TIDMBRK

RNS Number : 5149Z

Brooks Macdonald Group PLC

15 September 2022

15 September 2022

BROOKS MACDONALD GROUP PLC

Final results for the year ended 30 June 2022

Strong net flows, record underlying profit margin, and continued strategic delivery.

Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group") today announces its audited results for the year ended 30 June 2022.

Financial highlights

-- Group Funds Under Management ("FUM") closing at GBP15.7 billion (down 4.8% on FY21) as positive net flows were offset by the impact of declining markets on asset values

-- Positive net flows throughout the year, now five successive quarters, with net flows for the full year of 4.8%, representing a GBP1.1 billion improvement on prior year

-- Flows particularly strong in the fourth quarter (three months to 30 June 2022) with the annualised rate reaching 6.7% and 8.6% for Group and UK Investment Management respectively

-- Group revenue of GBP122.2 million, up 3.4% on FY21, driven by higher average FUM and the full year impact of the Group's acquisition of the Lloyds Channel Islands business

-- Underlying profit margin up by 2.3 points to 28.2%, in line with the Group's commitment to deliver top quartile margin over the medium term

-- Investment performance across the range of services of (9.6)% for the year, driven by declining and volatile markets

-- Total dividend increased by 12.7% to 71.0p (FY21: 63.0p), in line with the increase in underlying profit before tax, reflecting the Board's confidence in the Group's prospects.

Strategic progress

-- Remaining client- and adviser-facing processes now live on the SS&C platform, shortly after year end, a major milestone in the Group's digital transformation which will make Brooks Macdonald increasingly easy to do business with. Work now continuing to embed and refine the systems and processes

-- Investing for growth, with repositioning of the Group's Funds business under way through material repricing of the Cornelian Risk Managed Fund range to drive medium-term growth

-- Continued rapid growth of Brooks Macdonald Investment Solutions ("BMIS"), with FUM more than doubling during the financial year

-- Increasing momentum in the Managed Portfolio Service ("MPS") with 34.4% net flows for the year

-- Continued positive net flows in the Group's specialist Bespoke Portfolio Service products - Responsible Investment Service, Decumulation, AIM Portfolio Service and Court of Protection

-- Improving flows and solid commercial performance in International despite difficult market conditions. New Isle of Man office progressing well and expected to be a source of growth, particularly through the Group's referral agreement with Lloyds Bank

-- Acquisition of Integrity Wealth Solutions, subject to regulatory approval, bringing further scale, capability and management expertise to the Private Clients business.

Outlook

-- Fundamental long-term opportunity remains strong, driven by demographic and policy trends as well as continuing adviser demand for outsourced investment management

-- Medium-term ambition for net flows is 8-10%p.a., and the Group expects that flows will remain positive despite ongoing short-term market uncertainty affecting client confidence and conversion times

   --    FY23 underlying profitability in line with current market expectations 

-- Well positioned, continuing to deliver on the Group's ambitious growth strategy, looking forward with confidence.

Andrew Shepherd, CEO of Brooks Macdonald, commented:

"This has been another strong year for Brooks Macdonald - we've delivered higher net flows, we've hit another record for underlying profit margin, and we've increased our full year dividend for the seventeenth consecutive year. We have made good progress in driving our digital transformation forward, having now gone live with our remaining client- and adviser-facing processes on the SS&C platform. This will make Brooks Macdonald increasingly easy to do business with, delivering a best-in-class adviser experience and client service.

"Our clients and advisers are facing a challenging macroeconomic and market environment and, as ever, we will support them through these difficult times. Nonetheless, the fundamental long-term opportunity for Brooks Macdonald remains strong despite these challenges. We have momentum, we have an ambitious growth strategy and we have a strong team with the capabilities to take full advantage of the opportunities ahead."

Key financial results

 
                                    Year ended     Year ended    Change 
                                    30.06.2022     30.06.2021 
 
 Funds under management ("FUM")     GBP15.7bn      GBP16.5bn     (4.8)% 
 Revenue                            GBP122.2m      GBP118.2m      3.4% 
 

Underlying results(1)

 
 Underlying profit before tax           GBP34.5m   GBP30.6m   12.7% 
 Underlying profit margin before 
  tax                                    28.2%      25.9%     2.3ppt 
 Underlying basic earnings per share     174.1p     155.6p    18.5p 
 Underlying diluted(2) earnings per 
  share                                  168.7p     150.6p    18.1p 
 

Statutory results

 
 Statutory profit before tax           GBP29.5m   GBP25.1m   17.5% 
 Statutory profit margin before tax     24.1%      21.2%     2.9ppt 
 Statutory basic earnings per share     149.0p     125.3p    23.7p 
 Statutory diluted(2) earnings per 
  share                                 144.4p     121.3p    23.1p 
 
 Net cash                              GBP61.3m   GBP54.9m   11.7% 
 

Dividends

 
 Proposed final dividend per share    45.0p   40.0p   12.5% 
 Total dividend per share             71.0p   63.0p   12.7% 
 

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 ("APM") for the Group. R efer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered . A reconciliation between the Group's statutory and underlying profit before tax is also included in the Financial Review.

2 The underlying and statutory diluted earnings per share for FY21 have been restated in line with the current year methodology of calculating the diluted weighted average number of shares. Refer to note 8 for further details on the restatement.

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, CEO                                            020 7659 3492 
  Ben Thorpe, Chief Financial Officer 
 Peel Hunt LLP (Nominated Adviser and 
  Broker) 
  Paul Shackleton / Andrew Buchanan / John 
  Welch                                                           020 7418 8900 
 FTI Consulting                               brooksmacdonald@fticonsulting.com 
  Edward Berry / Laura Ewart / Katherine                   07703 330199 / 07711 
  Bell                                                    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 GBP15.7 billion as at 30 June 2022.

Brooks Macdonald offers a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts. The Group also provides financial planning as well as international investment management, and acts as fund manager to a range of onshore and international funds.

The Group has fourteen offices across the UK and Crown Dependencies including London, Birmingham, Cheltenham, East Anglia, Exeter, Leeds, Manchester, Southampton, Tunbridge Wells, Scotland, Wales, Jersey, Guernsey and Isle of Man.

LEI: 213800WRDF8LB8MIEX37

www.brooksmacdonald.com / @BrooksMacdonald

Chairman's statement

Introduction

I am pleased to report that Brooks Macdonald has had an excellent first year under the leadership of Andrew Shepherd as CEO. Despite challenging market conditions, the Group set records for revenue, underlying profit and underlying profit margin. The closing FUM figure of GBP15.7 billion was delivered through positive and improving net flows, offset by the impact on asset values of declining and volatile markets. After the Group's net flows returned to being positive in Q4 of the previous financial year, they remained positive throughout the twelve months to 30 June 2022, delivering 4.8% organic net new business for the year. The fourth quarter (three months to 30 June 2022) was particularly pleasing with an annualised positive net flows rate of 6.7%.

Our Centralised Investment Process continues to deliver strong performance over the medium and longer term, underpinning our mission to protect and enhance our clients' wealth. Our investment performance remains robust versus our peer group, as measured by the ARC indices, particularly over 3, 5 and 10 years. Overall Group investment performance for this financial year was (9.6)%, driven by three factors: the overall market decline, which affected both equity markets (MSCI All Countries World Index was down 12.3%) and bond markets (Bloomberg Gilts Total Return Index fell 14.3%); exposure to small- and medium-sized companies, which is common across the wealth management industry; and the impact of equity volatility on some of the portfolios the Group runs for clients with higher risk appetite.

Performance overview

Brooks Macdonald continues to grow strongly, driven by our strategy of focusing on intermediaries, alongside our complementary Private Clients business. Underlying profit before tax was GBP34.5 million, up 12.7% on the year (FY21: GBP30.6 million), and underlying basic earnings per share ("EPS") was up 11.9% to 174.1p (FY21: 155.6p).

Statutory profit before tax rose 17.5% to GBP29.5 million (FY21: GBP25.1 million). Statutory basic EPS rose 18.9% to 149.0p (FY21: 125.3p).

Delivering our strategy

We have a clear strategy based on the three value drivers of market-leading organic growth, service and operational excellence, and selective high-quality M&A. We have continued to deliver against all three drivers:

-- On organic growth, our focus on BM Investment Solutions and our Managed Portfolio Service (both in custody and on third-party platforms) has been highly successful with FUM growth of 25%.

-- We have driven improvements in our adviser experience and client service levels, with all client- and adviser-facing processes moving to the SS&C platform shortly after year end, continuing our digital transformation.

   --    We announced the acquisition of Integrity Wealth Solutions, subject to regulatory approval. 

In parallel, we have maintained our focus on the culture of the business and taken forward Our Promise, which is the Group's commitment to its people, to deliver an inclusive culture, fulfilling careers, and great recognition.

Dividend

The Board has recommended a final dividend of 45.0p (FY21: 40.0p), which, subject to approval by shareholders, will result in total dividends for the year of 71.0p (FY21: 63.0p). This represents an increase of 12.7% in total dividend on the previous year and underlines the Board's confidence in the prospects for the Group, despite the challenging macroeconomic environment, and our commitment to a progressive dividend policy. The final dividend will be paid on 4 November 2022 to shareholders on the register at the close of business on 23 September 2022.

Board changes

There were two changes to the Board during the financial year. As mentioned in last year's Annual Report and Accounts, our CEO, Andrew Shepherd, and the Group Chief Operating Officer, Lynsey Cross, were appointed to the Board with effect from 13 July 2021.

Looking ahead

The UK macroeconomic outlook in the short term remains highly uncertain, with high inflation, a cost of living crisis, increasing interest rates, and recessionary risks. Nonetheless, the fundamental opportunity for Brooks Macdonald remains strong, driven by demographic and policy trends as well as increasing adviser demand for outsourced investment management. The Group has a strong balance sheet, consistently supportive shareholders and an ambitious growth agenda. We look to the future with confidence.

Alan Carruthers

Chairman

14 September 2022

CEO's review

Introduction

I am delighted that my first full year as CEO of Brooks Macdonald has been another year of record performance across a number of dimensions, further demonstrating the strength and resilience of our business model.

The ongoing macroeconomic and market conditions have been challenging for all our stakeholders, and I thank them for their support. I am pleased that our positive and improving net flows show that our clients and their intermediaries recognise and value our products and services. I am also extremely grateful to our people who, over recent years, have dealt with Brexit, the pandemic and a global economic crisis whilst, despite all that, maintaining their service and commitment to our clients and their intermediaries.

Delivering our strategy

Brooks Macdonald's strategy is founded on the three value drivers of organic growth, service and operational excellence, and selective high-quality acquisitions. We are committed to delivering consistently top quartile underlying profit margins, through building on the sustainable and scalable business model we have put in place. We continue to make progress, ready to capitalise on the growth opportunities we see ahead, achieving higher returns as we go.

A core element of our strategy, alongside our robust Centralised Investment Process and our compelling investment proposition, is delivering a high-quality intermediary experience alongside exceptional client service. We are committed to continuous improvement on that dimension and I am delighted that, shortly after our financial year end, we reached a major milestone in our digital transformation when we went live with all our client- and intermediary-facing processes to the SS&C platform.

This is a critical step in our digital transformation, giving our clients and their intermediaries improved digital self-service capabilities, complementing the high-quality of our face-to-face relationships. The platform includes automated onboarding, full intermediary and client portal functionality, and bespoke reporting.

The migration has been a massive effort and I want to thank all our staff for their commitment and indeed patience as we continue the work to embed and refine the new processes and systems.

However, although this is a major milestone, it is by no means the end of our digital transformation, which will continue with further improvements in, for example, our use of data and the application of artificial intelligence.

We announced another building block in our M&A agenda with the acquisition of Integrity Wealth Solutions ("Integrity"), an IFA firm whom we have worked closely with for almost a decade now. We expect the acquisition to complete, subject to regulatory approval, later this calendar year. As well as being an important addition to our Private Clients business, Integrity will give us deeper insight into the products and services a high-quality, growing IFA firm values from a discretionary fund manager. This was one of a number of M&A discussions and going forward we expect further acquisitions.

We continue to review how we can further help the intermediaries we know well and with whom we have built a long-term trust-based relationship. While we do not set out to be a consolidator of IFAs, we are keen to give the opportunity to successful financial advisers, like Integrity, to join a larger wealth management company, and we expect this to become an increasingly important part of our proposition. We firmly believe that the biggest single factor in successful integration of acquisitions is complementary cultures, so working with firms we know well gives us a head start in integration.

