million
charge)
These comprise the costs incurred in integrating the Cornelian
business (acquisition completed on 28 February 2020) and the Lloyds
Channel Islands business (acquisition completed on 30 November
2020). They also include payments made to key employees who were
retained by the Group for a short period of time to assist with the
integration of the businesses.
The above costs are being excluded from the Group's underlying
performance as they were one-off in nature.
Amortisation of client relationship contracts and contracts
acquired with fund managers (GBP4.9 million charge)
These intangible assets are created in the course of acquiring
funds under management and are amortised over their useful life,
which have been assessed to range between 5 and 20 years. The
charge for the year includes the newly acquired investment
management contracts arising on the Lloyds Channel Islands
transaction. This amortisation charge has been excluded from the
underlying profit since it is a significant non-cash item. Refer to
Note 9 to the Notes to the preliminary announcement further below
for more details.
Client relationship contracts impairment (GBP1.5 million
charge)
Client relationship contracts are reviewed annually for
impairment. In view of accelerated withdrawals from the previously
acquired business, DPZ Limited, seen during the year, the estimated
useful economic life of the intangible assets associated with this
business is reduced. Accordingly, an impairment charge of GBP1.5
million has been recognised in the year. Refer to Note 9 to the
Notes to the preliminary announcement further below for more
details.
Dual running operating platform costs (GBP1.0 million
charge)
As announced in October 2020, the Group has entered into a
partnership agreement with SS&C to transform our adviser and
client service including the onboarding process and digital
experience, as well enhancing our operating platform. As part of
the transition process, during FY21, the Group incurred incremental
costs in running two operating platforms concurrently. The dual
running costs have been excluded from underlying profit in view of
their non-recurring nature.
Changes in fair value and finance cost of deferred consideration
(GBP0.4 million charge)
This comprises the fair value measurement arising on deferred
consideration payments from acquisitions carried out by the Group,
together with their associated net finance costs where applicable.
The increase is due to the recognition of deferred consideration on
the Cornelian and Lloyds Channel Islands acquisitions.
FY20 - Goodwill impairment (GBP4.5 million charge)
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 prior year related
to the Levitas transaction. In 2019, the Group entered into a new
five-year partnership with the distributor of the Levitas fund that
carried a lower fund sponsorship fee, the aim of this reduction was
to enhance FUM flows and deepen the relationship. Unfortunately,
for reasons beyond our control, the anticipated inflows were not
forthcoming and we reassessed the carrying value of this intangible
asset. As a result, the associated goodwill carrying value was no
longer supported and triggered an impairment charge in the prior
year.
FY20 - Head office relocation costs (GBP1.2 million charge)
The Group's previous London offices based in Welbeck Street and
Bevis Marks were relocated to a single site at 21 Lombard Street in
the City of London. As a result of the move, dual running costs
were incurred on the three locations until the office leases for
Bevis Marks and Welbeck Street came to an end in March 2020. The
dual running costs and other costs associated with the move have
been excluded from underlying profit in view of their one-off
nature.
Taxation
The Group's total tax charge for the year of GBP5.5 million is
up by 52.8% on the prior year. This is in part attributable to
higher statutory profits, and a higher proportion of disallowable
expenses added back for tax purposes, such as those arising on
amortisation of intangible assets and share-based payments,
compared to deductible tax allowances. The increase is also
attributable to the deferred tax debit recognised as a result of
remeasuring our deferred tax assets and liabilities for the
substantively enacted corporation tax rate to 25% from 1 April
2023. Details on taxation are provided in Note 5 of the Notes to
the preliminary announcement further below.
Earnings per share
The Group's basic statutory earnings per share for the year
ended 30 June 2021 was 125.3p (FY20: 43.2p). On an underlying
basis, diluted earnings per share was of 155.1p representing an
increase of 25.4% on the prior year (FY20: 123.7p) largely driven
by the contribution from the two acquired businesses. Details on
the basic and diluted earnings per share are provided in Note 7 of
the Notes to the preliminary announcement further below.
Dividend
The Board recognises the importance of dividends to shareholders
and the benefit of providing sustainable shareholder returns. In
determining the level of dividend in any year, the Board considers
a number of factors, such as, the level of retained earnings,
future cash commitments, statutory profit cover, capital and
liquidity requirements and the level of profit retention required
to sustain the growth of the Group. The Board has proposed a final
dividend of 40.0p per share (FY20: 32.0p). Taking into account the
interim dividend of 23.0p per share (FY20: 21.0p), this results in
a total dividend for the year of 63.0p per share (FY20: 53.0p), an
overall increase of 10p or 18.9%. Refer to Note 8 to the Notes to
the preliminary announcement further below for more details. The
recommended dividend is subject to shareholders' approval, which
will be sought at the Company's Annual General Meeting on 28
October 2021.
Financial position and regulatory capital
The Group's financial position is strong with net assets
increasing by 8.5% to GBP134.0 million at 30 June 2021 (FY20:
GBP123.5 million) and tangible net assets (net assets excluding
intangibles) up to GBP44.1 million (FY20: GBP39.7 million). As at
30 June 2021, the Group had regulatory capital resources of GBP52.6
million (FY20: GBP46.6 million). The own funds calculation takes
into account the respective years' profit after tax as these are
deemed to be verified at the date of publication of the annual
results. The Group continues to be well capitalised with a total
capital ratio of 21.6% over the Pillar I risk exposure requirement
(FY20: 20.7%).
FY21 FY20
GBPm GBPm
----------------------------------------------------------- ------ ------
Share capital 0.1 0.1
Share premium 78.7 78.0
Other reserves 8.5 6.4
Retained earnings 46.7 39.0
----------------------------------------------------------- ------ ------
Total equity 134.0 123.5
Intangible assets (net book value) (89.9) (83.8)
Deferred tax liabilities associated with intangible assets 8.5 6.9
----------------------------------------------------------- ------ ------
Tier 1 Capital 52.6 46.6
----------------------------------------------------------- ------ ------
Own funds 52.6 46.6
----------------------------------------------------------- ------ ------
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. 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 analyses 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 FY20 ICAAP review was conducted for the year ended 30 June
2020 and signed off by the Board in December 2020. 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.
The Group monitors a range of capital and liquidity statistics on a
daily and monthly basis.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation
from operations. Total cash resources at the end of the year were
GBP54.9 million (FY20: GBP50.2 million). During the year, the Group
financed the Lloyds Channel Islands acquisition resulting in a net
cash outflow of GBP5.3m from own funds. The Group had no borrowings
at 30 June 2021 (FY20: GBPnil).
During the year ended 30 June 2021, the Group incurred capital
expenditure of GBP3.7 million. This comprised technology-related
development of GBP3.1 million, property-related costs of GBP0.4
million and IT and office equipment of GBP0.2 million. The
technology-related spend was incurred in connection with the
partnership arrangement with SS&C to enhance our operating
platform and transform the Group's adviser and client service. The
capital expenditure incurred during the year includes legal fees in
relation to the master agreement, planning and scoping the
implementation programme and software costs to re-platform. These
will be amortised over a ten-year period from the point the new
platform goes live in FY22.
Financial outlook
The economic uncertainty and market disruption caused by the
COVID-19 pandemic has reinforced the importance of high-quality
financial planning and investment management. The past year has
proven the resilience of the Group's business model and gives us a
high degree of confidence in our ability to deliver for
shareholders, advisers and clients. The continued growth in our
core business, combined with the successful integration of the
Cornelian and the Lloyds Channel Islands businesses, together with
the enhancements we are putting in place to our operating platform,
position the Group well for further success. As we implement the
next phase of our strategy, we remain focused on positive momentum
in organic growth, delivery of a scalable operating platform and
progression in operating margin.
Ben Thorpe
Chief Financial Officer
15 September 2021
Risks
Taking a dynamic approach to risk management to accelerate
digital transformation and positive client outcomes
Over the past year, the Group has continued in its commitment to
promote a positive compliance and risk culture across the
organisation. Furthermore, it has sustained its focus on embedding
and enhancing the risk management framework, through its focus on
harm, third parties and resilience. The Group has also continued
its drive towards efficient, data-driven and evidenced-based risk
management, which has facilitated the transition to an agile and
dynamic approach to identifying, assessing, managing and monitoring
risks. Not only has this proven valuable with the acquisition of
Cornelian and the Lloyds Channel Islands acquisition, but also
during the COVID-19 pandemic and the concurrent change management
initiatives, including the new partnership with SS&C. Overall,
the Group remains well capitalised and liquid with significant
buffers above all regulatory requirements.
How we manage risk
The Group Risk Management Framework ("RMF")
Risk management starts with oversight through an appropriate
governance structure using 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 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").
Controls assessment. 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.
Overarching risk appetite statement
-- The Group's Overarching risk appetite statement ("ORAS"), as
defined by the Board, sets out the acceptable level of current and
emerging risk we are willing to take to achieve our strategic
business objectives. It provides a framework to allow the Group to
effectively balance the risk and reward relationship in decision
making.
-- Clients, both existing and prospective, are at the heart of
everything we do. As such, we will operate a sustainable business
that conducts itself in a reputable and prudent manner, taking into
account the interests of our clients through providing products and
services suited to their needs and risk profile, which demonstrate
value for money.
-- As the business continues to grow through sustainable organic
growth and strategic value-adding acquisitions, the ORAS will help
ensure our key stakeholder obligations are met, supported by
internal policies and regulatory requirements. We commit to using
this framework to ensure we make strategic and business decisions
that do not exceed our overarching risk appetite.
-- In all of the Group's decisions and operations, we balance
risk versus reward and we consider the following three
dimensions.
Client outcome
-- We will put client interests at the heart of everything we do
to ensure appropriate client outcomes.
Control environment
-- We will, at all times, operate within our risk appetite,
operational risk parameters and regulatory framework, ensuring a
robust control and oversight environment.
Financial performance and resources
-- We will optimise profitability and use resources efficiently to drive financial performance.
-- We will, at all times, maintain adequate capital and liquid
assets to meet financial and funding obligations as they
fall due.
-- We will invest in the development and wellbeing of our employees.
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.
Group level risks
Key risks identified
by risk management Change since Rationale for
Definition framework last year change
===================== ========================================================== ============ =====================
1. Credit risk Unchanged The risk remains
The risk of loss * Cash deposits with external banks unchanged given
arising the strong credit
from a client or risk control
counterparty * Client credit risk environment
failing to meet their including ongoing
financial obligations monitoring and
to a Brooks Macdonald * Counterparty credit risk due diligence
entity as and when on all
they counterparties.
fall due. * Custodian-related credit risk
* Indirect counterparty risk in respect of referrals
--------------------- ---------------------------------------------------------- ------------ ---------------------
2. Liquidity risk Decreasing The Group has
The risk that assets * Corporate cash deposited with external banks sufficient liquid
are resources
insufficiently liquid significantly
and/or Brooks * Client cash deposited with external banks (CASS above its Minimum
Macdonald rules) Liquidity
does not have Requirement.
sufficient The Group has
financial resources * Failed trades a robust Liquidity
available Risk Management
to meet liabilities Framework, including
as * Indirect liquidity risk associated with client adequate contingency
they fall due, or can portfolios funding arrangements
secure such resources which are tested
only at excessive on a periodic
cost. * Indirect liquidity risks associated with dealing basis.
Liquidity risk also
includes
the risk that the * Indirect risk in respect of the liquidity of
Group individual holdings in a fund
is
unable to meet
regulatory * Indirect risk in respect of the overall liquidity of
prudential liquidity our funds
ratios.
--------------------- ---------------------------------------------------------- ------------ ---------------------
3. Market risk Decreasing Given the COVID-19
The risk that arises * Failed trades pandemic, markets,
from and most asset
fluctuations in the classes exhibited
value * Indirect market risk associated with advising on significant
of, or income arising client portfolios volatility.
from, movements in However, with
equity, a successful vaccine
bonds, or other * Indirect market risks associated with dealing rollout and gradual
traded reopening of
markets, interest economies,
rates * Indirect market risk associated with managing client it is expected
or foreign exchange portfolios that the worst
rates of the COVID-19
that has a financial induced market
impact. volatility is
over.
===================== ========================================================== ============ =====================
Business level risks
Key risks identified
by risk management Change since
Definition framework last year Rationale for change
================================ ====================================== ============ ==============================
4. Business and strategic Unchanged This risk remains unchanged,
risk * Adviser concentration given strong investment
The risk of having an performance and a progressive
inadequate business model improvement in net flows
or making strategic decisions * Business growth over the last year.
that may result in lower
than anticipated profit
or losses or exposes * Extreme market events
the Group to unforeseen
risks.
* Investment performance
* Product governance
* UK political risk
-------------------------------- -------------------------------------- ------------ ------------------------------
5. Conduct risk Unchanged Over the past year, the
The risk of causing detriment * Client service Group has been working
to clients, stakeholders on several initiatives
or the integrity of the to promote good risk
wider market because * Investment performance culture and awareness.
of inappropriate execution Furthermore, the Group
of Brooks Macdonald's has developed enhanced
business activities. * Suitability and conduct risk management information
to measure conduct risk,
as well as, promoting
good conduct culture
through policy compliance,
online training, and
virtual classrooms/webinars.
-------------------------------- -------------------------------------- ------------ ------------------------------
6. Operational risk Unchanged The Group has enhanced
The risk of loss arising * Data quality its processes, including
from inadequate or failed improved documentation
internal processes, people of all key processes.
and systems, or from * Cyber Incident management has
external events. It includes been enhanced throughout
legal and fraud risk the year. Furthermore,
but not strategic, reputational * IT infrastructure and capability a change risk management
and business risks. framework is in place.
* Key suppliers and outsourcing
* Operational maturity
* People
* Resilience
-------------------------------- -------------------------------------- ------------ ------------------------------
7. Prudential risk Decreasing The Group has capital
The risk of adverse business * Prudential requirements resources significantly
and/or client impact above its Minimum Capital
resulting from breaching Requirement.
regulatory capital/liquidity
requirements, or market/credit
risk internal limits.
-------------------------------- -------------------------------------- ------------ ------------------------------
8. Legal and regulatory Unchanged This risk remains unchanged
risk * Reputational risk given that the regulatory
Legal and regulatory landscape and focus on
risk is defined as the the wealth management
risk of exposure to legal * Financial crime industry has not changed.
or regulatory penalties,
financial forfeiture
and material loss due * Governance
to failure to act in
accordance with industry
laws and regulations. * Legacy issues
* Regulatory, tax and legal compli
ance
================================ ====================================== ============ ==============================
Emerging risks
Definition Context
================================ ==================================================
9. Change management risk In line with our growth agenda, the Group is
(Emerging) undergoing a strategic transformation project
The potential financial, of the end-to-end operating model and client
reputational, operational journey, to cater for shifting client demand
and client-related risks and sectoral changes.
arising from the poor
implementation of material
projects or change initiatives.
-------------------------------- --------------------------------------------------
10. Operational resilience Given our agile operating model, strong capital
(Emerging) and liquidity position, the Group has continued
The potential financial, to provide a high level of service to our clients
reputational, operational and advisers, whilst introducing a new connected
and client-related risks way of working as staff begin to return to
arising from the inability our offices.
to prevent, adapt, respond
to, recover and learn
from operational disruptions.
-------------------------------- --------------------------------------------------
11. Third-party supplier Given our announcement to partner with SS&C
risk and outsource back office services, the Group
(Emerging) has focused on enhancing its third-party supplier
The potential financial, framework and continuing to invest in oversight
reputational, operational capabilities.
and client-related risks
arising from using third-party
suppliers.
================================ ==================================================
Viability statement
In accordance with the UK Corporate Governance Code, the Board
has assessed the Group's viability over a five-year period from
FY22 through to FY26. The decision to do so over this period is
aligned with the Group's strategy, its budgeting and forecasting
process and the scenarios set out in the Internal Capital Adequacy
Assessment Process ("ICAAP").
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 emerging and principal risks, as set out
in the Risks section of this Strategic report and outlined 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. Moreover, the
Board's assessment considered the widespread economic impact
arising from the outbreak of the COVID-19 pandemic on the Group's
profitability, regulatory capital and liquidity forecasts. The
Board's assessment of the Group's capital and liquidity position
also considers the implications of maintaining the Group's proposed
interim and final dividend pay-outs.
The five-year MTP forms part of the Group's annual business
planning process. The model translates the Group's current and
future strategy into a detailed year-one budget, followed by higher
level forecasts for years two through to five. The combination of
this detailed budgeting, longer-term forecasting and various stress
tests provides a transparent and holistic view of the
forward-looking financial prospects of the Group. The Board reviews
and challenges the Group's MTP annually. The MTP covering the
five-year period from FY22 to FY26 was reviewed, challenged and
approved by the Board in June 2021.
In addition to the annual MTP preparation process, a re-forecast
is carried out by Management and reviewed by the Board on a
quarterly basis. These reflect updates for prevailing trading
conditions and other changes required to the budget assumptions set
at the start of the year.
As part of the ICAAP, the Group models a range of downside
scenarios and a severe but plausible stress scenario designed to
assess the Group's ability to withstand a market-wide shock such as
a sharp market decline triggered by a global recession;
Group-specific stresses, such as the loss of an investment
management team or key introducer; and a combination of both.
The Group modelled a multi-layered scenario involving a
significant decline in financial markets over a five-year period (a
drop of 42.5% and 19.0% in years one and two respectively, followed
by a gradual recovery), combined with the loss of a key investment
management team. This scenario would have a material impact on the
Group's profitability compared to the MTP base case.
Management identified a number of mitigating actions that could
be implemented in the event of such severe stresses. These include
a reduction in staff variable pay and Group dividends as well as a
reduction in discretionary expenditure (T&E, marketing and
similar) and a recruitment freeze or headcount reduction. Over the
longer term, mitigating actions could include a broader and more
significant reduction in the Group's cost base (IT, property,
change initiatives and others). The implementation of the above
actions depends on the nature of the specific stress events and the
time frames over which they occur.