Financial performance

We had another year of strong financial performance in FY22, continuing to deliver on our medium-term commitment to top quartile margins, with the underlying profit margin up 2.3 points to 28.2%. We also delivered record revenue and underlying profit levels of GBP122.2 million and GBP34.5 million respectively.

Statutory profit before tax rose 17.5% to GBP29.5 million (FY21: GBP25.1 million).

Our year-end closing FUM was GBP15.7 billion. Net flows were positive in all quarters, 4.8% at Group level for the full year, and reaching an annualised level of 6.7% for the final quarter. Total FUM was down 4.8% over the year, with the decline being the result of strong flows offset by the impact of declining markets on asset values. We have a strong pipeline going into FY23, although market conditions are resulting in some clients taking longer to commit funds.

Investment performance and market conditions

Investment performance for the year came in at (9.6)%, with declining markets bringing down FUM totals. Nonetheless, our investment performance remains strong for client portfolios over 3, 5 and 10 years against peers as represented by ARC benchmarks.

The path of investment markets over the year was complex, with the market environment favouring different asset classes and different investment styles at different times. In the first quarter, equities were strong and Brooks Macdonald's growth and mid-cap positions performed well. Later in 2021, equity sentiment worsened, with smaller companies most affected. Active funds, which tend to have a smaller companies skew, therefore underperformed, which was negative for the Group given our active bias. During 2022, the market has focused on inflationary risks, resulting initially in good performance for our short-duration bond positions but declines in our growth-orientated equity positions. The last quarter of our financial year saw investors shift focus to possible recessionary risks, leading to falls across asset classes. Brooks Macdonald performed broadly in line with peers.

Looking ahead, we expect inflation to begin to moderate in the United States but remain sticky in Europe. Despite the higher yields now available in bond markets, equities remain our preferred asset class given the lower valuations after the sell-off to date in 2022. The impact of inflation is creating a catalyst for flows as clients look to 'put money to work' to help offset the effect of rising prices on real returns.

Review of business performance

UK Investment Management

In UK Investment Management ("UKIM"), led by Robin Eggar and his team, we have continued to provide high-quality service to clients and intermediaries across the UK. We have seen positive net flows throughout the year, reaching an annualised rate of 8.6% at UKIM level in the final quarter. The standout performance was from BM Investment Solutions ("BMIS"), our 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. Over the course of FY22, the team continued to build on their previous success, signing a series of material deals.

Our Platform Managed Portfolio Service ("PMPS") also had a good year. 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 over 20 of the most popular platforms, and this has helped drive strong growth in the year. BMIS and PMPS combined to deliver the material majority of our net flows over the year.

In our flagship Bespoke Portfolio Service ("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 continued success of these more specialised offerings highlights how we have been able to innovate to meet developing client needs.

In common with much of the industry, our Funds business had a challenging year, with persistent net outflows. Within that, our Defensive Capital Fund ("DCF") had a stronger year, with a particular highlight being positive investment performance in such a difficult year, although flows continued to be affected by the ongoing downturn in sentiment in the Investment Association's Targeted Absolute Return sector. We see multi-asset funds as a major potential source of growth for Brooks Macdonald, and we have therefore started repositioning our Funds business, with the first step being a material repricing of our Cornelian Risk Managed Fund range to drive medium-term growth.

During the year, we opened offices in Southampton and Birmingham, replacing our former offices in Fareham and Leamington Spa respectively, to improve facilities for clients and colleagues, and to access a larger group of intermediaries and greater pools of wealth.

Private Clients

Our new Private Clients arm, bringing together Financial Planning and UKIM direct client investment management services, has also had strong flows and has restructured processes to ensure our direct clients receive the best possible service. The acquisition of Integrity Wealth Solutions (expected to complete, subject to regulatory approval, later this calendar year) brings further scale, capability and management expertise to our Private Clients business, and we look forward to welcoming Martin Lindsey and his team to the Group.

International

In International, Richard Hughes' first full year since he took over from me as CEO International has been a good one, with improving flows and solid commercial performance in difficult market conditions. We opened a new Isle of Man office, which we expect to be an increasing source of business growth, particularly through our referral agreement with Lloyds Bank.

People

I am personally committed to ensuring that we support the talent we have in the business, as well as bringing in new, high-quality hires. The aim of our people agenda is to enable our strategy by attracting, engaging and retaining the best talent in the industry. The people agenda is founded on our Guiding Principles and promoting and advancing our culture is a core priority for me. The current focus of our people agenda, what we call 'Our Promise,' is to offer an inclusive culture, fulfilling careers, and great recognition.

Among internal promotions this year, we brought two more of our most talented internal leaders on to the Executive Committee in March: Caroline Abbondanza, our Chief Technology Officer, and Simon Broomfield, our General Counsel. I am also delighted to welcome Sarah Ackland as our new Global Head of Distribution. Sarah is an experienced senior executive with deep expertise in the UK retail funds market, most recently at Liontrust and Architas, and took up her post after the financial year end.

Outlook

One year into my tenure as CEO, we are well positioned to take advantage of the opportunities facing Brooks Macdonald, despite the external macroeconomic and markets challenges. We will build on our success to date:

   --    Driving organic growth, both through intermediaries and among private clients; 
   --    Ensuring service and operational excellence, building on our migration of all client- and intermediary-facing processes to the SS&C platform to further our digital transformation; and 
   --    Executing selective high-quality acquisitions. 

We will also continue to deliver top quartile profit margins and improving returns.

The fundamental opportunity for Brooks Macdonald remains strong. An ageing population, a supportive policy environment that both encourages individuals to save for their retirement and gives them pension freedoms to invest as they please, plus growing wealth in our target demographic, all combine to give us a highly positive market opportunity so long as we continue to deliver strong investment performance alongside exceptional client service.

We have a strong team and we are well positioned for the future, with deep experience in navigating a wide range of economic conditions. I would like to finish by reiterating my thanks to our clients, the intermediaries we work with, and our people for their continuing support. I look forward with excitement to what we can achieve together.

Andrew Shepherd

CEO

14 September 2022

Our strategy

Brooks Macdonald is delivering strong performance and has put in place foundations for our continued future success. 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 to be 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 advice-led 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

Market-leading organic growth - Best-in-class adviser experience and excellent client service, rigorous Centralised Investment Process, compelling investment proposition

Service and operational excellence - Easy to do business with, digital enhancement, margin growth through efficiency and scalability resilience

Agile, high-quality M&A - Strict criteria, delivery of benefits

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 have put in place. Within the three value drivers of the existing strategy, we announced five priority areas for 2022:

Organic growth

-- Investment Solutions: strong focus on MPS, Funds and BMIS, the fastest-growing sectors of the wealth marketplace.

-- Private Clients: standardisation and streamlining of our financial planning processes, building a strong advice-led pillar of the Group.

Service and operational excellence

-- Being the best we can be: driving continuous improvement in our client and adviser service levels, delivering digital transformation, increasing data-driven decision making throughout the firm.

   --    Delivering Our Promise: attracting, engaging and retaining the best talent in the industry. 

Agile, high-quality M&A

-- Selective acquisitions: disciplined acquisition criteria - high-quality businesses that are a good strategic and cultural fit and bring compelling economics - and ambitious inorganic growth plans, with Integrity Wealth acquisition announced in May (subject to regulatory approval).

Delivering our strategy

We announced our new strategy in our annual results presentation last year, and since then we have made material progress on all three value drivers.

 
Value driver         Progress in FY22 
-------------------  ------------------------------------------------------------ 
Organic growth 
                       *    Increasingly strong positive net flows of client 
                            assets throughout the financial year 
 
 
                       *    Further strong business-to-business mandates through 
                            BM Investment Solutions 
 
 
                       *    Further growth in Platform MPS and our specialist BPS 
                            products - Responsible Investment Service, 
                            Decumulation, Court of Protection, and the AIM 
                            Portfolio Service 
 
 
                       *    Positive net flows in Private Clients 
-------------------  ------------------------------------------------------------ 
Service and 
 operational           *    Continued to work with our technology partner, SS&C, 
 excellence                 rolling out digital onboarding and (after financial 
                            year end) migrating all our processes to the SS&C 
                            platform 
-------------------  ------------------------------------------------------------ 
Agile, high-quality 
 M&A                   *    Announced acquisition of Integrity Wealth Solutions 
                            in May, subject to regulatory approval 
 
 
                       *    Continued to review a range of potential targets 
-------------------  ------------------------------------------------------------ 
 

Financial review

Review of results for the year

The Group delivered another strong set of results for FY22, despite the second half of the financial year being impacted by the Russian invasion of Ukraine. The change in financial markets and client sentiment has been significant, with the situation being further impacted by the increase in energy prices, the resulting rise of inflation and the need for central banks to respond with higher interest rates. However, the Group responded well and flows in H2 were up on H1 and financial performance was resilient. Therefore, once again, the Group reported improved revenue, underlying profit and underlying profit margin.

The improved performance was due to increased revenue driven by higher average FUM for the year and the full year impact of the Lloyds Channel Islands acquisition, and the Group's continued discipline around costs and financial resources.

This contributed to an underlying profit of GBP34.5 million, an increase of 12.7% on the previous year and an underlying profit margin of 28.2%, up 2.3 percentage points from last year's margin of 25.9%.

Group financial results summary

The table below shows the Group's financial performance for the year ended 30 June 2022 with the comparative period and provides a reconciliation between the underlying results, which the Board considers to be an appropriate reflection of the Group's underlying performance, and the statutory results. Underlying profit represents an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information section at the end of the document for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered. A breakdown of the underlying adjustments is shown in the Reconciliation between underlying and statutory profits section below.

 
                                          FY22    FY21 
                                          GBPm    GBPm   Change 
--------------------------------------  ------  ------  ------- 
Revenue                                  122.2   118.2     3.4% 
 
Fixed staff costs                       (40.5)  (40.0)     1.3% 
Variable staff costs                    (14.8)  (13.2)    12.1% 
--------------------------------------  ------  ------  ------- 
Total staff costs                       (55.3)  (53.2)     3.9% 
Non-staff costs                         (31.3)  (32.2)   (2.8)% 
FSCS levy                                (1.1)   (2.2)  (50.0)% 
--------------------------------------  ------  ------  ------- 
Total non-staff costs                   (32.4)  (34.4)   (5.8)% 
--------------------------------------  ------  ------  ------- 
Total underlying costs                  (87.7)  (87.6)     0.1% 
--------------------------------------  ------  ------  ------- 
 
Underlying profit before tax              34.5    30.6    12.7% 
Underlying adjustments                   (5.0)   (5.5)   (9.1)% 
--------------------------------------  ------  ------  ------- 
Statutory profit before tax               29.5    25.1    17.5% 
Taxation                                 (6.1)   (5.5)    10.9% 
--------------------------------------  ------  ------  ------- 
Statutory profit after tax                23.4    19.6    19.4% 
--------------------------------------  ------  ------  ------- 
 
Underlying profit margin before tax      28.2%   25.9%   2.3ppt 
Underlying basic earnings per share     174.1p  155.6p    18.5p 
Underlying diluted earnings per share   168.7p  150.6p    18.1p 
Statutory profit margin before tax       24.1%   21.2%   2.9ppt 
Statutory basic earnings per share      149.0p  125.3p    23.7p 
Statutory diluted earnings per share    144.4p  121.3p    23.1p 
Dividends per share                      71.0p   63.0p     8.0p 
--------------------------------------  ------  ------  ------- 
 

FUM movement in the year

The table below shows the opening and closing FUM position and the flows for the year broken down by segment and by our key services within UK Investment Management ("UKIM").