These scenarios are refreshed on a regular basis to ensure they
remain relevant and continue to be a suitable tool for developing
our controls and mitigating actions. Management also considers a
reverse stress case and carries out an assessment of the cost to
the Group of a wind-down in the event of a non-recoverable shock to
the operating model. Moreover, Management has identified a number
of actions that could be implemented in the event of severe
stresses. The implementation of the above actions depends on the
nature of the specific stress events and the time frames over which
they occur.
The Group's business continuity planning enabled it to react
effectively to the COVID-19 crisis and move seamlessly to remote
working during the various lockdown periods with a strong focus on
staff well-being and maintaining high-quality service to clients
and intermediaries. The Group was also able to transition to a
hybrid operating model as Government restrictions eased.
The COVID-19 outbreak last year caused economic uncertainty and
market volatility and whilst the markets have since recovered, the
pandemic is still present and its full scale and duration are still
not known. However, taking into consideration the assessment of the
above factors, including the results of the latest ICAAP, the
Group's risk management framework and the mitigating actions that
can be put in place, together with the Group's successful
navigation of the pandemic thus far, the Board has reasonable
expectations the Group will be able to continue in operation and
meet its liabilities as they fall due over the period under
assessment.
Consolidated statement of comprehensive income
For the year ended 30 June 2021
2021 2020
Note GBP'000 GBP'000
--------------------------------------------- ---- -------- ---------
Revenue 4 118,206 108,558
Administrative costs (96,012) (93,794)
--------------------------------------------- ---- -------- ---------
Gross profit 22,194 14,764
Other gains/(losses) - net (1,438) (4,519)
--------------------------------------------- ---- -------- ---------
Operating profit 20,756 10,245
Gain on bargain purchase 6 4,966 -
Finance income 47 261
Finance costs (678) (454)
--------------------------------------------- ---- -------- ---------
Profit before tax 25,091 10,052
Taxation 5 (5,449) (3,626)
--------------------------------------------- ---- -------- ---------
Profit for the period attributable to equity
holders of the Company 19,642 6,426
Other comprehensive income - -
--------------------------------------------- ---- -------- ---------
Total comprehensive income for the year 19,642 6,426
--------------------------------------------- ---- -------- ---------
Earnings per share
Basic 7 125.3p 43.2p
Diluted 7 124.9p 43.1p
--------------------------------------------- ---- -------- ---------
Consolidated statement of financial position
As at 30 June 2021
30 Jun 30 Jun
2021 2020(1)
Note GBP'000 GBP'000
---------------------------------------------- ---- -------- --------
Assets
Non-current assets
Intangible assets 9 89,897 83,804
Property, plant and equipment 2,756 3,181
Right-of-use assets 5,979 6,991
Financial assets at fair value through other
comprehensive income 500 500
Deferred tax assets 10 2,736 1,524
---------------------------------------------- ---- -------- --------
Total non-current assets 101,868 96,000
Current assets
Financial assets at fair value through profit
or loss 624 549
Trade and other receivables 28,449 26,081
Current tax receivables 32 -
Cash and cash equivalents 54,899 50,168
---------------------------------------------- ---- -------- --------
Total current assets 84,004 76,798
---------------------------------------------- ---- -------- --------
Total assets 185,872 172,798
---------------------------------------------- ---- -------- --------
Liabilities
Non-current liabilities
Deferred consideration 11 (303) (6,300)
Lease liabilities (5,422) (6,659)
Provisions 12 (279) (219)
Deferred tax liabilities 10 (8,902) (7,230)
Other non-current liabilities (548) (330)
---------------------------------------------- ---- -------- --------
Total non-current liabilities (15,454) (20,738)
Current liabilities
Trade and other payables (27,055) (22,765)
Current tax liabilities - (480)
Deferred consideration 11 (5,934) (1,691)
Lease liabilities (1,447) (1,275)
Provisions 12 (1,979) (2,308)
---------------------------------------------- ---- -------- --------
Total current liabilities (36,415) (28,519)
---------------------------------------------- ---- -------- --------
Net assets 134,003 123,541
---------------------------------------------- ---- -------- --------
Equity
Share capital 161 161
Share premium account 78,703 77,982
Other reserves 8,467 6,398
Retained earnings 46,672 39,000
---------------------------------------------- ---- -------- --------
Total equity 134,003 123,541
---------------------------------------------- ---- -------- --------
(1) See Note 2b for details regarding the reclassification of
current deferred consideration and current provisions as at 30 June
2020.
The Consolidated financial statements were approved by the Board
of Directors and authorised for issue on 15 September 2021, and
signed on their behalf by:
Andrew Shepherd Ben Thorpe
CEO Chief Financial Officer
Company registration number: 4402058
Consolidated statement of changes in equity
For the year ended 30 June 2021
Share
premium Other Retained Total
Share capital account reserves earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------ ------------- -------- --------- --------- --------
Balance at 1 July 2019 139 39,068 4,575 43,091 86,873
----------------------------------- ------ ------------- -------- --------- --------- --------
Comprehensive income
Profit for the year - - - 6,426 6,426
Other comprehensive income - - - - -
----------------------------------- ------ ------------- -------- --------- --------- --------
Total comprehensive income - - - 6,426 6,426
Transactions with owners
Issue of ordinary shares 22 38,914 - - 38,936
Share-based payments - - 3,571 - 3,571
Share options payments exercised - - (1,770) 1,770 -
Purchase of own shares by Employee
Benefit Trust - - - (4,607) (4,607)
Tax on share options - - 22 - 22
Dividends paid 8 - - - (7,680) (7,680)
----------------------------------- ------ ------------- -------- --------- --------- --------
Total transactions with owners 22 38,914 1,823 (10,517) 30,242
Balance at 30 June 2020 161 77,982 6,398 39,000 123,541
----------------------------------- ------ ------------- -------- --------- --------- --------
Comprehensive income
Profit for the year - - - 19,642 19,642
Other comprehensive income - - - - -
----------------------------------- ------ ------------- -------- --------- --------- --------
Total comprehensive income - - - 19,642 19,642
Transactions with owners
Issue of ordinary shares - 721 - - 721
Share-based payments - - 2,991 - 2,991
Share options payments exercised - - (1,812) 1,812 -
Purchase of own shares by Employee
Benefit Trust - - - (5,210) (5,210)
Tax on share options - - 890 - 890
Dividends paid 8 - - - (8,572) (8,572)
----------------------------------- ------ ------------- -------- --------- --------- --------
Total transactions with owners - 721 2,069 (11,970) (9,180)
----------------------------------- ------ ------------- -------- --------- --------- --------
Balance at 30 June 2021 161 78,703 8,467 46,672 134,003
----------------------------------- ------ ------------- -------- --------- --------- --------
Consolidated statement of cash flows
For the year ended 30 June 2021
2021 2020(1)
Note GBP'000 GBP'000
-------------------------------------------------- ---- -------- --------
Cash flows from operating activities
Cash generated from operations 13 36,907 29,433
Taxation paid (5,804) (5,865)
-------------------------------------------------- ---- -------- --------
Net cash generated from operating activities 31,103 23,568
Cash flows from investing activities
Purchase of computer software 9 (3,061) (1,614)
Purchase of property, plant and equipment (620) (1,958)
Consideration paid 6 (5,287) (21,102)
Deferred consideration paid 11 (2,421) (919)
Proceeds from sale of discontinued operations - 568
Interest received 47 252
Finance costs paid - (5)
-------------------------------------------------- ---- -------- --------
Net cash used in investing activities (11,342) (24,778)
Cash flows from financing activities
Proceeds of issue of shares 721 38,936
Shares issued as consideration 6 - (9,000)
Payment of lease liabilities and initial direct
costs (1,969) (2,111)
Proceeds of lease reverse premium - 1,250
Purchase of own shares by Employee Benefit
Trust (5,210) (4,607)
Dividends paid to shareholders 8 (8,572) (7,680)
-------------------------------------------------- ---- -------- --------
Net cash (used)/generated in financing activities (15,030) 16,788
Net increase in cash and cash equivalents 4,731 15,578
-------------------------------------------------- ---- -------- --------
Cash and cash equivalents at beginning of year 50,168 34,590
-------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of year 54,899 50,168
-------------------------------------------------- ---- -------- --------
(1) See Note 13 for details regarding changes to the prior year
classification of cash flows from operating activities and cash
flows from investing activities.
Notes to the preliminary announcement
For the year ended 30 June 2021
1. General information
Brooks Macdonald Group plc ("the Company") is the Parent Company
of a group of companies ("the Group"), which offers a range of
investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts. The
Group also provides financial planning as well as international
investment management, and acts as fund manager to a range of
onshore and international funds.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom under the Companies Act 2006 and
listed on AIM. The address of its registered office is 21 Lombard
Street, London, EC3V 9AH.
2. Principal accounting policies
a. Basis of preparation
The Group's Consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
("IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU, and IFRS Interpretations Committee ("IFRS IC")
interpretations, as adopted by 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.
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. 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 2020, except as explained below.
New accounting standards, amendments and interpretations adopted
in the year
In the year ended 30 June 2021, the Group did not adopt any new
standards or amendments issued by the IASB or interpretations by
the IFRS IC that have had a material impact on the Consolidated
financial statements.
As a result of the UK leaving the European Union on 31 January
2021, the Group's Consolidated financial statements for the year
ended 30 June 2021 have been prepared under international
accounting standards in conformity with the Companies Act 2006.
This has not had any impact on the recognition, measurement or
disclosure in these Consolidated financial statements.
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
-------------------------------------------------------- --------------
Definition of a Business (Amendments to IFRS 3) 1 January 2020
Definition of Material (Amendments to IAS 1 and IAS 8) 1 January 2020
Interest Rate Benchmark Reform (Amendments to IFRS 9,
IAS 39 and IFRS 7) 1 January 2020
COVID-19-related Rent Concessions (Amendment to IFRS 16) 1 January 2020
-------------------------------------------------------- --------------
Comparative year reclassification
Current deferred consideration has been recognised on the face
of the Consolidated statement of financial position in the current
year. In previous periods, current deferred consideration was
recognised within current provisions. The comparative information
has therefore been reclassified by moving GBP1,691,000 from current
provisions to current deferred consideration at 30 June 2020 to be
consistent with the current period.
c. 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 important
estimations are used relate to the measurement of intangible
assets, deferred consideration, 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, but there have been the
use of important estimations 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 is 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 9. In assessing the fair value of
these assets, the Group has estimated their finite life based on
information about the typical length of existing client
relationships. 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 ("CGU") 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 9.
In assessing the value of client relationships and the
associated investment management contracts and goodwill or gain on
bargain purchase arising as part of a business combination, the
Group prepares forecasts for the cash flows acquired and discounts
to a net present value. The Group uses a pre-tax discount rate,
adjusting from a post-tax discount rate calculated by the Group's
weighted average cost of capital ("WACC"), adjusted for any
specific risks for the relevant CGU. The Group uses the capital
asset pricing model ("CAPM") to estimate the WACC, which is
calculated at the point of acquisition for a business combination,
or the relevant reporting period. The key inputs are the risk-free
rate, market risk premium, the Group's adjusted beta with reference
to beta data from peer listed companies, small company premium and
any risk adjusted premium for the relevant CGU. See Note 9 for
further details on the discount rate for the various CGUs.
Deferred consideration
As described in Note 11, the Group has a deferred consideration
balance in respect of the acquisition of Cornelian Asset Managers
Group Limited in February 2020, and the Lloyds Channel Island
acquisition in November 2020. Deferred consideration is recognised
at its fair value, being an estimate of the amount that will
ultimately be payable in future periods. For Cornelian, the
deferred consideration has been calculated allowing for estimated
growth in the acquired funds and estimated cost savings, discounted
by the estimated interest rate. For the Lloyds Channel Islands
acquisition, the deferred consideration has been calculated based
on client attrition, discounted by the estimated interest rate. If
the estimated discount rate used in the deferred consideration
calculations increased by 2%, the Group's estimated deferred
consideration at 30 June 2021 would decrease by GBP73,000.
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. A decrease of 10% in the vesting assumptions
would decrease the charge in the Consolidated statement of
comprehensive income for the year by GBP801,000.
Provisions
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.
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.
As described in Note 12, 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.
3. Segmental information
For management purposes the Group's activities are organised
into two operating divisions: UK Investment Management and
International. The Group's other activity, offering nominee and
custody services to clients, is included within UK Investment
Management. These divisions are the basis on which the Group
reports its primary segmental information to the Executive
Committee, which is the Group's chief operating decision-maker. In
accordance with IFRS 8 'Operating Segments', disclosures are
required to reflect the information 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.
From 1 January 2021, the Group integrated its previous Financial
Planning segment into its UK Investment Management segment. As a
result, the prior year information has been restated to reflect the
new segments of UK Investment Management, International and Group
and other consolidation adjustments, consistent with the current
year.
The UK Investment Management segment offers a range of
investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts, as
well as wealth management services to high net worth individuals
and families, giving independent "whole of market" financial advice
enabling clients to build, manage and protect their wealth. The
International segment is based in the Channel Islands and offers a
similar range of investment management and financial planning
services as the UK Investment Management segment. The Group segment
principally comprises the Group Board's management and associated
costs, along with the consolidation adjustments.
Following the Lloyds Channel Islands acquisition (Note 6), the
activities since acquisition have been included in the
International segment.
Revenues and expenses are allocated to the business segment that
originated the transaction. Sales between segments are carried out
at arm's length. Centrally incurred expenses are allocated to
business segments on an appropriate pro rata basis.
Group &
UK Investment consolidation
Management International adjustments Total
Year ended 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------- ------------- -------------- -----------------------
Total revenue 102,998 18,211 - 121,209
Inter segment revenue (3,003) - - (3,003)
----------------------------------------------- ------------- ------------- -------------- -----------------------
External revenue 99,995 18,211 - 118,206
Underlying administrative costs (45,738) (10,804) (30,870) (87,412)
----------------------------------------------- ------------- ------------- -------------- -----------------------
Operating contribution 54,257 7,407 (30,870) 30,794
Allocated costs (25,067) (2,864) 27,931 -
Net finance (cost)/income (285) (21) 109 (197)
----------------------------------------------- ------------- ------------- -------------- -----------------------
Underlying profit/(loss) before tax 28,905 4,522 (2,830) 30,597
Gain on bargain purchase - - 4,966 4,966
Amortisation of client relationships (1,770) (992) (2,166) (4,928)
Acquisition-related costs (467) (2,244) 39 (2,672)
Impairment of client relationship contracts - (1,210) (303) (1,513)
Dual running costs of operating platform (1,000) - - (1,000)
Finance cost of deferred consideration - (7) (292) (299)
Changes in fair value of deferred consideration - - (60) (60)
Profit/(loss) mark-up on Group allocated
costs 143 (147) 4 -
----------------------------------------------- ------------- ------------- -------------- -----------------------
Profit/(loss) before tax 25,811 (78) (642) 25,091
Taxation (5,449)
----------------------------------------------- ------------- ------------- -------------- -----------------------
Profit for the period attributable
to equity holders of the Company 19,642
----------------------------------------------- ------------- ------------- -------------- -----------------------
Group &
UK Investment consolidation
Management International adjustments
Year ended 30 June 2021 GBP'000 GBP'000 GBP'000 Total GBP'000
--------------------------------------- ------------- ------------- -------------- -------------
Statutory operating costs included the
following:
Amortisation 4,307 1,209 2,166 7,682
Depreciation 2,142 495 - 2,637
Interest income 3 10 - 13
--------------------------------------- ------------- ------------- -------------- -------------
Group &
UK Investment consolidation
Management International adjustments Total
Year ended 30 June 2020 (1) GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- ------------- -------------- --------
Total revenue 99,781 13,335 (6) 113,110
Inter segment revenue (4,552) - - (4,552)
--------------------------------------------- ------------- ------------- -------------- --------
External revenue 95,229 13,335 (6) 108,558
Underlying administrative costs (45,165) (8,026) (32,424) (85,615)
--------------------------------------------- ------------- ------------- -------------- --------
Operating contribution 50,064 5,309 (32,430) 22,943
Allocated costs (26,069) (2,890) 28,959 -
Net finance income 1 50 29 80
--------------------------------------------- ------------- ------------- -------------- --------
Underlying profit/(loss) before tax 23,996 2,469 (3,442) 23,023
--------------------------------------------- ------------- ------------- -------------- --------
Goodwill impairment - - (4,471) (4,471)
Acquisition-related costs (1,085) (606) (2,570) (4,261)
Amortisation of client relationships
and contracts acquired with fund managers (701) (420) (1,762) (2,883)
Head office relocation costs (1,166) - - (1,166)
Finance cost of deferred consideration - - (145) (145)
Changes in fair value of contingent
consideration (54) - - (54)
Finance income from contingent consideration 7 - 2 9
Profit mark-up on Group allocated costs 136 (136) - -
--------------------------------------------- ------------- ------------- -------------- --------
Profit/(loss) before tax 21,133 1,307 (12,388) 10,052
Taxation (3,626)
--------------------------------------------- ------------- ------------- -------------- --------
Profit for the period attributable
to equity holders of the Company 6,426
--------------------------------------------- ------------- ------------- -------------- --------
Group &
UK Investment consolidation
Management International adjustments Total
Year ended 30 June 2020(1) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- -------------- -------
Statutory operating costs included
the following:
Amortisation 3,134 429 1,764 5,327
Depreciation 2,940 324 120 3,384
----------------------------------- ------------- ------------- -------------- -------
(1) The prior year has been restated to reflect the integration
of the previous Financial Planning into UK Investment Management as
described earlier in this Note.