 
                                    Year ended 30 June 2022 (GBPm) 
                                    Organic net new business 
                      -------                                      -------  -------  ---------  ------- 
                      Opening                                               Closing      Total 
                          FUM                                        Total      FUM    organic 
                        1 Jul                                         Inv.   30 Jun    net new      Total 
                           21     Q1     Q2     Q3     Q4   Total    Perf.       22   business       mvmt 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
BPS                     9,460      6     51     30      1      88    (967)    8,581       0.9%     (9.3)% 
      MPS Custody       1,025     13      3     10      5      31     (96)      960       3.0%     (6.3)% 
      MPS Platform      1,386    149    153    171    325     798    (131)    2,053      57.6%      48.1% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
MPS                     2,411    162    156    181    330     829    (227)    3,013      34.4%      25.0% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
UKIM discretionary     11,871    168    207    211    331     917  (1,194)   11,594       7.7%     (2.3)% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
      Funds - DCF         478   (11)      2   (15)   (22)    (46)        7      439     (9.6)%     (8.2)% 
      Funds - Other     1,598   (15)   (23)   (20)    (3)    (60)    (120)    1,418     (3.8)%    (11.3)% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
Funds total             2,076   (26)   (21)   (35)   (25)   (106)    (113)    1,857     (5.1)%    (10.5)% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
UKIM total             13,947    142    186    176    306     810  (1,307)   13,451       5.8%       3.6% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
 
International           2,512   (14)     12      3   (26)    (25)    (271)    2,216     (1.0)%    (11.8)% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
 
Total                  16,459    128    198    179    280     785  (1,578)   15,667       4.8%     (4.8)% 
--------------------  -------  -----  -----  -----  -----  ------  -------  -------  ---------  --------- 
Total investment performance                                                                       (9.6)% 
-----------------------------------------------------------------------------------  ---------  --------- 
MSCI PIMFA Private Investor Balanced Index(1)                                                      (6.3)% 
-----------------------------------------------------------------------------------  ---------  --------- 
 
 
   1    Capital-only index. 

During the year, the Group recorded positive net flows of GBP0.8 billion or 4.8%, representing an upswing of GBP1.1 billion on last year. This was offset by the market downturn experienced in the second half leading to an overall decrease in the Group's closing FUM of 4.8% to GBP15.7 billion (FY21: GBP16.5 billion).

Investment performance for the year came in at (9.6%), with declining markets bringing down FUM totals. Nonetheless, investment performance remains strong for client portfolios over the three, five and ten-years against peers as represented by ARC benchmarks.

Within UKIM, the BPS core offering made good progress with net inflows of GBP0.1 billion in the year. 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 different client needs.

Increasing flows in MPS has been an area of strategic focus for the Group in FY22 and our MPS services delivered flows of GBP0.8 billion in the year, primarily seen within Platform MPS and in Brooks Macdonald Investment Solutions, with several material deals agreed during the year.

The Funds business recorded total net outflows of GBP0.1 billion during the year. Whilst still experiencing net outflows overall, we have seen a notable decline in outflows in the Defensive Capital Fund compared to the prior year, assisted in part by its robust investment performance over the last six months.

International made good progress in the year, returning to positive net flows for two-quarters of the year, with net outflows reducing from GBP59.8 million to GBP25.4 million overall for the year.

Revenue

The Group's total revenue for FY22 increased by 3.4% to GBP122.2 million (FY21: GBP118.2 million). FUM-related revenue overall increased by 3.5% to GBP116.1 million, whilst non-FUM-related revenue increased marginally to GBP6.1 million. The rise in fee income was driven by higher average FUM as a result of net inflows and favourable markets in H1, and the full-year impact of the Lloyds Channel Islands business, which contributed an additional GBP3.4 million of revenue compared to FY21.

This was offset by a reduction in transactional income as a result of the Group's relatively stable asset allocation during the year and the continued trend of clients moving to a fee-only rate card.

Interest turn increased slightly on the prior year, driven by the rise in the Bank of England base rates in the latter part of the financial year, although it continues to remain low by historic levels.

Total financial planning and wealth management advice income increased slightly by GBP0.2 million during the year. Within that, UKIM financial planning fees were up by GBP0.4 million as we continue to grow our Private Clients business, whilst International saw a slight reduction as more private clients moved to an all-in investment management fee.

Revenue, yields and average FUM

 
                                     Revenue              Average FUM              Yield(2) 
                                FY22   FY21  Change    FY22    FY21  Change   FY22   FY21  Change 
                                GBPm   GBPm       %    GBPm    GBPm       %    bps    bps     bps 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
BPS fees                        59.9   58.7     2.0                           65.8   67.3   (1.5) 
BPS non-fees (transactional)    12.1   14.5  (16.6)                           13.3   16.6   (3.3) 
BPS non-fees (interest 
 turn)                           1.0    1.4  (28.6)                            1.1    1.6   (0.5) 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total BPS                       73.0   74.6   (2.1)   9,108   8,722     4.4   80.2   85.5   (5.3) 
MPS Custody                      6.4    6.0     6.7   1,029     950     8.3   62.6   63.2   (0.6) 
MPS Platform                     3.5    2.3    52.2   1,808   1,119    61.6   19.2   20.6   (1.4) 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total MPS                        9.9    8.3    19.3   2,837   2,069    37.1   34.9   40.1   (5.2) 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
UKIM discretionary              82.9   82.9       -  11,945  10,791    10.7   69.4   76.8   (7.4) 
Funds                           12.8   12.2     4.9   2,220   2,207     0.6   57.8   55.3     2.5 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total UKIM                      95.7   95.1     0.6  14,165  12,998     9.0   67.6   73.2   (5.6) 
International fees               9.0    8.9     1.1   1,602   1,636   (2.1)   56.7   54.4     2.3 
International non-fees           2.7    2.9   (6.9)       -       -       -   16.6   17.7   (1.1) 
Lloyds Channel Islands(1)        8.7    5.3    64.2     841     540    55.7  103.0  101.9     1.1 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total International             20.4   17.1    19.3   2,443   2,176    12.3   83.6   79.3     4.3 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total FUM-related 
 revenue                       116.1  112.2     3.5  16,608  15,174     9.5   70.0   73.9   (3.9) 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Financial planning 
 - UK                            4.1    3.7    10.8 
Financial planning 
 - International                 0.8    1.0  (20.0) 
Other income                     1.2    1.3   (7.7) 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total non-FUM-related 
 revenue                         6.1    6.0     1.7 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
Total Group revenue            122.2  118.2     3.4 
-----------------------------  -----  -----  ------  ------  ------  ------  -----  -----  ------ 
 

1 The Lloyds Channel Islands yields for FY21 were calculated on a pro rata basis reflecting the relative period the business was owned by the Group.

   2    The yield calculation is based on the average FUM at the respective billing dates. 

The yield on BPS fees for UKIM decreased by 1.5bps to 65.8bps during the year (FY21: 67.3bps). This was driven by the movement from net outflows to net inflows year on year and also a number of IFA partners passing through pricing thresholds, as we captured higher levels of their new business. This highlights the alignment between us and IFAs and how our collective success can ultimately lead to better outcomes for clients. The BPS non-fee income yield also declined, primarily due to the decrease in transactional income (3.3bps) due to a higher proportion of fee-only accounts and a relatively stable asset allocation; and lower interest turn (0.5bps) driven by lower Bank of England base rates at the start of the financial year.

MPS recorded a decline in yields of 5.2bps to 34.9bps. This reduction was principally driven by a change in mix with Platform MPS growing more rapidly than custody MPS. The Platform MPS service includes our Brooks Macdonald Investment Solutions offering that attracts relatively larger mandates, which benefit from discounted tiered rates.

The Funds fee yields rose by 2.5bps to 57.8bps in FY22, also as a result of a change in mix and the impact of timing inflows and outflows.

International fee-income yields were up by 2.3bps to 56.7bps as a result of higher performance and custody fees, whilst non-fee income yield declined by 1.1bps driven by a decrease in interest and FX income during the year. The Lloyds Channel Islands assets reported a yield of 103.0bps, slightly up on the prior year.

Underlying costs

Total underlying costs have remained relatively flat at GBP87.7 million (FY21: GBP87.6 million) with the increase in staff costs fully offset by a reduction in non-staff costs.

Staff costs

Total staff costs increased by GBP2.1 million to GBP55.3 million. Of this, GBP0.9 million was driven by the incremental costs arising from the Lloyds Channel Islands acquisition, which completed at the end of November 2020.

Fixed staff costs for the Group's core operations decreased slightly by GBP0.3 million. This comprised an increase of GBP1.0 million resulting from pay rises and net new joiners, with FTE headcount increasing slightly from 430 to 446 during the year, offset by savings of GBP1.3 million arising from the transfer of a number of roles from the Investment Services and the Technology departments to SS&C in December 2020 as part of the Group's digital transformation project.

Variable staff costs increased by 12.1% to GBP14.8 million in FY22. Apart from the impact of the Lloyds Channel Islands acquisition, the increase comprised a higher bonus pool reflecting the improvement in the Group's financial performance, offset by a reduction in the share-based payment charge as the share option schemes held at the end of the year were marked to market.

Non-staff costs

Non-staff costs amounted to GBP32.4 million representing a decrease of 5.8% on the prior year. Excluding the impact of the acquired costs of GBP1.1 million, non-staff costs for the core business fell by GBP3.1 million or 11.0%. Within that there were a number of movements, which are set out in the bridge chart on the left and the key items explained below.

With the Group's return to office and increased travel and client facing activities, travel and entertainment spend increased by GBP0.8 million on the prior year.

During the year, the Group turned on portions of the new SS&C technology landscape with a full go-live taking place shortly after year end. This gave rise to additional external technology spend of GBP1.9 million in the year. This was in part driven by the transition from our legacy systems but also by the delivery of brand-new capabilities to the Group to support our growth agenda. In FY22, the main delivery being a whole new suite of tools to support our Funds business, which has grown rapidly through the acquisition of the Cornelian and Lloyds offshore funds businesses.

This movement to an outsourced technology and operations provider has allowed us to make further structural non-staff costs reductions. For example, during the year, the Group fully amortised the remaining legacy operating platform-related assets in advance of moving onto the SS&C platform. This gave rise to a decrease in computer software amortisation of GBP1.3 million compared to FY21. The Group also spent GBP0.6 million less on technology and operational change as it focused on the new system go-live.

The Group also received a further benefit from the partnership agreement with SS&C as it received a transition funding credit of GBP1.2 million due to the partial utilisation of the new operating platform during the transition period.

Following agreement with HMRC over the VAT treatment on the supply of certain Group services and other historic tax provisions, the Group recognised a release of GBP1.4 million during the year. Moreover, the FSCS levy for the year represented a reduction of GBP1.1 million on the fee charged for FY21.

Profit before tax

Combined, the above gave rise to an underlying profit before tax of GBP34.5 million, representing an increase of 12.7% on FY21 and resulting in a profit margin of 28.2%, an increase of 2.3 percentage points (FY21: 25.9%).

On a statutory basis, the profit before tax increased by 17.5% to GBP29.5 million (FY21: GBP25.1 million). The statutory profit margin before tax also saw an increase from last year, up to 24.1%. The quantum of one-off underlying adjustments for the year has reduced by GBP0.5 million, with just three material adjustments.

Segmental analysis

The Group reports its results across two key operating segments, UK Investment Management and International. The tables below provide a breakdown of the half-year performance broken down by these segments, with comparatives.

 
                                                                             Group and 
                                          UK Investment                  consolidation 
FY22 (GBPm)                                  Management  International     adjustments   Total 
----------------------------------------  -------------  -------------  --------------  ------ 
Revenue                                           101.0           21.2               -   122.2 
Direct costs                                     (43.4)         (14.0)          (30.0)  (87.4) 
----------------------------------------  -------------  -------------  --------------  ------ 
Operating contribution                             57.6            7.2          (30.0)    34.8 
Indirect cost recharges and net finance 
 costs                                           (25.4)          (3.2)            28.3   (0.3) 
----------------------------------------  -------------  -------------  --------------  ------ 
Underlying profit/(loss) before tax                32.2            4.0           (1.7)    34.5 
----------------------------------------  -------------  -------------  --------------  ------ 
Underlying adjustments                            (1.9)          (3.0)           (0.1)   (5.0) 
----------------------------------------  -------------  -------------  --------------  ------ 
Statutory profit/(loss) before tax                 30.3            1.0           (1.8)    29.5 
----------------------------------------  -------------  -------------  --------------  ------ 
 
Underlying profit margin before tax               31.9%          18.9%             N/A   28.2% 
Statutory profit margin before tax                30.0%           4.7%             N/A   24.1% 
----------------------------------------  -------------  -------------  --------------  ------ 
 
 
                                                                             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/(loss) before tax                29.0            4.5           (2.9)    30.6 
----------------------------------------  -------------  -------------  --------------  ------ 
Underlying adjustments                            (3.1)          (4.6)             2.2   (5.5) 
----------------------------------------  -------------  -------------  --------------  ------ 
Statutory profit/(loss) before tax                 25.9          (0.1)           (0.7)    25.1 
----------------------------------------  -------------  -------------  --------------  ------ 
 
Underlying profit before tax margin               29.0%          24.7%             N/A   25.9% 
Statutory profit/(loss) margin before 
 tax                                              25.9%         (0.5)%             N/A   21.2% 
----------------------------------------  -------------  -------------  --------------  ------ 
 

UKIM, which includes the Group's Private Clients business, reported a 1.0% increase in revenue, arising from higher fee income offset by a fall in transactional income. The increase in revenue, combined with disciplined cost management and efficiencies, resulted in an underlying profit of GBP32.2 million, up by 11.0%, and an underlying profit margin of 31.9%, an improvement of 2.9 percentage points.

The International segment reported an increase in revenues of 16.5% driven by higher fee income during the year, primarily due to a full-year contribution from the Lloyds Channel Islands business. Direct costs of GBP14.0 million were ahead of the prior year, largely as a result of the incremental costs from the Lloyds Channel Islands business, investment in setting up the Isle of Man office, which is now fully up and running and legal and professional costs incurred in re-domiciling and simplifying the legal entity corporate structure. This resulted in a slight decline in underlying profit to GBP4.0 million and a lower underlying profit margin of 18.9% for the year. Excluding the Isle of Man office direct costs of GBP0.5 million, the International underlying profit margin would have been 21.2%, a reduction of 3.5 percentage points on FY21 due to the impact of markets on fee income in the second half of the year and the additional costs noted above.

Reconciliation between underlying and statutory profits

Underlying profit before tax is considered by the Board to be an appropriate reflection of the Group's performance compared to the statutory results as it excludes income and expense categories, which are deemed to be of a non-recurring nature or a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage. Underlying profit is deemed to be an alternative performance measure ("APM"); refer to the Non-IFRS financial information section at the end of the document for a glossary of the Group's APMs, their definitions, and the criteria for how underlying adjustments are considered. A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2022 with comparatives is shown in the table below:

 
                                                      FY22   FY21 
                                                      GBPm   GBPm 
---------------------------------------------------  -----  ----- 
Underlying profit before tax                          34.5   30.6 
Amortisation of client relationships                 (5.5)  (4.9) 
Dual running operating platform costs                (2.4)  (1.0) 
Changes in fair value and finance cost of deferred 
 consideration                                       (0.1)  (0.4) 
Other non-operating income                             3.0      - 
Client relationship contracts impairment                 -  (1.5) 
Acquisitions related items: 
- Gain arising on acquisition                            -    5.0 
- Integration and staff retention costs                  -  (2.7) 
---------------------------------------------------  -----  ----- 
Total underlying adjustments                         (5.0)  (5.5) 
 
Statutory profit before tax                           29.5   25.1 
---------------------------------------------------  -----  ----- 
 

Amortisation of client relationship contracts (GBP5.5 million charge)

These intangible assets are created in the course of acquiring funds under management and are amortised over their useful life, which have been assessed to range between 6 and 20 years. The increase in the charge from last year is due to the full year impact of the Lloyds Channel Islands acquisition. This amortisation charge has been excluded from the underlying profit since it is a significant non-cash item.

Dual running operating platform costs (GBP2.4 million charge)

The Group is in a partnership agreement with SS&C to transform our client- and intermediary-facing processes, launch a digital onboarding solution and enhance our operating platform. As part of the transition process, during FY22 the Group incurred incremental costs in running two operating platforms concurrently. The increase is due to the full-year impact given the partnership agreement commenced half way through FY21. 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 (GBP0.1 million charge)

This comprises the associated net finance costs arising on deferred consideration payments from acquisitions carried out by the Group, together with their fair value measurements where applicable.

Other non-operating income (GBP3.0 million credit)

During the year, the Group received confirmation from HMRC that the supply of certain Group services was exempt from VAT. As a result, the Group received a refund from HMRC in respect of VAT arising on those services during the period from 1 July 2017 to 30 June 2020 of GBP3.0 million. This has been treated as an adjusting item to the underlying profit in view of its non-recurring nature.

FY21 - 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 FY21, the estimated useful economic life of the intangible assets associated with this business was reduced. Accordingly, an impairment charge of GBP1.5 million was recognised in FY21.

FY21 - 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.

ii. 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.

Reconciliation between profits and earnings before interest, tax depreciation and amortisation ("EBITDA")

The table below provides a reconciliation between the Group's underlying profit before tax and the earnings before interest, tax and depreciation ("EBITDA"), which constitutes an APM, and which the Board considers to be an appropriate alternative measure to the Group's BAU performance.

 
                                               FY22   FY21  Change 
                                               GBPm   GBPm       % 
--------------------------------------------  -----  -----  ------ 
Statutory profit before tax                    29.5   25.1    17.5 
Add back total underlying adjustments           5.0    5.5   (9.1) 
Underlying profit before tax                   34.5   30.6    12.7 
Add back: 
Net finance costs                               0.2    0.2       - 
Depreciation and amortisation                   4.0    5.4  (25.9) 
--------------------------------------------  -----  -----  ------ 
Underlying EBITDA                              38.7   36.2     6.9 
--------------------------------------------  -----  -----  ------ 
 
Net finance costs on deferred consideration     0.1    0.4  (75.0) 
Amortisation of client relationships            5.5    4.9    12.2 
--------------------------------------------  -----  -----  ------ 
Earnings before interest, tax depreciation 
 and amortisation ("EBITDA")                   44.3   41.5     6.7 
--------------------------------------------  -----  -----  ------ 
 

Taxation

The Group's total tax charge for the year was GBP6.1 million, representing an increase of 10.9% from last year (FY21: GBP5.5 million). The Group's underlying effective tax rate has increased marginally from 20.3% to 20.8% and the statutory effective tax rate has decreased from 21.7% to 20.8%. This is due to a higher proportion of allowable deductions for tax purposes, such as those arising from the allowance on share-option exercises, compared to taxable add backs, which have not changed significantly from the prior year.

Earnings per share

Basic statutory earnings per share for the Group in FY22 was 149.0p (FY21: 125.3p). On an underlying basis, basic earnings per share was 174.1p representing an increase of 11.9% on the prior year (FY21: 155.6p) driven by the increase in underlying earnings.

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 45.0p per share (FY21: 40.0p). Including the interim dividend of 26.0p per share (FY21: 23.0p), this results in a total dividend for the year of 71.0p per share (FY21: 63.0p), an overall increase of 8.0p or 12.7%. The recommended dividend is subject to shareholders' approval, which will be sought at the Company's Annual General Meeting on 27 October 2022.

Financial position and regulatory capital

Net assets increased by 10.7% to GBP148.4 million at 30 June 2022 (FY21: GBP134.0 million), demonstrating the Group's continued strong financial position. The Group's tangible net assets (net assets excluding intangibles) was up to GBP62.5 million at 30 June 2022 (FY21: GBP44.1 million). As at 30 June 2022, the Group had regulatory capital resources of GBP70.0 million (FY21: GBP52.6 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 28.5% over the Pillar I risk exposure requirement (FY21: 21.6%). The total capital ratio is the Group's total regulatory capital resources relative to its Pillar I risk exposure requirement.

 
                                                        FY22    FY21 
                                                        GBPm    GBPm 
----------------------------------------------------  ------  ------ 
Share capital                                            0.1     0.1 
Share premium                                           79.1    78.7 
Other reserves                                          10.0     8.5 
Retained earnings                                       59.2    46.7 
----------------------------------------------------  ------  ------ 
Total equity                                           148.4   134.0 
Intangible assets (net book value)                    (85.9)  (89.9) 
Deferred tax liabilities associated with intangible 
 assets                                                  7.5     8.5 
----------------------------------------------------  ------  ------ 
Tier 1 capital                                          70.0    52.6 
----------------------------------------------------  ------  ------ 
Own funds                                               70.0    52.6 
----------------------------------------------------  ------  ------ 
 

Brooks Macdonald Asset Management Limited, the Group's main operating subsidiary, is a MIFIDPRU Investment 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 FY21 ICAAP review was conducted for the year ended 30 June 2021 and signed off by the Board in December 2021. 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 IFPR Public Disclosures (previously referred to as the 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 GBP61.3 million (FY21: GBP54.9 million) and the Group had no borrowings at 30 June 2022.

During the year ended 30 June 2022, the Group made the final payment in relation to the acquisition of Cornelian Asset Managers Group Limited of GBP6.0 million.

The Group incurred capital expenditure of GBP3.2 million (FY21: GBP3.7 million). This comprised technology-related development of GBP2.9 million, property-related costs of GBP0.2 million and IT and office equipment of GBP0.1 million. The capital expenditure comprised the programme implementation and software costs incurred in respect of the migration of the Group's client- and intermediary-facing processes onto the SS&C platform. The amortisation for these costs will commence in FY23 and will be amortised over the remaining eight years of the ten-year agreement entered into with SS&C.

FY23 guidance and outlook

Looking ahead, we anticipate the impact of lower markets year on year to have some impact on financial performance, although this will be in part offset by lower variable performance-based pay. The Group has a clear plan in place to manage and offset inflationary cost pressures and we are focused on containing cost growth to a mid-single digit percentage increase. We remain mindful of the need to support staff through these difficult times, whilst balancing our desire to deliver top quartile underlying profit margins.

Despite these short-term headwinds, the Group is well placed to deliver on our strategy in the medium term. The fundamental opportunity is huge and building and we now have all the required elements to deliver our ambitious organic and inorganic growth agenda and we look forward to the future with confidence.

The Strategic report in its entirety has been approved by the Board of Directors and is signed on its behalf by:

Ben Thorpe

Chief Financial Officer

14 September 2022

Risks

Continued dynamic approach to risk identification and management in order to support positive client outcomes

Despite the pandemic, geopolitical and macroeconomic challenges faced in the last year and the subsequent increase in certain risk exposures, the Group has continued in its commitment to promote a positive compliance and risk culture across the organisation.

Furthermore, it has maintained its focus on embedding and enhancing the risk management framework, through its focus on resilience, third parties, and client outcomes.

The Group has also continued its drive towards efficient, data-driven and evidenced-based risk management, which has facilitated the transition to a more agile and dynamic approach to identifying, assessing, managing and monitoring risks.

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 appropriate governance; an efficient 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 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 and Risk Assessment ("ICARA").

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 to either accept, avoid or transfer part or all of those risks that are outside our risk appetite, or to reconsider the risk appetite.

Reporting. Ongoing reporting of risks to senior management provides insight to inform risk-based 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 aim to 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 helps 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 put client interests at the heart of everything we do to ensure appropriate client outcomes.

Control environment

-- We, 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 optimise profitability and use resources efficiently to drive financial performance. 

-- We, at all times, maintain adequate capital and liquid assets to meet financial and funding obligations as they fall due.

   --    We 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 continues 
The risk of loss         *    Cash deposits with external banks                                  to remain unchanged 
arising                                                                                          given the strong 
from a client or                                                                                 credit risk control 
counterparty             *    Client credit risk                                                 environment including 
failing to meet their                                                                            ongoing monitoring 
financial                                                                                        and due diligence 
obligations to a         *    Counterparty credit risk                                           on all 
Brooks                                                                                           counterparties. 
Macdonald entity as 
and                      *    Custodian-related credit risk 
when they fall due. 
 