4. Revenue
2021 2020
GBP'000 GBP'000
------------------------------ -------- --------
Portfolio management fees 98,006 95,108
Fund management fees 15,353 8,644
Advisory fees 4,526 4,325
Financial services commission 321 481
------------------------------ -------- --------
Total revenue 118,206 108,558
------------------------------ -------- --------
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.
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. Fees are calculated on
the basis of a percentage of the value of the portfolio over the
period.
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.
a. Geographic analysis
The Group's operations are located in the United Kingdom and the
Channel Islands. The following table presents external revenue
analysed by the geographical location of the Group entity providing
the service.
2021 2020
GBP'000 GBP'000
---------------- -------- --------
United Kingdom 99,995 95,223
Channel Islands 18,211 13,335
---------------- -------- --------
Total revenue 118,206 108,558
---------------- -------- --------
b. Major clients
The Group is not reliant on any one client or group of connected
clients for the generation of revenues.
5. Taxation
The tax charge on profit for the year was as follows:
2021 2020
GBP'000 GBP'000
----------------------------------------------- -------- --------
UK Corporation Tax at 19% (FY20: 19%) 5,466 3,991
Over provision in prior years (127) (66)
----------------------------------------------- -------- --------
Total current tax 5,339 3,925
Deferred tax credits (6) (674)
Under provision of deferred tax in prior years 116 462
Research and development tax credit - (87)
----------------------------------------------- -------- --------
Income tax expense 5,449 3,626
----------------------------------------------- -------- --------
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:
2021 2020
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Profit before taxation 25,091 10,052
Profit multiplied by the standard rate of tax in the
UK of 19% (FY20: 19%) 4,767 1,910
Tax effect of amounts that are not deductible (taxable)
in calculating taxable income:
Overseas tax losses not available for UK tax purposes (541) (24)
Disallowable expenses 447 394
Share-based payments 30 (139)
Depreciation and amortisation 1,419 336
Impairment charges 287 850
Non-taxable income (951) (10)
Research and development tax credit - (87)
(Over)/under provision in prior years (9) 396
-------------------------------------------------------- -------- --------
Income tax expense 5,449 3,626
-------------------------------------------------------- -------- --------
The deferred tax credits for the year arise from:
2021 2020
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Share option reserve (77) (247)
Accelerated capital allowances (53) (91)
Accelerated capital allowances on research and development (16) (154)
Dilapidations 15 -
Amortisation of acquired client relationship contracts 309 (224)
Unused overseas trading losses (184) 42
Under provision in prior years 116 -
----------------------------------------------------------- -------- --------
Deferred tax credits 110 (674)
----------------------------------------------------------- -------- --------
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 2021
is 19% (FY20: 19%).
It was outlined in the Finance Bill 2021 (11 March 2021) and
substantively enacted having received royal ascent on the 10 June
2021 that the UK corporation tax rate would increase to 25% from 1
April 2023 and remain at 19% until that date. As a result, the
relevant deferred tax balances have been remeasured. Deferred tax
assets and liabilities are calculated at the rate that is expected
to be in force when the temporary differences unwind, however
limited to the extent that such rates have been substantively
enacted.
6. Business combinations
2021
On 30 November 2020, the Group acquired Lloyds Bank
International's Channel Islands wealth management and funds
business ("Lloyds Channel Islands acquisition"). The acquisition
brings a high-quality discretionary client base, adds a multi-asset
and fixed income fund range to the Group's offering, and increases
distribution reach through well-established intermediary
relationships. The acquisition consisted of the entire share
capital of Lloyds Investment Fund Managers Limited (renamed Brooks
Macdonald International Fund Managers Limited following
acquisition), and a portfolio of discretionary management private
clients.
The acquisition has been accounted for using the acquisition
method and details of the purchase consideration are as
follows:
Note GBP'000 GBP'000
------------------------------------------------ ----- ------- -------
Business consideration 4,650
Business consideration adjustment i (1,070)
------------------------------------------------ ----- ------- -------
Initial business consideration - Discretionary
business 3,580
Shares consideration 4,650
Excess for net assets ii 95
------------------------------------------------ ----- ------- -------
Initial shares consideration - Funds business 4,745
------------------------------------------------------- ------- -------
Initial cash paid 8,325
Deferred contingent consideration at fair value iii 308
------------------------------------------------ ----- ------- -------
Total purchase consideration 8,633
------------------------------------------------------- ------- -------
i. Following completion, an adjustment was made to the business
consideration in relation to the revenue that has transferred to
the Group. The adjustment reflects the fall in revenue acquired by
the Group compared to the expected revenue that would transfer to
the Group in the Sale and Purchase Agreement ("SPA").
ii. Per the SPA, the completion balance sheet was to contain net
assets of GBP2,500,000 to be acquired by the Group. Any excess or
deficit of the actual net assets acquired would be paid or recouped
by the Group. The actual net assets acquired by the Group were
GBP2,595,000 resulting in the Group paying additional consideration
of GBP95,000.
iii. The total cash deferred contingent consideration is
GBP334,000, payable in two years following completion, based on the
client attrition of the funds under management acquired over the
two-year period.
The fair value of the deferred consideration liability has been
remeasured at 30 June 2021, and remains unchanged, which assumes
the deferred consideration criteria will be met resulting in the
full GBP334,000 to be paid in two years. The client attrition has
been forecast using a similar outflows pattern to that experienced
by the rest of the Group. The client attrition is dependent on
several unpredictable variables including client sentiment and
market conditions.
Client relationship intangible assets of GBP9,080,000 and
GBP3,147,000 were recognised on acquisition in respect of the
expected cash inflows and economic benefit from the discretionary
and fund management contracts acquired respectively. A gain on
bargain purchase of GBP4,284,000 was recognised on acquisition in
relation to the discretionary business and a gain on bargain
purchase of GBP682,000 was recognised on acquisition in relation to
the funds business as the net identifiable assets acquired were
greater than the total purchase consideration, which has been
recognised in the Consolidated statement of comprehensive income.
The fair value of the assets acquired are the gross contractual
amounts and all are considered to be fully recoverable. The fair
value of the identifiable assets and liabilities acquired, at the
date of acquisition, are detailed in (a) below.
Directly attributable acquisition costs of GBP19,000 (FY20:
GBP606,000) and integration costs of GBP2,225,000 (FY20: GBPnil)
were incurred in the acquisition and integration of the Lloyds
Channel Islands acquisition, which have been charged to
administrative costs in the Consolidated statement of comprehensive
income but excluded from underlying profit. During H1 of the year
ended 30 June 2021, the Group incurred the remaining integration
costs of GBP456,000 (FY20: GBP1,426,000) in relation to the
Cornelian acquisition that completed during the prior year, see
further details below in this Note.
a. Net assets acquired through business combination
GBP'000
--------------------------------------------------------- -------
Trade and other receivables 35
Cash at bank 3,038
Trade and other payables (367)
Corporation tax payable (115)
--------------------------------------------------------- -------
Total net assets recognised by acquired companies 2,591
Fair value adjustments:
Client relationship contracts - discretionary business 9,080
Client relationship contracts - fund-management business 3,147
Deferred tax liabilities (1,219)
--------------------------------------------------------- -------
Net identifiable assets 13,599
Gain on bargain purchase (4,966)
--------------------------------------------------------- -------
Total purchase consideration 8,633
--------------------------------------------------------- -------
The trade and other receivables were recognised at their fair
value, being the gross contractual amounts, deemed fully
recoverable.
b. Impact on reported results from date of acquisition
In the period from acquisition to 30 June 2021, the Lloyds
Channel Islands acquisition earned revenue of GBP5,315,000 and
statutory profit before tax of GBP3,005,000.
c. Net cash outflow resulting from business combinations
GBP'000
----------------------------------------------- -------
Total purchase consideration 8,633
Less deferred cash consideration at fair value (308)
----------------------------------------------- -------
Cash paid to acquire Lloyds Channel Islands 8,325
Less cash held by Lloyds Channel Islands (3,038)
----------------------------------------------- -------
Net cash outflow - investing activities 5,287
----------------------------------------------- -------
2020
On 28 February 2020, the Group acquired the entire share capital
of Cornelian Asset Managers Group Limited ("Cornelian"), an
Edinburgh-based independent, well-established wealth manager with
national distribution reach. Cornelian Asset Managers Group Limited
had two wholly owned subsidiaries: Cornelian Asset Managers Limited
and Cornelian Asset Managers Nominees Limited, which also formed
part of the Group on acquisition.
The acquisition has been accounted for using the acquisition
method and details of the purchase consideration are as
follows:
Note GBP'000
------------------------------------------------ ----- -------
Cash paid i 22,000
Shares issued ii 9,000
Cash paid for final net assets acquired 5,757
Deferred contingent consideration at fair value iii 7,466
------------------------------------------------ ----- -------
Total purchase consideration 44,223
------------------------------------------------------- -------
i. The Group issued 1,690,141 ordinary shares in November 2019
to fund the cash consideration, based on the share price on 21
November 2020 of GBP18.25 discounted by GBP0.50 to GBP17.75 per
share.
ii. The Group issued 453,172 ordinary shares to the previous
shareholders of Cornelian Asset Managers Group Limited at a price
of GBP19.86 per share, based on the share price at 28 February
2020.
iii. The total cash deferred contingent consideration is
GBP8,000,000, payable in up to three instalments in March 2021,
October 2021 and March 2022, based on the future value of the funds
under management acquired, and cost savings and synergies achieved
on integrating the business (Note 11).