                         *    Indirect counterparty risk in respect of referrals 
---------------------  ----------------------------------------------------------  ------------  --------------------- 
2. Liquidity risk                                                                  Unchanged     The Group has 
The risk that assets    *    Corporate cash deposited with external banks                        adequate 
are                                                                                              liquidity resources 
insufficiently liquid                                                                            significantly above 
and/or                  *    Client cash deposited with external banks (CASS                     its Minimum Liquidity 
Brooks Macdonald does        rules)                                                              Requirement and 
not                                                                                              maintains appropriate 
have sufficient                                                                                  banking facilities. 
financial               *    Failed trades                                                       The Group regularly 
resources available                                                                              monitors forecast 
to meet                                                                                          against actual 
liabilities as they     *    Indirect liquidity risk associated with client                      cash flows and 
fall                         portfolios                                                          matches the maturity 
due, or can secure                                                                               profiles of financial 
such                                                                                             assets and 
resources only at       *    Indirect liquidity risks associated with dealing                    liabilities. 
excessive                                                                                        The Group has robust 
cost. Liquidity risk                                                                             contingency funding 
also                    *    Indirect risk in respect of the liquidity of                        arrangements which 
includes the risk            individual holdings in a fund                                       are tested on a 
that the                                                                                         periodic basis. 
Group is unable to 
meet                    *    Indirect risk in respect of the overall liquidity of 
regulatory prudential        our funds 
liquidity 
ratios. 
---------------------  ----------------------------------------------------------  ------------  --------------------- 
3. Market risk                                                                     Increasing    Although it is 
The risk that arises    *    Failed trades                                                       likely that the 
from                                                                                             worst of the pandemic 
fluctuations in the                                                                              induced market 
value                   *    Indirect market risk associated with advising on                    shocks have passed, 
of, or income arising        client portfolios                                                   the continued 
from,                                                                                            conflict 
movements in equity,                                                                             in Ukraine and 
bonds,                  *    Indirect market risks associated with dealing                       the associated 
or other traded                                                                                  geopolitical 
markets,                                                                                         tensions, 
interest rates or       *    Indirect market risk associated with managing client                coupled with 
foreign                      portfolios                                                          significant 
exchange rates that                                                                              global inflationary 
has                                                                                              pressure, gives 
a financial impact.                                                                              rise to increased 
                                                                                                 volatility and 
                                                                                                 heightened downside 
                                                                                                 risk. 
---------------------  ----------------------------------------------------------  ------------  --------------------- 
 

Business level risks

 
Definition                            Key risks identified                      Change       Rationale 
                                       by                                        since last   for change 
                                       risk management framework                 year 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
4. Business and strategic                                                       Unchanged    Despite current 
 risk                                   *    Adviser concentration                            macro-economic 
 The risk of having an inadequate                                                             and geological 
 business model or making                                                                     challenges, the 
 strategic decisions that               *    Acquisitions                                     Group continues 
 may result in lower than                                                                     to post positive 
 anticipated profit or losses,                                                                net flows on a 
 or exposes the Group to                *    Business growth                                  quarterly basis, 
 unforeseen risks.                                                                            therefore highlighting 
                                                                                              the resiliency 
                                        *    Extreme market events                            of its business 
                                                                                              model. 
 
                                        *    Investment performance 
 
 
                                        *    Product governance 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
5. Conduct risk                                                                 Unchanged    The Group continues 
 The risk of causing detriment          *    Suitability and conduct risk                     to work on numerous 
 to clients, stakeholders                                                                     initiatives to 
 or the integrity of the                                                                      promote good risk 
 wider market because of                                                                      and compliance 
 inappropriate execution                                                                      culture and awareness 
 of Brooks Macdonald's business                                                               to ensure positive 
 activities.                                                                                  client outcomes. 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
6. Operational risk                                                             Unchanged    This risk remains 
 The risk of loss arising               *    Data quality                                     unchanged despite 
 from inadequate or failed                                                                    the increase of 
 internal processes, people                                                                   external threats 
 and systems, or from external          *    Cyber/data security                              brought about by 
 events. It includes legal                                                                    the current geopolitical 
 and fraud risk but not strategic,                                                            environment coupled 
 reputational and business              *    Change management                                with idiosyncratic 
 risks.                                                                                       risks linked to 
                                                                                              the Group's transition 
                                        *    IT infrastructure and capability                 to a new operating 
                                                                                              model and business 
                                                                                              as usual oversight. 
                                        *    Operational maturity                             The Group is monitoring 
                                                                                              this risk closely 
                                                                                              and will continue 
                                        *    Third-party suppliers                            to invest in enhancing 
                                                                                              its control environment. 
 
                                        *    People 
 
 
                                        *    Resilience 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
7. Prudential risk                                                              Unchanged    The Group continues 
 The risk of adverse business           *    Prudential requirements                          to maintain capital 
 and/or client impact resulting                                                               resources and liquid 
 from breaching regulatory                                                                    assets above its 
 capital/liquidity requirements,                                                              minimum regulatory 
 or market/credit risk internal                                                               requirement and 
 limits.                                                                                      internal thresholds. 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
8. Legal and regulatory                                                         Unchanged    This risk continues 
 risk                                  *    Reputational risk                                 to remain unchanged 
 Legal and regulatory risk                                                                    given that the 
 is defined as the risk of                                                                    regulatory landscape 
 exposure to legal or regulatory       *    Financial crime                                   and focus on the 
 penalties, financial forfeiture                                                              wealth management 
 and material loss due to                                                                     industry has not 
 failure to act in accordance          *    Governance                                        changed. 
 with industry laws and regulations. 
 
                                       *    Legacy issues 
 
 
                                       *    Regulatory, tax and legal complian 
                                      ce 
------------------------------------  ----------------------------------------  -----------  ------------------------- 
 

Emerging risks

 
Definition                        Context 
--------------------------------  -------------------------------------------------- 
9. Climate change (Emerging)      With the frequency of extreme natural events 
 The potential financial,          increasing as a result of climate change, this 
 reputational and client-related   could have a profound impact on the financial 
 risks associated with             services industry. 
 ever increasing climate 
 change-related risks. 
--------------------------------  -------------------------------------------------- 
10. Geopolitical landscape        Geopolitical events have a direct impact on 
 (Emerging)                        market risk listed previously. Prolonged economic 
 In light of an ongoing            downturn also has an impact on client sentiment 
 energy crisis and cost            and thus business and strategic risk as listed 
 of living issues.                 previously. 
--------------------------------  -------------------------------------------------- 
 

Viability statement

In accordance with the UK Corporate Governance Code, the Board has assessed the Group's viability over a five-year period from FY23 through to FY27. The decision to do so over this period is to be aligned with the Group's strategy, its budgeting and forecasting process and the scenarios set out in the 2021 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 Russian invasion of Ukraine and subsequent impact on markets and rising inflation, 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 FY23 to FY27 was reviewed, challenged and approved by the Board in June 2022.

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 28% and 12% 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, with the CET1 capital ratio forecast to decrease by 63% over the five-year period, without management applying any mitigating actions.

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), as well as freezing and deferring purchases of non-current assets and a recruitment freeze or headcount reduction. In the Group's modelling on the above-mentioned multi-layered scenario, the management mitigating actions implemented forecast that the Group's forecast CET1 capital ratio would increase by 29% as opposed to fall by 63% without any mitigating actions. 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.

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 2022

 
                                                       2022    2021(1) 
                                             Note   GBP'000    GBP'000 
-------------------------------------------  ----  --------  --------- 
Revenue                                         4   122,210    118,206 
Administrative costs                               (95,288)   (96,012) 
-------------------------------------------  ----  --------  --------- 
Gross profit                                         26,922     22,194 
 
Other gains/(losses) - net                             (55)    (1,438) 
 
Operating profit                                     26,867     20,756 
 
Finance income                                           68         47 
Finance costs                                         (372)      (678) 
Other non-operating income                      6     2,983          - 
Gain on bargain purchase                                  -      4,966 
 
Profit before tax                                    29,546     25,091 
 
Taxation                                        5   (6,135)    (5,449) 
 
Profit for the year attributable to equity 
 holders of the Company                              23,411     19,642 
 
Other comprehensive income                                -          - 
 
Total comprehensive income for the year              23,411     19,642 
-------------------------------------------  ----  --------  --------- 
 
Earnings per share 
Basic                                           8    149.0p     125.3p 
Diluted                                         8    144.4p     121.3p 
-------------------------------------------  ----  --------  --------- 
 
   1    See Note 8 for details regarding the restatement of diluted earnings per share. 

Consolidated statement of financial position

As at 30 June 2022

 
                                                       30 June   30 June 
                                                          2022      2021 
                                                Note   GBP'000   GBP'000 
----------------------------------------------  ----  --------  -------- 
Assets 
Non-current assets 
Intangible assets                                 10    85,887    89,897 
Property, plant and equipment                            2,202     2,756 
Right-of-use assets                                      4,971     5,979 
Financial assets at fair value through other 
 comprehensive income                                      500       500 
Deferred tax assets                                      3,002     2,736 
----------------------------------------------  ----  --------  -------- 
Total non-current assets                                96,562   101,868 
Current assets 
Financial assets at fair value through profit 
 or loss                                                   784       624 
Trade and other receivables                             30,473    28,449 
Current tax receivables                                      -        32 
Cash and cash equivalents                               61,328    54,899 
----------------------------------------------  ----  --------  -------- 
Total current assets                                    92,585    84,004 
----------------------------------------------  ----  --------  -------- 
Total assets                                           189,147   185,872 
----------------------------------------------  ----  --------  -------- 
 
Liabilities 
Non-current liabilities 
Lease liabilities                                      (4,075)   (5,422) 
Provisions                                        11     (326)     (279) 
Deferred consideration                            12         -     (303) 
Deferred tax liabilities                               (7,959)   (8,902) 
Other non-current liabilities                            (570)     (548) 
----------------------------------------------  ----  --------  -------- 
Total non-current liabilities                         (12,930)  (15,454) 
Current liabilities 
Lease liabilities                                      (1,952)   (1,447) 
Provisions                                        11     (819)   (1,979) 
Deferred consideration                            12     (327)   (5,934) 
Trade and other payables                              (23,861)  (27,055) 
Current tax liabilities                                  (833)         - 
----------------------------------------------  ----  --------  -------- 
Total current liabilities                             (27,792)  (36,415) 
----------------------------------------------  ----  --------  -------- 
Net assets                                             148,425   134,003 
----------------------------------------------  ----  --------  -------- 
 
Equity 
Share capital                                              162       161 
Share premium account                                   79,141    78,703 
Other reserves                                           9,962     8,467 
Retained earnings                                       59,160    46,672 
----------------------------------------------  ----  --------  -------- 
Total equity                                           148,425   134,003 
----------------------------------------------  ----  --------  -------- 
 

The Consolidated financial statements were approved by the Board of Directors and authorised for issue on 14 September 2022, and signed on their behalf by:

Andrew Shepherd

CEO

Ben Thorpe

Chief Financial Officer

Company registration number: 4402058

Consolidated statement of changes in equity

For the year ended 30 June 2022

 
                                                  Share 
                                        Share   premium      Other   Retained     Total 
                                      capital   account   reserves   earnings    equity 
                               Note   GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
---------------------------  ------  --------  --------  ---------  ---------  -------- 
Balance at 1 July 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 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                    9         -         -          -    (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 
---------------------------  ------  --------  --------  ---------  ---------  -------- 
 
Comprehensive income 
Profit for the year                         -         -          -     23,411    23,411 
Other comprehensive income                  -         -          -          -         - 
---------------------------  ------  --------  --------  ---------  ---------  -------- 
Total comprehensive income                  -         -          -     23,411    23,411 
 
Transactions with owners 
Issue of ordinary shares                    1       438          -          -       439 
Share-based payments                        -         -      2,779          -     2,779 
Share options exercised                     -         -    (2,494)      2,494         - 
Purchase of own shares by 
 Employee Benefit Trust                     -         -          -    (3,100)   (3,100) 
Tax on share options                        -         -      1,210          -     1,210 
Dividends paid                    9         -         -          -   (10,317)  (10,317) 
---------------------------  ------  --------  --------  ---------  ---------  -------- 
Total transactions with 
 owners                                     1       438      1,495   (10,923)   (8,989) 
 
Balance at 30 June 2022                   162    79,141      9,962     59,160   148,425 
---------------------------  ------  --------  --------  ---------  ---------  -------- 
 

Consolidated statement of cash flows

For the year ended 30 June 2022

 
                                                           2022      2021 
                                                 Note   GBP'000   GBP'000 
-----------------------------------------------  ----  --------  -------- 
Cash flows from operating activities 
Cash generated from operations                     13    32,826    36,907 
Corporation Tax paid                                    (5,269)   (5,804) 
Tax refund                                          6     2,983         - 
-----------------------------------------------  ----  --------  -------- 
Net cash generated from operating activities             30,540    31,103 
 
Cash flows from investing activities 
Purchase of computer software                      10   (2,912)   (3,061) 
Purchase of property, plant and equipment                 (289)     (620) 
Purchase of financial assets at fair value 
 through profit or loss                                   (215)         - 
Consideration paid                                            -   (5,287) 
Deferred consideration paid                        12   (6,000)   (2,421) 
Interest received                                            68        47 
-----------------------------------------------  ----  --------  -------- 
Net cash used in investing activities                   (9,348)  (11,342) 
 
Cash flows from financing activities 
Proceeds of issue of shares                                 439       721 
Payment of lease liabilities                            (1,785)   (1,969) 
Purchase of own shares by Employee Benefit 
 Trust                                                  (3,100)   (5,210) 
Dividends paid to shareholders                      9  (10,317)   (8,572) 
-----------------------------------------------  ----  --------  -------- 
Net cash used in financing activities                  (14,763)  (15,030) 
 
Net increase in cash and cash equivalents                 6,429     4,731 
-----------------------------------------------  ----  --------  -------- 
 
Cash and cash equivalents at beginning of year           54,899    50,168 
-----------------------------------------------  ----  --------  -------- 
Cash and cash equivalents at end of year                 61,328    54,899 
-----------------------------------------------  ----  --------  -------- 
 

Notes to the consolidated financial statements

For the year ended 30 June 2022

1. General information

Brooks Macdonald Group plc ("the Company") is the Parent Company of a group of companies ("the Group"), which offers a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts. The Group also provides financial planning as well as international investment management, and acts as fund manager to a range of onshore and international funds.