The fair value of the deferred consideration liability has been
remeasured at 30 June 2020, and remains unchanged, which assumes
the deferred consideration criteria will be met resulting in the
full GBP8,000,000 to be paid at the various payment dates. The
growth of funds under management ("FUM") has been forecast using a
similar growth pattern to that experienced by the rest of the
Group. The future value of the FUM is dependent on several
unpredictable variables including client retention and market
movements. The cost savings and synergies are expected to be
yielded in full, which has been forecast based on the Group's
five-year Medium-Term Plan ("MTP").
Client relationship intangible assets of GBP25,623,000 were
recognised on acquisition in respect of the expected cash inflows
and economic benefit from the discretionary and fund-management
contracts acquired. Goodwill of GBP16,111,000 was recognised on
acquisition in respect of the expected growth in the funds under
management and associated cash inflows. The fair value of the
assets acquired are the gross contractual amounts and all are
considered to be fully recoverable. The fair value of the
identifiable assets and liabilities acquired, at the date of
acquisition, are detailed in (d) below.
Directly attributable acquisition costs of GBP2,229,000 and
integration costs, including staff retention costs of GBP1,426,000,
were incurred in the acquisition and integration of Cornelian,
which have been charged to administrative costs in the Consolidated
statement of comprehensive income but excluded from underlying
profit.
d. Net assets acquired through business combination
GBP'000
--------------------------------------------------------- -------
Computer software 87
Property, plant and equipment 74
Financial assets at fair value through profit and loss 543
Trade and other receivables 1,244
Cash and cash equivalents 6,655
Trade and other payables (1,229)
Deferred tax liabilities (17)
--------------------------------------------------------- -------
Total net assets recognised by acquired companies 7,357
--------------------------------------------------------- -------
Fair value adjustments:
Client relationship contracts - discretionary business 18,012
Client relationship contracts - fund-management business 7,611
Deferred tax liabilities (4,868)
--------------------------------------------------------- -------
Net identifiable assets 28,112
Goodwill 16,111
--------------------------------------------------------- -------
Total purchase consideration 44,223
--------------------------------------------------------- -------
The trade and other receivables were recognised at their fair
value, being the gross contractual amounts.
e. Impact on reported results from date of acquisition
In the period from acquisition to 30 June 2020, Cornelian earned
revenue of GBP3,048,000 and statutory profit before tax of
GBP452,000. Had Cornelian been consolidated from 1 July 2019, the
Consolidated statement of comprehensive income would show revenue
of GBP7,328,000 and statutory profit before tax of
GBP1,685,000.
f. Net cash outflow resulting from business combinations
GBP'000
------------------------------------------ -------
Total purchase consideration 44,223
Less:
Shares issued as consideration (9,000)
Deferred cash consideration at fair value (7,466)
------------------------------------------ -------
Cash paid to acquire Cornelian 27,757
Less cash held by Cornelian (6,655)
------------------------------------------ -------
Net cash outflow - investing activities 21,102
------------------------------------------ -------
7. 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, which is an alternative performance
measure, are calculated based on 'underlying earnings', which is
also 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 and
contingent consideration, gain on bargain purchase, goodwill
impairment, client relationship contracts impairment, amortisation
of client relationships and contracts acquired with fund managers,
acquisition related costs, dual running costs of operating platform
and head office relocation costs. 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:
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Earnings attributable to ordinary shareholders 19,642 6,426
---------------------------------------------------------- -------- --------
Gain on bargain purchase (4,966) -
Amortisation of acquired client relationship contracts
(Note 9) 4,928 2,867
Acquisition-related costs (Note 6) 2,672 4,261
Impairment of acquired client relationship contracts
(Note 9) 1,513 -
Dual running costs of operating platform 1,000 -
Finance cost of deferred consideration (Note 11) 299 145
Changes in fair value of deferred consideration (Note
11) 60 -
Goodwill impairment (Note 9) - 4,471
Head office relocation costs - 1,166
Changes in fair value of contingent consideration - 54
Amortisation of contracts acquired with fund managers
(Note 9) - 16
Finance income of contingent consideration - (9)
Tax impact of adjustments (760) (939)
---------------------------------------------------------- -------- --------
Underlying earnings attributable to ordinary shareholders 24,388 18,458
---------------------------------------------------------- -------- --------
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:
2021 2020
Number Number
of shares of shares
--------------------------------------------------------- ---------- ----------
Weighted average number of shares in issue 15,671,672 14,870,729
Effect of dilutive potential shares issuable on exercise
of employee share options 50,891 46,052
--------------------------------------------------------- ---------- ----------
Diluted weighted average number of shares in issue 15,722,563 14,916,781
--------------------------------------------------------- ---------- ----------
Earnings per share for the year attributable to equity holders
of the Company were:
2021 2020
p p
------------------------------ ----- -----
Based on reported earnings:
Basic earnings per share 125.3 43.2
Diluted earnings per share 124.9 43.1
Based on underlying earnings:
Basic earnings per share 155.6 124.1
Diluted earnings per share 155.1 123.7
------------------------------ ----- -----
8. Dividends
Amounts recognised as distributions to equity holders of the
Company in the year were as follows:
2021 2020
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Final dividend paid for the year ended 30 June 2020
of 32.0p (FY19: 32.0p) per share 4,999 4,382
Interim dividend paid for the year ended 30 June 2021
of 23.0p (FY20: 21.0p) per share 3,573 3,298
------------------------------------------------------ -------- --------
Total dividends 8,572 7,680
------------------------------------------------------ -------- --------
Final dividend proposed for the year ended 30 June
2021 of 40.0p (FY20: 32.0p) per share 6,229 5,161
------------------------------------------------------ -------- --------
The interim dividend of 23.0p (FY20: 21.0p) per share was paid
on 16 April 2021.
A final dividend for the year ended 30 June 2021 of 40.0p (FY20:
32.0p) per share was declared by the Board of Directors on 15
September 2021 and is subject to approval by the shareholders at
the Company's Annual General Meeting. It will be paid on 5 November
2021 to shareholders who are on the register at the close of
business on 24 September 2021. 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.
9. 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 2019 35,776 8,874 32,161 3,521 80,332
Additions 16,111 1,614 25,623 - 43,348
Cost of intangible assets on
acquisition of subsidiary - 1,006 - - 1,006
Disposals - (991) - - (991)
At 30 June 2020 51,887 10,503 57,784 3,521 123,695
---------------------------------- -------- --------- ------------- --------- --------
Additions - 3,061 12,227 - 15,288
Disposals - (2,166) - - (2,166)
---------------------------------- -------- --------- ------------- --------- --------
At 30 June 2021 51,887 11,398 70,011 3,521 136,817
---------------------------------- -------- --------- ------------- --------- --------
Accumulated amortisation and
impairment
At 1 July 2019 6,742 3,192 16,726 3,505 30,165
Amortisation charge - 2,444 2,867 16 5,327
Accumulated amortisation of
intangible assets on acquisition
of subsidiary - 919 - - 919
Accumulated amortisation on
disposals - (991) - - (991)
Impairment 4,471 - - - 4,471
---------------------------------- -------- --------- ------------- --------- --------
At 30 June 2020 11,213 5,564 19,593 3,521 39,891
Amortisation charge - 2,754 4,928 - 7,682
Accumulated amortisation on
disposals - (2,166) - - (2,166)
Impairment - - 1,513 - 1,513
---------------------------------- -------- --------- ------------- --------- --------
At 30 June 2021 11,213 6,152 26,034 3,521 46,920
---------------------------------- -------- --------- ------------- --------- --------
Net book value
At 1 July 2019 29,034 5,682 15,435 16 50,167
At 30 June 2020 40,674 4,939 38,191 - 83,804
---------------------------------- -------- --------- ------------- --------- --------
At 30 June 2021 40,674 5,246 43,977 - 89,897
---------------------------------- -------- --------- ------------- --------- --------
The amortisation charge of intangible assets is recognised
within administrative costs in the Consolidated statement of
comprehensive income.
Intangible assets totalling GBP74,462,000 at 30 June 2021 are
recognised in the United Kingdom and GBP15,435,000 are recognised
in the Channel Islands.