The Company is a public limited company, incorporated and domiciled in the United Kingdom under the Companies Act 2006 and listed on AIM. The address of its registered office is 21 Lombard Street, London, EC3V 9AH.

2. Principal accounting policies

The general accounting policies applied in the preparation of these Financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated.

a. Basis of preparation

The Group's Consolidated financial statements for the year ended 30 June 2022 have been prepared in accordance with UK-adopted International Accounting Standards ("IFRS") and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. These Consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of 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. For further details on the Group's going concern assessment, see the Viability statement. There have been no post balance sheet events that have materially impacted the Group's liquidity headroom and going concern assessment.

b. Changes in accounting policies

The Group's accounting policies 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 2021, except as explained below.

New accounting standards, amendments and interpretations adopted in the year

In the year ended 30 June 2022, the Group did not adopt any new standards or amendments issued by the International Accounting Standards Board ("IASB") or interpretations by the IFRS Interpretations Committee ("IFRS IC") that have had a material impact on the Consolidated financial statements.

Other new standards, amendments and interpretations listed in the following table were newly adopted by the Group but have not had a material impact on the amounts reported in these Financial statements. They may, however, impact the accounting for future transactions and arrangements.

 
Standard, Amendment or Interpretation                 Effective date 
----------------------------------------------------  -------------- 
Deferral of IFRS 9 (Amendments to IFRS 4)             1 January 2021 
Interest Rate Benchmark Reform - Phase 2 (Amendments 
 to IFRS 4, IFRS 16)                                  1 January 2021 
COVID-19-related Rent Concessions (Amendment to IFRS 
 16)                                                    1 April 2021 
----------------------------------------------------  -------------- 
 

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 and the estimation of the fair value of share-based payments.

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 10. 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.

Of the client-relationship intangible assets held by the Group at 30 June 2022, the expected amortisation charge for the year ending 30 June 2023 is GBP5,443,000. If the useful economic lives were to reduce by one year, the charge would increase by GBP1,302,000.

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 and sensitivity analysis are given in Note 10.

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 10 for further details on the discount rate for the various CGUs.

Share-based payments

The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the inputs to that model. The charge to the Consolidated statement of comprehensive income in respect of share-based payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly. A decrease of 10% in the total options would decrease the share-based payment charge and the associated national insurance charge in the Consolidated statement of comprehensive income for the year by GBP891,000 and GBP159,000 respectively.

3. Segmental information

For management purposes, the Group's activities are organised into two operating divisions: UK Investment Management and International. The Group's other activity, offering nominee and custody services to clients, is included within UK Investment Management. These divisions are the basis on which the Group reports its primary segmental information to the Group Board of Directors, which is the Group's chief operating decision-maker. In accordance with IFRS 8 'Operating Segments', disclosures are required to reflect the information 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.

The UK Investment Management segment offers a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts, as well as wealth management services to high net worth individuals and families, giving independent 'whole of market' financial advice enabling clients to build, manage and protect their wealth. The International segment is based in the Channel Islands and the Isle of Man, offering a similar range of investment management and wealth management services as the UK Investment Management segment. The Group segment principally comprises the Group Board's management and associated costs, along with the consolidation adjustments.

Revenues and expenses are allocated to the business segment that originated the transaction. Sales between segments are carried out at arm's length. Centrally incurred expenses are allocated to business segments on an appropriate pro rata basis.

 
                                                                                    Group and 
                              UK Investment                                     consolidation 
                                 Management            International              adjustments                    Total 
Year ended 30 June 2022             GBP'000                  GBP'000                  GBP'000                  GBP'000 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
Total revenue                       105,550                   21,156                        -                  126,706 
Inter segment revenue               (4,496)                        -                        -                  (4,496) 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
External revenue                    101,054                   21,156                        -                  122,210 
Underlying administrative 
 costs                             (43,469)                 (14,016)                 (29,932)                 (87,417) 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
Operating contribution               57,585                    7,140                 (29,932)                   34,793 
 
Allocated costs                    (25,129)                  (3,152)                   28,281                        - 
Net finance costs                     (254)                     (15)                        -                    (269) 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
Underlying profit/(loss) 
 before tax                          32,202                    3,973                  (1,651)                   34,524 
 
Amortisation of client 
 relationships                      (2,978)                  (2,465)                        -                  (5,443) 
Other non-operating income            2,983                        -                        -                    2,983 
Dual running costs of 
 operating platform                 (2,119)                    (309)                        -                  (2,428) 
Finance cost of deferred 
 consideration                            -                     (12)                     (78)                     (90) 
Profit/(loss) mark-up on 
 Group allocated 
 costs                                  214                    (214)                        -                        - 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
Profit/(loss) before tax             30,302                      973                  (1,729)                   29,546 
 
Taxation                                                                                                       (6,135) 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
Profit for the period 
 attributable 
 to equity holders of the 
 Company                                                                                                        23,411 
----------------------------  -------------  -----------------------  -----------------------  ----------------------- 
 
 
                                                                        Group and 
                                     UK Investment                  consolidation 
                                        Management  International     adjustments     Total 
Year ended 30 June 2022                    GBP'000        GBP'000         GBP'000   GBP'000 
-----------------------------------  -------------  -------------  --------------  -------- 
Statutory operating costs included 
 the following: 
Amortisation                                 2,888            917           3,117     6,922 
Depreciation                                 2,014            498               -     2,512 
Interest income                                 20             23               -        43 
-----------------------------------  -------------  -------------  --------------  -------- 
 
 
                                                                                    Group and 
                                                 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 (costs)/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 relationships                           -        (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 and 
                                     UK Investment                  consolidation 
                                        Management  International     adjustments     Total 
Year ended 30 June 2021                    GBP'000        GBP'000         GBP'000   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 
-----------------------------------  -------------  -------------  --------------  -------- 
 

4. Revenue

 
                             UK Investment 
                                Management  International     Total 
Year ended 30 June 2022            GBP'000        GBP'000   GBP'000 
---------------------------  -------------  -------------  -------- 
Investment management fees          70,161         13,182    83,343 
Transactional income                12,209          2,491    14,700 
Fund management fees                13,187          4,441    17,628 
Wealth management fees               4,082            832     4,914 
Interest turn                        1,377            210     1,587 
Other income                            38              -        38 
---------------------------  -------------  -------------  -------- 
Total revenue                      101,054         21,156   122,210 
---------------------------  -------------  -------------  -------- 
 
 
                             UK Investment 
                                Management  International     Total 
Year ended 30 June 2021(1)         GBP'000        GBP'000   GBP'000 
---------------------------  -------------  -------------  -------- 
Investment management fees          67,301         11,452    78,753 
Transactional income                15,008          2,766    17,774 
Fund management fees                12,538          2,815    15,353 
Wealth management fees               3,721            963     4,684 
Interest turn                        1,427            215     1,642 
---------------------------  -------------  -------------  -------- 
Total revenue                       99,995         18,211   118,206 
---------------------------  -------------  -------------  -------- 
 

1 The revenue note has been updated to provide a more appropriate breakdown of how revenue is recorded and monitored by the Directors. As a result, the prior year revenue breakdown has been reclassified to ensure a consistent, like-for-like comparison to the current year.

Investment management fees

Investment management fees are earned for the management services provided to clients. Fees are billed quarterly in arrears but are recognised over the period the service is provided. Fees are calculated based on a percentage of the value of the portfolio at the billing date. Fees are only recognised when the fee amount can be estimated reliably, and it is probable that the fee will be received. Amounts are shown net of rebates paid to significant investors.

Performance fees are earned from some clients when contractually agreed performance levels are exceeded within specified performance measurement periods. They are only recognised, at the end of these performance periods, when a reliable estimate of the fee can be made and is virtually certain that it will be received.

Transactional income

Transactional income is earned through dealing and admin charges levied on trades at the time a deal is placed for a client. Revenue is recognised at the point of the trade being placed.

Foreign exchange trading fees are also included, that are charged on client trades placed in non-base currencies, and therefore requiring a foreign currency exchange in order to action the trade. Revenue is recognised at the point of the trade being placed.

Fund management fees

Fund management fees are earned for the management services provided to several Open-Ended Investment Company ("OEICs"). Fees are billed monthly in arrears but are recognised over the period the service is provided. Fees are calculated daily based on a percentage of the value of each fund. Fees are only recognised when the fee amount can be estimated reliably, and it is probable that the fee will be received. Amounts are shown net of rebates paid to significant investors.

Wealth management fees

Wealth management fees relate to fees for the provision of financial advice. Fees are charged to clients using an hourly rate, by a fixed fee arrangement, or by a fund-based arrangement whereby fees are calculated based on a percentage of the value of the portfolio at the billing date. All fees are recognised over the period the service is provided. Commissions receivable and payable are accounted for in the period in which they are earned.

Interest turn

Interest turn is bank interest earned on client cash deposits. Income is recognised over the period for which the deposit is held with the bank. Amounts shown are net of any interest passed on to clients.

a. Geographic analysis

The Group's operations are located in the United Kingdom, the Channel Islands and the Isle of Man. The following table presents external revenue analysed by the geographical location of the Group entity providing the service.

 
                      2022      2021 
                   GBP'000   GBP'000 
----------------  --------  -------- 
United Kingdom     101,054    99,995 
Channel Islands     21,079    18,211 
Isle of Man             77         - 
----------------  --------  -------- 
Total revenue      122,210   118,206 
----------------  --------  -------- 
 

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:

 
                                                     2022      2021 
                                                  GBP'000   GBP'000 
-----------------------------------------------  --------  -------- 
UK Corporation Tax at 19% (FY21: 19%)               6,441     5,466 
Over provision in prior years                       (307)     (127) 
-----------------------------------------------  --------  -------- 
Total current tax                                   6,134     5,339 
Deferred tax credits                                (211)       (6) 
Under provision of deferred tax in prior years        212       116 
-----------------------------------------------  --------  -------- 
Income tax expense                                  6,135     5,449 
-----------------------------------------------  --------  -------- 
 

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the time apportioned tax rate applicable to profits of the consolidated entities in the UK as follows, split out between underlying and statutory profits:

 
                                                               Underlying           Underlying  Statutory 
                                                                   profit   profit adjustments     profit 
Year ended 30 June 2022                                           GBP'000              GBP'000    GBP'000 
-------------------------------------------------------------  ----------  -------------------  --------- 
Profit before taxation                                             34,524              (4,978)     29,546 
 
Profit multiplied by the standard rate of tax 
 in the UK of 19%                                                   6,560                (946)      5,614 
Tax effect of amounts that are not deductible/(taxable) 
 in calculating taxable income: 
 
  *    Depreciation and amortisation                                  609                (207)        402 
 
  *    Non-taxable income                                             (8)                    -        (8) 
 
  *    Overseas tax losses not available for UK tax purposes        (293)                    -      (293) 
 
  *    Lower tax rates in other jurisdictions in which the 
       Group operates                                               (201)                   92      (109) 
 
  *    Disallowable expenses                                          309                   15        324 
 
  *    Share-based payments                                           315                    -        315 
 
  *    Over provision in prior years                                (110)                    -      (110) 
-------------------------------------------------------------  ----------  -------------------  --------- 
Income tax expense                                                  7,181              (1,046)      6,135 
-------------------------------------------------------------  ----------  -------------------  --------- 
 
Effective tax rate                                                  20.8%                  n/a      20.8% 
-------------------------------------------------------------  ----------  -------------------  --------- 
 
 
                                                               Underlying           Underlying  Statutory 
                                                                   profit   profit adjustments     profit 
Year ended 30 June 2021                                           GBP'000              GBP'000    GBP'000 
-------------------------------------------------------------  ----------  -------------------  --------- 
Profit before taxation                                             30,597              (5,506)     25,091 
 
Profit multiplied by the standard rate of tax 
 in the UK of 19%                                                   5,813              (1,046)      4,767 
Tax effect of amounts that are not deductible/(taxable) 
 in calculating taxable income: 
 
  *    Depreciation and amortisation                                  749                  670      1,419 
 
  *    Non-taxable income                                             (7)                (944)      (951) 
 
  *    Overseas tax losses not available for UK tax purposes        (541)                    -      (541) 
 
  *    Disallowable expenses                                          174                  273        447 
 
  *    Impairment charges                                               -                  287        287 
 
  *    Share-based payments                                            30                    -         30 
 
  *    Over provision of deferred tax in prior years                  (9)                    -        (9) 
-------------------------------------------------------------  ----------  -------------------  --------- 
Income tax expense                                                  6,209                (760)      5,449 
-------------------------------------------------------------  ----------  -------------------  --------- 
 
Effective tax rate                                                  20.3%                  n/a      21.7% 
-------------------------------------------------------------  ----------  -------------------  --------- 
 

The deferred tax charges/(credits) for the year arise from:

 
                                                                 2022      2021 
                                                              GBP'000   GBP'000 
-----------------------------------------------------------  --------  -------- 
Share-based payments                                              399      (77) 
Accelerated capital allowances                                     73      (53) 
Accelerated capital allowances on research and development       (63)      (16) 
Dilapidations                                                      12        15 
Amortisation of acquired client relationship contracts          (880)       309 
Trading losses carried forward                                    248     (184) 
Under provision in prior years                                    212       116 
-----------------------------------------------------------  --------  -------- 
Deferred tax charge                                                 1       110 
-----------------------------------------------------------  --------  -------- 
 

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 2022 is 19% (FY21: 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. Other non-operating income

During the year, the Group received confirmation from HMRC that the supply of certain group services were exempt from VAT. As a result, the Group received a refund from HMRC in respect of VAT arising on those services during the period from 1 July 2017 to 30 June 2020 of GBP2,983,000. This has been treated as non-operating income in view of its non-recurring nature and given it is outside the ordinary course of business. This other non-operating income is fully taxable for Corporation Tax purposes.

7. Business combinations

On 23 May 2022, the Group announced, subject to regulatory approval, the acquisition of Integrity Wealth (Holdings) Limited, together with its subsidiary, Integrity Wealth Solutions Limited ("IWS"), a successful and rapidly growing Independent Financial Adviser ("IFA") firm with funds under management of c.GBP250m and c.800 clients. The acquisition consists of acquiring 100% of the issued share capital of Integrity Wealth (Holdings) Limited and Integrity Wealth Bidco Limited (intermediate holding company), and this will be funded through existing financial resources.

Under the terms of the acquisition, the purchase consideration includes an initial up front portion and a deferred contingent element. The acquisition will be accounted for in the Group's books following regulatory approval, expected in H1 FY23.

8. Earnings per share

The Directors believe that underlying earnings per share provides an appropriate reflection of the Group's performance in the year. Underlying earnings per share, which is an alternative performance measure ("APM"), is calculated based on 'underlying earnings', which is also an APM. Refer to the Non-IFRS information section at the end of the document for a glossary of the Group's APMs, their definition and criteria for how underlying adjustments are considered. The tax effect of the underlying adjustments to statutory earnings has also been considered, refer to Note 5 for the taxation on underlying and statutory profit.

Earnings for the year used to calculate earnings per share as reported in these Consolidated financial statements were as follows:

 
                                                                2022      2021 
                                                             GBP'000   GBP'000 
----------------------------------------------------------  --------  -------- 
Earnings attributable to ordinary shareholders                23,411    19,642 
----------------------------------------------------------  --------  -------- 
Amortisation of acquired client relationship contracts 
 (Note 10)                                                     5,443     4,928 
Other non-operating income (Note 6)                          (2,983)         - 
Dual running costs of operating platform                       2,428     1,000 
Finance cost of deferred consideration (Note 12)                  90       299 
Gain on bargain purchase                                           -   (4,966) 
Acquisition-related costs                                          -     2,672 
Impairment of acquired client relationship contracts 
 (Note 10)                                                         -     1,513 
Changes in fair value of deferred consideration (Note 
 12)                                                               -        60 
Tax impact of adjustments                                    (1,046)     (760) 
----------------------------------------------------------  --------  -------- 
Underlying earnings attributable to ordinary shareholders     27,343    24,388 
----------------------------------------------------------  --------  -------- 
 

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:

 
                                                                 2022     2021(1) 
                                                               Number      Number 
                                                            of shares   of shares 
---------------------------------------------------------  ----------  ---------- 
Weighted average number of shares in issue                 15,707,706  15,671,672 
Effect of dilutive potential shares issuable on exercise 
 of employee share options                                    502,259     521,547 
---------------------------------------------------------  ----------  ---------- 
Diluted weighted average number of shares in issue         16,209,965  16,193,219 
---------------------------------------------------------  ----------  ---------- 
 

Earnings per share for the year attributable to equity holders of the Company were:

 
                                 2022  2021(1) 
                                    p        p 
------------------------------  -----  ------- 
Based on reported earnings: 
Basic earnings per share        149.0    125.3 
Diluted earnings per share      144.4    121.3 
 
Based on underlying earnings: 
Basic earnings per share        174.1    155.6 
Diluted earnings per share      168.7    150.6 
------------------------------  -----  ------- 
 

1 The Group previously reported the dilutive effect of potential shares issuable on exercise of employee share options for employee share options that are satisfied from newly created shares. This did not take into account share options that are satisfied from shares bought in the market and held in the Group's Employee Benefit Trust ("EBT"). The Group now considers it is appropriate to also take into account the share options that are satisfied from shares held in the EBT where the average market price of the ordinary shares during the period exceeds the exercise price of the options, in calculating the dilutive weighted average number of shares in issue. Accordingly, the diluted weighted average number of shares in issue and diluted earnings per share for the comparative period has been restated to be consistent with the current period calculation. For the ye ar ended 30 June 2021, the reported effect of dilutive potential shares was 50,891 and the reported diluted weighted average number of shares in issue was 15,722,563. For the year ended 30 June 2021, the reported diluted earnings per share on statutory and underlying earnings was 124.9p and 155.1p respectively.

9. Dividends

Amounts recognised as distributions to equity holders of the Company in the year were as follows:

 
                                                            2022      2021 
                                                         GBP'000   GBP'000 
------------------------------------------------------  --------  -------- 
Final dividend paid for the year ended 30 June 2021 
 of 40.0p (FY20: 32.0p) per share                          6,251     4,999 
Interim dividend paid for the year ended 30 June 2022 
 of 26.0p (FY21: 23.0p) per share                          4,066     3,573 
------------------------------------------------------  --------  -------- 
Total dividends                                           10,317     8,572 
------------------------------------------------------  --------  -------- 
 
Final dividend proposed for the year ended 30 June 
 2022 of 45.0p (FY21: 40.0p) per share                     7,031     6,229 
------------------------------------------------------  --------  -------- 
 

The interim dividend of 26.0p (FY21: 23.0p) per share was paid on 14 April 2022.

A final dividend for the year ended 30 June 2022 of 45.0p (FY21: 40.0p) per share was declared by the Board of Directors on 14 September 2022 and is subject to approval by the shareholders at the Company's Annual General Meeting. It will be paid on 4 November 2022 to shareholders who are on the register at the close of business on 23 September 2022. 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.

10. 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 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 
Additions                                      -      2,912              -          -     2,912 
Disposals                                      -    (7,380)              -          -   (7,380) 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
At 30 June 2022                           51,887      6,930         70,011      3,521   132,349 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
 
Accumulated amortisation and 
 impairment 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
At 1 July 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 
Amortisation charge                            -      1,479          5,443          -     6,922 
Accumulated amortisation on disposals          -    (7,380)              -          -   (7,380) 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
At 30 June 2022                           11,213        251         31,477      3,521    46,462 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
 
Net book value 
At 1 July 2020                            40,674      4,939         38,191          -    83,804 
At 30 June 2021                           40,674      5,246         43,977          -    89,897 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
At 30 June 2022                           40,674      6,679         38,534          -    85,887 
--------------------------------------  --------  ---------  -------------  ---------  -------- 
 

The amortisation charge of intangible assets is recognised within administrative costs in the Consolidated statement of comprehensive income.

At 30 June 2022, intangible assets totalling GBP76,140,000 are recognised in the United Kingdom and GBP9,747,000 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:

 
                                                                        2022      2021 
                                                                     GBP'000   GBP'000 
------------------------------------------------------------------  --------  -------- 
Funds 
Braemar Group Limited ("Braemar")                                      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 2022 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 2023, and then extrapolated over a longer period for the following four years, resulting in the budgets and forecasts covering a period of five years. Cash flows are then extrapolated beyond the five-year budget and forecast period using an expected long-term growth rate, with the long-term growth rate considered reasonable against the budgeted and forecast growth.

The Cornelian CGU recoverable amount was calculated as GBP61,502,000 at 30 June 2022, giving a surplus over the Cornelian CGU carrying amount of GBP29,182,000, 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. The revenue growth forecasts range between 13% and 21% annually over the five-year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on FUM, multiplied by estimated fee yields. Expenditure growth is forecast between 4% and 6% annually over the five-year period. Both the revenue growth and expenditure growth reflect historic actual growth and planned management actions and are considered to be reasonable in the current market and industry conditions. A pre-tax discount rate of 16% has been used (FY21: 13%), based on the Group's assessment of the risk-free rate of interest and specific risks relating to Cornelian. The recoverable amount was based on the estimated cash inflows over the next five financial years, the period covered by the most recent forecasts, which reflect planned management actions and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds and investment management industries in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment however to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

-- An increase of the pre-tax discount rate by 12%, from 16% to 28% would result in an impairment.

   --    The 2% perpetuity growth rate would need to reduce by 24% to -22% to trigger an impairment. 
   --    The forecast pre-tax cash flows would need to reduce by 40% to result in an impairment. 

Based on a value-in-use calculation, the recoverable amount of the Brooks Macdonald International CGU at 30 June 2022 was GBP64,453,000, giving a surplus over the Brooks Macdonald International CGU carrying amount of GBP32,200,000, 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 14% (FY21: 12%) 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 8% and 12% annually over the five-year period, based on new business targets, expected outflows and estimated impact of market performance. Annual cash flow growth rates range between 14% and 47% 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.

The Directors do not believe that any reasonably possible change would result in an impairment however to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

-- An increase of the pre-tax discount rate by 10%, from 14% to 24% would result in an impairment.

   --    The 2% perpetuity growth rate would need to reduce by 23% to -21% to trigger an impairment. 
   --    The forecast pre-tax cash flows would need to reduce by 47% to result in an impairment. 

Based on a value-in-use calculation, the recoverable amount of the Braemar CGU at 30 June 2022 was GBP17,847,000, giving a surplus over the Braemar CGU carrying amount of GBP3,299,000 indicating that there is no impairment. A pre-tax discount rate of 17% (FY21: 14%) 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 9% and 11% 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 1% and 12% annually over the five-year period. The inputs to the forecast cash inflows over the next five financial years, reflect historic actual growth and planned management activities and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds industry in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment however to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

-- An increase of the pre-tax discount rate by 48%, from 17% to 65% would result in an impairment.

-- The 2% perpetuity growth rate could reduce by 100% to -98% and an impairment would still not be triggered.

   --    The forecast pre-tax cash flows would need to reduce by 83% to result in an impairment. 

At 30 June 2022, 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 2022.

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 2022, the Group received GBP2,039,000 from SS&C towards the costs incurred in the transition of the client- and adviser-facing processes to their platform and systems, which has been utilised against capitalised spend on the project. The gross computer software additions during the year were GBP4,951,000, with the net amount recognised of GBP2,912,000, after the amount received from SS&C.