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:
2021 2020
GBP'000 GBP'000
------------------------------------------------------------------ -------- --------
Funds
Braemar Group Limited ("Braemar") 3,320 3,320
Levitas Investment Management Services Limited ("Levitas") - -
------------------------------------------------------------------ -------- --------
3,320 3,320
International
Brooks Macdonald Asset Management (International)
Limited and Brooks Macdonald Retirement Services (International)
Limited (collectively "Brooks Macdonald International") 21,243 21,243
Cornelian
Cornelian Asset Managers Group Limited ("Cornelian") 16,111 16,111
Total goodwill 40,674 40,674
------------------------------------------------------------------ -------- --------
Goodwill is reviewed annually for impairment and its
recoverability has been assessed at 30 June 2021 by comparing the
carrying amount of the CGUs to their expected recoverable amount,
estimated on a value-in-use basis. The value-in-use of each CGU has
been calculated using pre-tax discounted cash flow projections
based on the most recent budgets and forecasts approved by the
relevant subsidiary company boards of directors. The most recent
budgets prepared are part of the detailed budget process for the
year ending 30 June 2022, and then extrapolated over a longer
period of the next four years, resulting in the budgets and
forecasts covering a period of five years. Cash flows are then
extrapolated beyond the five-year budget and forecast period using
an expected long-term growth rate, with the long-term growth rate
considered reasonable against the budgeted and forecast growth.
The Cornelian CGU recoverable amount was calculated as
GBP39,420,000 at 30 June 2021, 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. The revenue generated in the
cash flow forecasts is based on FUM forecasts multiplied by the
relevant yields, with FUM growth ranging between 6% and 7% annually
over the five-year period. FUM growth is forecast using estimated
new business targets, expected outflows and estimated impact of
market performance. Expenditure growth is forecast between 4% and
6% annually over the five-year period. Both the FUM growth and
expenditure growth reflect historic actual growth and planned
management actions and are considered to be reasonable in the
current market and industry conditions. A pre-tax discount rate of
13% has been used, based on the Group's assessment of the risk-free
rate of interest and specific risks relating to Cornelian. The
recoverable amount was based on the estimated cash inflows over the
next five financial years, the period covered by the most recent
forecasts, which reflect planned management actions and are
considered to be reasonable in the current market and industry
conditions. The 2% long-term growth rate applied is considered
prudent in the context of the long-term average growth rate for the
funds and investment management industries in which the CGU
operates.
Sensitivity analysis has been performed and an impairment would
arise if the one of the following occurred:
-- An increase of the pre-tax discount rate by 1%.
-- A decrease in the perpetuity growth rate by 2%.
-- A decrease in the pre-tax cash flows by 12% from the forecasts.
Based on a value-in-use calculation, the recoverable amount of
the Brooks Macdonald International CGU at 30 June 2021 was
GBP83,061,000, 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% (FY20: 11%) has been
used, based on the Group's assessment of the risk-free rate of
interest and specific risks relating to Brooks Macdonald
International. The key input in forecasting revenue is FUM, which
is forecast to grow between 12% and 17% annually over the five-year
period. FUM growth is forecast using estimated new business
targets, expected outflows and estimated impact of market
performance. Annual cash inflow growth rates range between 9% and
45% 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 reasonable in
the current market and industry conditions. The 2% long-term growth
rate applied is considered prudent in the context of the long-term
average growth rate for the funds, investment management and
financial planning industries in which the CGU operates.
Sensitivity analysis has not been performed given the vast headroom
the recoverable amount provides over the goodwill balance.
Based on a value-in-use calculation, the recoverable amount of
the Braemar CGU at 30 June 2021 was GBP10,461,000, indicating that
there is no impairment. A pre-tax discount rate of 14% (FY20: 11%)
has been used, based on the Group's assessment of the risk-free
rate of interest and specific risks relating to Braemar. The key
underlying assumptions of the calculation are the discount rate,
the growth in FUM of the funds business and the long-term growth
rate. The revenue generated in the cash flow forecasts is based on
FUM forecasts multiplied by the relevant yields, with FUM growth
ranging between 6% and 7% annually over the five-year period. FUM
growth is forecast using estimated new business targets, expected
outflows and estimated impact of market performance. Expenditure
growth is forecast between 3% and 7% annually over the five-year
period. The inputs to the forecast cash inflows over the next five
financial years, reflect historic actual growth and planned
management activities and are considered to be reasonable in the
current market and industry conditions. The 2% long-term growth
rate applied is considered prudent in the context of the long-term
average growth rate for the funds industry in which the CGU
operates. Sensitivity analysis has not been performed given the
vast headroom the recoverable amount provides over the goodwill
balance.
At 30 June 2021, 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 impairment required to
the goodwill balances at 30 June 2021.
At the end of the financial year ended 30 June 2019, the Group
entered into a five-year partnership agreement in relation to
Levitas that carried a lower sponsorship fee, the aim of this
reduction was to enhance FUM flows and deepen the relationship with
the fund distributor. Unfortunately, for reasons beyond the Group's
control, the anticipated fund inflows were not forthcoming and the
Levitas fund recorded net outflows during the financial year ended
30 June 2020, impacting its rate of growth and future cash flows.
Based on an updated value-in-use calculation, the recoverable
amount of the Levitas CGU at 30 June 2020 did not support the
goodwill balance of GBP4,471,000 and was fully impaired.
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.
During the year ended 30 June 2021, the Group conducted a review
of the computer software assets and retired assets from the fixed
asset register with a GBPnil net book value, and no longer used in
the business. This resulted in disposals of computer software, with
cost and accumulated amortisation both totalling GBP2,166,000
(2020: GBP991,000).
c. Acquired client relationship contracts
This asset represents the fair value of future benefits accruing
to the Group from acquired client relationship contracts. The
amortisation of client relationships is charged to the Consolidated
statement of comprehensive income on a straight-line basis over
their estimated useful lives (6 to 20 years). During the year, the
Group recognised an impairment of GBP1,513,000 on the
client-relationship intangible assets as the expected useful
economic life was reduced from 15 to 12 years. No further
impairment indicators were present for the acquired client
relationship contract intangible assets.
Of the client-relationship intangible assets held by the Group
at 30 June 2021, the expected amortisation charge for the year
ending 30 June 2022 is GBP5,443,000. If the useful economic lives
are reduced by one year, the charge would increase by
GBP1,302,000.
During the year ended 30 June 2021, the Group acquired client
relationship contracts totalling GBP12,227,000, as part of the
Lloyds Channel Islands acquisition (Note 6), which were recognised
as separately identifiable intangible assets in the Consolidated
statement of financial position. The additions included contracts
related to the Lloyds discretionary business of GBP9,080,000, with
a useful economic life of 15 years, and GBP3,147,000 related to the
Cornelian funds-management business, with a useful economic life of
six 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.
10. 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.
2021 2020
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Deferred tax assets
Deferred tax assets to be settled after more than
one year 2,022 430
Deferred tax assets to be settled within one year 714 1,094
-------------------------------------------------- -------- --------
Total deferred tax assets 2,736 1,524
-------------------------------------------------- -------- --------
Deferred tax liabilities
Deferred tax liabilities to be settled after more
than one year (8,022) (6,463)
Deferred tax liabilities to be settled within one
year (880) (767)
-------------------------------------------------- -------- --------
Total deferred tax liabilities (8,902) (7,230)
-------------------------------------------------- -------- --------
The gross movement on the deferred income tax account during the
year was as follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
At 1 July (5,706) (1,055)
Additional liability on acquisition of client-relationship
intangible assets (Note 6) (1,219) (4,868)
Adjustment on acquisition of business combination (21) (17)
(Charge)/credit to the Consolidated statement of comprehensive
income (110) 212
Credit recognised in equity 890 22
--------------------------------------------------------------- -------- --------
At 30 June (6,166) (5,706)
--------------------------------------------------------------- -------- --------
The change in deferred income tax assets and liabilities during
the year was as follows:
Trading
losses Accelerated
Share-based carried capital
payments forward Dilapidations allowances Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----------- -------- ------------- ----------- --------
Deferred tax assets
At 1 July 2019 620 499 - 104 1,223
Adjustment on acquisition of
business combination - - - (17) (17)
Credit/(charge) to the Consolidated
statement of comprehensive
income 247 (42) - 91 296
Credit to equity 22 - - - 22
------------------------------------ ----------- -------- ------------- ----------- --------
At 30 June 2020 889 457 - 178 1,524
Adjustment on acquisition of
business combination - - - (21) (21)
Under provision in prior years
charged to the Consolidated
statement of comprehensive
income - - 44 - 44
Credit/(charge) to the Consolidated
statement of comprehensive
income 77 184 (15) 53 299
Credit to equity 890 - - - 890
------------------------------------ ----------- -------- ------------- ----------- --------
At 30 June 2021 1,856 641 29 210 2,736
------------------------------------ ----------- -------- ------------- ----------- --------
The carrying amount of the deferred tax asset is reviewed at
each reporting date and is only recognised to the extent that it is
probable that future taxable profits of the Group will allow the
asset to be recovered.
Accelerated
capital
allowances
on research Intangible
& development asset amortisation Total
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------------- ----------------------- --------
Deferred tax liabilities
At 1 July 2019 - 2,278 2,278
Additional liability on acquisition of client-relationship
intangible assets - 4,868 4,868
Credit to the Consolidated statement of comprehensive
income (154) (224) (378)
Under provision in prior years charged to the
Consolidated statement of comprehensive income 462 - 462
----------------------------------------------------------- -------------- ----------------------- --------
At 30 June 2020 308 6,922 7,230
Additional liability on acquisition of client-relationship
intangible assets (Note 6) - 1,219 1,219
Under provision in prior years charged to the
Consolidated statement of comprehensive income 160 - 160
(Credit)/charge to the Consolidated statement
of comprehensive income (16) 309 293
----------------------------------------------------------- -------------- ----------------------- --------
At 30 June 2021 452 8,450 8,902
----------------------------------------------------------- -------------- ----------------------- --------
11. Deferred consideration
Deferred consideration payable is split between non-current
liabilities and current liabilities to the extent that it is due
for payment within one year of the reporting date. It reflects the
Directors' best estimate of amounts payable in the future in
respect of certain client relationships and subsidiary undertakings
that were acquired by the Group. Deferred consideration is measured
at its fair value based on discounted expected future cash flows.
The movements in the total deferred consideration balance during
the year were as follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------- -------- --------
At 1 July 7,991 1,299
Additions 308 7,466
Finance cost of deferred consideration 299 145
Fair value adjustments 60 -
Payments made during the year (2,421) (919)
--------------------------------------------- -------- --------
At 30 June 6,237 7,991
--------------------------------------------- -------- --------
Analysed as:
Amounts falling due within one year 5,934 1,691
Amounts falling due after more than one year 303 6,300
--------------------------------------------- -------- --------
Total deferred consideration 6,237 7,991
--------------------------------------------- -------- --------
During the year ended 30 June 2021, the Group completed the
Lloyds Channel Islands acquisition (Note 6) and part of the
consideration is to be deferred over a period of two years. The
total cash deferred consideration of GBP334,000 was recognised at
its fair value of GBP308,000 on acquisition. The deferred
consideration is payable in December 2022 based on the future
revenue generated by the discretionary business acquired. Since
acquisition to 30 June 2021, the Group recognised a finance cost of
GBP7,000 on the Lloyds Channel Islands acquisition deferred
consideration. The fair value of the Lloyds Channel Islands
acquisition deferred consideration at 30 June 2021 was
GBP315,000.
During the year ended 30 June 2021, the fair value of the
estimated deferred consideration for Cornelian Asset Managers Group
Limited (Note 6) was revalued by GBP60,000 due to a change in the
estimated timing of when the consideration will be payable. During
the year ended 30 June 2021, the Group revalued the deferred
consideration by GBP60,000 due to a change in the estimated timing
of when the consideration will be payable and paid GBP2,000,000 to
the vendors of Cornelian. During the year ended 30 June 2021, the
Group recognised a finance cost of GBP286,000 in relation to the
Cornelian deferred consideration. The fair value of the Cornelian
deferred consideration at 30 June 2021 was GBP5,922,000 (FY20:
GBP7,576,000).
During the year ended 30 June 2021, the final payment was made
in relation to the acquisition of Levitas totalling GBP421,000
(FY20: GBP919,000). Full details of the Levitas acquisition are
disclosed in Note 13 of the 2015 Annual Report and Accounts. The
fair value of the Levitas deferred consideration at 30 June 2021
was GBPnil.
12. Provisions
Exceptional
costs of
resolving
legacy Leasehold
Client compensation matters FSCS levy dilapidations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------------- ----------- --------- -------------- --------
At 1 July 2019 100 701 928 366 2,095
Charge to the Consolidated
statement of comprehensive
income 266 - 2,171 381 2,818
Additions on acquisition of
subsidiary - - - 103 103
Utilised during the year (328) (93) (1,598) (470) (2,489)
------------------------------- ------------------- ----------- --------- -------------- --------
At 30 June 2020 38 608 1,501 380 2,527
------------------------------- ------------------- ----------- --------- -------------- --------
Charge to the Consolidated
statement of comprehensive
income 347 - 2,218 136 2,701
Utilised during the year (385) (8) (2,474) (103) (2,970)
------------------------------- ------------------- ----------- --------- -------------- --------
At 30 June 2021 - 600 1,245 413 2,258
------------------------------- ------------------- ----------- --------- -------------- --------
Analysed as:
Amounts falling due within
one year - 600 1,245 134 1,979
Amounts falling due after more
than one year - - - 279 279
------------------------------- ------------------- ----------- --------- -------------- --------
Total provisions - 600 1,245 413 2,258
------------------------------- ------------------- ----------- --------- -------------- --------
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. The amount
utilised during the year represented a goodwill payment made to a
client of GBP8,000. The amount remaining at 30 June 2021 of
GBP600,000 relates to the remaining goodwill offers yet to be
accepted by clients. During the prior year ended 30 June 2020, a
contingent liability was recognised in relation to potential claims
related to the legacy matters (Note 14), which is still recognised
as at 30 June 2021.
c. FSCS levy
Following confirmation by the FSCS in April 2021 of its final
industry levy for the 2021/22 scheme year, the Group has made a
provision of GBP1,245,000 (FY20: GBP1,501,000) for its estimated
share.
d. 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.
13. Reconciliation of operating profit to net cash inflow from
operating activities
2021 2020(1)
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Operating profit 20,756 10,245
Adjustments for:
Amortisation of intangible assets 7,682 5,327
Depreciation of property, plant and equipment 1,045 2,028
Depreciation of right-of-use assets 1,614 1,256
Other losses/(gains) - net 1,438 4,519
(Increase)/decrease in receivables (2,333) 2,642
Increase/(decrease) in payables 3,765 (202)
(Decrease)/increase in provisions (269) 431
Increase/(decrease) in other non-current liabilities 218 (384)
Share-based payments charge 2,991 3,571
----------------------------------------------------- -------- --------
Net cash inflow from operating activities 36,907 29,433
----------------------------------------------------- -------- --------
1 The cash held by subsidiary entities acquired has been
recognised in cash flows from investing activities on the
Consolidated statement of cash flows. In the prior year, this had
been classified as cash generated from operations and therefore has
been changed to reflect the correct classification. The changes
made to the prior year numbers are that acquisition of
subsidiaries, net of cash acquired has been increased by
GBP6,655,000, working capital movement in receivables has been
increased by GBP1,948,000, working capital movement in payables has
been reduced by GBP1,246,000 and net assets acquired in business
combination has been decreased by GBP7,357,000.
14. Guarantees and contingent liabilities
In the normal course of business, the Group is exposed to
certain legal issues which, in the event of a dispute, could
develop into litigious proceedings and in some cases may result in
contingent liabilities. Similarly, a contingent liability may arise
in the event of an unexpected finding in respect of the Group's tax
affairs which could result in a financial outflow to the relevant
tax authorities.
A claim for unspecified losses has been made by a client against
Brooks Macdonald Financial Consulting Limited, a subsidiary of the
Group, in relation to alleged negligent financial advice. The
claimant has not yet advised the quantum of their claim so it is
not possible to reliably estimate the potential impact of a ruling
in their favour. There remains significant uncertainty surrounding
the claim and the Group's legal advice indicates that it is not
probable that the claim will be upheld; therefore, no provision for
any liability has been recognised at this stage.
Brooks Macdonald Asset Management Limited, a subsidiary company
of the Group, has an agreement with the Royal Bank of Scotland plc
to guarantee settlement for trading with CREST stock on behalf of
clients. The Group holds client assets to fund such trading
activity.
Additional levies by the 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 prior year ended 30 June 2020, 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 (Note 12(b)), which
were 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 2021. 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.
15. 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
------------------ ------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Brooks Macdonald Asset Management Limited - - - 22,641
Brooks Macdonald Asset Management (International)
Limited 246 14 - -
Brooks Macdonald Retirement Services
(International) Limited - 29 - -
Brooks Macdonald Financial Consulting
Limited - - 2,753 2,638
-------------------------------------------------- -------- -------- -------- --------
All of the above amounts are interest-free and repayable on
demand.
16. Events since the end of the year
No material events have occurred between the reporting date and
the date of signing the 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 auditors'.
The financial information set out above does not constitute the
Group's statutory financial statements for the years ended 30 June
2021 or 2020. Statutory financial statements for 2020 have been
delivered to the Registrar of Companies. Statutory financial
statements for 2021 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditor has
reported on both the 2021 and 2020 financial statements. Their
reports were unqualified.
Forward looking statements
This announcement has been prepared to provide information to
shareholders to assess the current position and future potential of
Brooks Macdonald Group. It contains certain forward-looking
statements with respect to the Group's financial condition,
operations, and business opportunities. Forward looking statements
involve known and unknown risks, uncertainties and other important
factors that could cause actual results to differ materially from
what is expressed or implied by the statements. Any forward-looking
statement is made in good faith based on information available to
the Directors as of the date of the statement. Past performance
cannot be relied on as a guide to future performance.
Financial calendar
Results announcement 16 September 2021
------------------------------ -----------------
Ex-dividend date for final
dividend 23 September 2021
------------------------------ -----------------
Record date for final dividend 24 September 2021
------------------------------ -----------------
Annual General Meeting 28 October 2021
------------------------------ -----------------
Final dividend payment date 5 November 2021
------------------------------ -----------------
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END
FR SFUFAIEFSEFU
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September 16, 2021 02:00 ET (06:00 GMT)
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