During the year ended 30 June 2022, 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 GBP7,380,000.

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 ended 30 June 2021, the Group acquired client relationship contracts totalling GBP12,227,000, as part of the Lloyds Channel Islands acquisition, which were recognised as separately identifiable intangible assets in the Consolidated statement of financial position. The additions included contracts related to the Lloyds Channel Islands discretionary business of GBP9,080,000, with a useful economic life of 15 years, and GBP3,147,000 related to the Lloyds Channel Islands funds-management business, with a useful economic life of six years.

During the year ended 30 June 2021, 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.

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.

11. Provisions

 
                                                       Exceptional 
                                                          costs of 
                                                         resolving                  Leasehold 
                              Client compensation   legacy matters  FSCS levy   dilapidations  Tax-related     Total 
                                          GBP'000          GBP'000    GBP'000         GBP'000      GBP'000   GBP'000 
----------------------------  -------------------  ---------------  ---------  --------------  -----------  -------- 
At 1 July 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 
Charge to the Consolidated 
 statement of comprehensive 
 income                                       398                -      1,304             126          162     1,990 
Transfer from trade 
 and other payables                             -                -          -               -        1,217     1,217 
Utilised during the 
 year                                       (286)            (600)    (2,163)           (172)      (1,099)   (4,320) 
----------------------------  -------------------  ---------------  ---------  --------------  -----------  -------- 
At 30 June 2022                               112                -        386             367          280     1,145 
----------------------------  -------------------  ---------------  ---------  --------------  -----------  -------- 
 
Analysed as: 
Amounts falling due 
 within one year                              112                -        386              41          280       819 
Amounts falling due 
 after more than one 
 year                                           -                -          -             326            -       326 
----------------------------  -------------------  ---------------  ---------  --------------  -----------  -------- 
Total provisions                              112                -        386             367          280     1,145 
----------------------------  -------------------  ---------------  ---------  --------------  -----------  -------- 
 

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 related to a number of discretionary portfolios formerly managed by Spearpoint, now managed by the Group and a Dublin-based fund, for which Spearpoint acted as investment manager. The Directors deem the legacy matters to be resolved and therefore a provision is no longer required. The amount utilised during the year of GBP600,000 represents the remaining offers paid to claimants and associated legal fees during the year ended 30 June 2022. There are a small number of clients who have rejected the goodwill offers, and the Group has recognised a contingent liability as a result of these, see Note 14 for further details.

c. FSCS levy

Following confirmation by the FSCS in July 2022 of its final industry levy for the 2022/23 scheme year, the Group has made a provision of GBP386,000 (FY21: GBP1,245,000) 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.

e. Tax-related

During the year ended 30 June 2022, the Group recognised a provision in relation to an input VAT review, making a voluntary disclosure to HM Revenue and Customs ("HMRC"), totalling GBP162,000.

At 1 July 2021, the Group reclassified other tax-related provisions from trade and other payables, totalling GBP1,217,000. These amounts were previously voluntarily disclosed to HMRC, however HMRC had not responded on the disclosures and it was therefore deemed more appropriate to reclassify the balance as a provision.

As discussed in Note 6, the Group received a refund from HMRC in relation to previously paid VAT on certain Group services. As disclosed in the 2020 Annual Report and Accounts, the Group previously recognised an estimated VAT liability due to HMRC in relation to certain Group services. Following HMRC's confirmation that this VAT is no longer payable on these services, the Group released GBP1,044,000 in relation to the estimated VAT payable, which is no longer payable. The remaining utilised amount of GBP55,000 relates to the HMRC four-year time limitation rules, reducing the relevant provision accordingly.

12. 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:

 
                                                   2022      2021 
                                                GBP'000   GBP'000 
---------------------------------------------  --------  -------- 
At 1 July                                         6,237     7,991 
Additions                                             -       308 
Finance cost of deferred consideration               90       299 
Fair value adjustments                                -        60 
Payments made during the year                   (6,000)   (2,421) 
---------------------------------------------  --------  -------- 
At 30 June                                          327     6,237 
---------------------------------------------  --------  -------- 
 
Analysed as: 
Amounts falling due within one year                 327     5,934 
Amounts falling due after more than one year          -       303 
---------------------------------------------  --------  -------- 
Total deferred consideration                        327     6,237 
---------------------------------------------  --------  -------- 
 

During the year ended 30 June 2021, the Group completed the Lloyds Channel Islands acquisition 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. During the year ended 30 June 2022, the Group recognised a finance cost of GBP12,000 on the Lloyds Channel Islands acquisition deferred consideration. The fair value of the Lloyds Channel Islands acquisition deferred consideration at 30 June 2022 was GBP327,000.

During the year ended 30 June 2022, the final payment was made in relation to the acquisition of Cornelian Asset Managers Group Limited totalling GBP6,000,000 (FY21: GBP2,000,000). Prior to the final payment, GBP78,000 was recognised as a finance cost of deferred consideration within FY22. Full details of the Cornelian acquisition are disclosed in Note 11 of the 2020 Annual Report and Accounts.

13. Reconciliation of operating profit to net cash inflow from operating activities

 
                                                           2022      2021 
                                                        GBP'000   GBP'000 
-----------------------------------------------------  --------  -------- 
Operating profit                                         26,867    20,756 
 
Adjustments for: 
 
  *    Amortisation of intangible assets                  6,922     7,682 
 
  *    Depreciation of property, plant and equipment        843     1,045 
 
  *    Depreciation of right-of-use assets                1,669     1,614 
 
  *    Other gains/(losses) - net                            55     1,438 
 
  *    Increase in receivables                          (2,024)   (2,333) 
 
  *    (Decrease)/increase in payables                  (3,194)     3,765 
 
  *    Decrease in provisions                           (1,113)     (269) 
 
  *    Increase in other non-current liabilities             22       218 
 
  *    Share-based payments charge                        2,779     2,991 
-----------------------------------------------------  --------  -------- 
Net cash inflow from operating activities                32,826    36,907 
-----------------------------------------------------  --------  -------- 
 

14. Contingent liabilities and guarantees

In the normal course of business, the Group is exposed to certain legal issues which, in the event of a dispute, could develop into litigious proceedings and, in some cases, may result in contingent liabilities. Similarly, a contingent liability may arise in the event of a finding in respect of the Group's tax affairs, including the accounting for VAT, which could result in a financial outflow and/or inflow from the relevant tax authorities.

A claim for unspecified losses has been made by a client against Brooks Macdonald Financial Consulting Limited, a subsidiary of the Group, in relation to alleged negligent financial advice. The claimant has not yet advised the quantum of their claim so it is not possible to reliably estimate the potential impact of a ruling in their favour. There remains significant uncertainty surrounding the claim and the Group's legal advice indicates that it is not probable that the claim will be upheld, therefore no provision for any liability has been recognised at this stage.

During the 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. While some of these clients have since accepted their offers, it is possible that one or more of these remaining clients might issue claims against Brooks Macdonald Asset Management (International) Limited. At 30 June 2022, one claim has been issued to Brooks Macdonald Asset Management (International) Limited; however, it is not possible to estimate with any certainty whether or not any outflow might result, nor the quantum or timing of any potential outflow. As a result, it is not possible to estimate the quantum of any potential liability with any certainty 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.

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 
                                                        2022      2021      2022      2021 
                                                     GBP'000   GBP'000   GBP'000   GBP'000 
--------------------------------------------------  --------  --------  --------  -------- 
Brooks Macdonald Asset Management Limited                238         -         -         - 
Brooks Macdonald Asset Management (International) 
 Limited                                                   -       246        89         - 
Brooks Macdonald Financial Consulting 
 Limited                                                   -         -        34     2,753 
--------------------------------------------------  --------  --------  --------  -------- 
 

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.

Non-IFRS financial information

Non-IFRS financial information or alternative performance measures ("APMs") are used as supplemental measures in monitoring the performance of the Group. The adjustments applied to IFRS measures to compute the Group's APMs exclude income and expense categories which are deemed of a non-recurring nature or a non-cash operating item. The Board considers the disclosed APMs to be an appropriate reflection of the Group's performance and considered appropriate for external analyst coverage and peer group benchmarking.

The Group follows a rigorous process in determining whether an adjustment should be made to present an alternative performance measure compared to IFRS measures. For an adjustment to be excluded from underlying profit as an alternative performance measure compared to statutory profit, it must initially meet at least one of the following criteria:

   --    It is unusual in nature, e.g. outside the normal course of business and operations. 
   --    It is a significant item, which may be recognised in more than one accounting period. 

-- It has been incurred as a result of either an acquisition, disposal or a company restructure process.

The Group uses the below APMs:

 
APM                   Equivalent IFRS       Definition and purpose 
                       measure 
--------------------  --------------------  ------------------------------------------------------ 
Underlying profit     Statutory profit      Calculated as profit before tax excluding 
 before tax            before tax            income and expense categories which are deemed 
                                             of a non-recurring nature or a non-cash operating 
                                             item. It is considered by the Board to be 
                                             an appropriate reflection of the Group's performance 
                                             and considered appropriate for external analyst 
                                             coverage and peer group benchmarking. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying tax        Statutory tax charge  Calculated as the statutory tax charge, excluding 
 charge                                      the tax impact of the adjustments excluded 
                                             from underlying profit. See Note 5 Taxation. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying earnings/  Total comprehensive   Calculated as underlying profit before tax 
 Underlying profit     income                less the underlying tax charge. 
 after tax                                   See Note 8 for a reconciliation of underlying 
                                             profit after tax and statutory profit after 
                                             tax. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying profit     Statutory profit      Calculated as underlying profit before tax 
 margin before tax     margin before tax     over revenue for the year. This is another 
                                             key metric assessed by the Board and appropriate 
                                             for external analyst coverage and peer group 
                                             benchmarking. 
--------------------  --------------------  ------------------------------------------------------ 
EBITDA/Underlying     N/A                   Earnings before interest, tax, depreciation 
 EBITDA                                      and amortisation ("EBITDA"). Underlying EBITDA 
                                             is EBITDA excluding income and expense categories 
                                             which are deemed of a non-recurring nature 
                                             or a non-cash operating item. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying basic      Statutory basic       Calculated as underlying profit after tax 
 earnings per share    earnings per share    divided by the weighted average number of 
                                             shares in issue during the year. This is a 
                                             key management incentive metric and is a measure 
                                             used within the Group's remuneration schemes. 
                                             See Note 8 Earnings per share. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying diluted    Statutory diluted     Calculated as underlying profit after tax 
 earnings per share    earnings per share    divided by the weighted average number of 
                                             shares in issue during the year, including 
                                             the dilutive impact of future share awards. 
                                             This is a key management incentive metric 
                                             and is a measure used within the Group's remuneration 
                                             schemes. See Note 8 Earnings per share. 
--------------------  --------------------  ------------------------------------------------------ 
Underlying costs      Statutory costs       Calculated as total administrative expenses, 
                                             other net gains/(losses), finance income and 
                                             finance costs and excluding income and expense 
                                             categories which are deemed of a non-recurring 
                                             nature or a non-cash operating item. This 
                                             is a key measure used in calculating underlying 
                                             profit before tax. 
--------------------  --------------------  ------------------------------------------------------ 
Segmental underlying  Segmental statutory   Calculated as profit before tax excluding 
 profit before tax     profit before tax     income and expense categories which are deemed 
                                             of a non-recurring nature or a non-cash operating 
                                             item for each segment. See Note 3 Segmental 
                                             information. 
--------------------  --------------------  ------------------------------------------------------ 
Segmental underlying  Segmental statutory   Calculated as segmental underlying profit 
 profit before tax     profit before tax     before tax over segmental revenue. 
 margin                margin 
--------------------  --------------------  ------------------------------------------------------ 
Total capital ratio   N/A                   Calculated as the Group's total regulatory 
                                             resources relative to its Pillar I risk exposure 
                                             requirement. 
--------------------  --------------------  ------------------------------------------------------ 
 

Finance information

The financial information contained within this preliminary announcement has been extracted from the Group's Financial statements, which have been approved by the Board of Directors and agreed with the Company's auditors'.

The financial information set out above does not constitute the Group's statutory financial statements for the years ended 30 June 2022 or 2021. Statutory financial statements for 2021 have been delivered to the Registrar of Companies. Statutory financial statements for 2022 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor has reported on both the 2022 and 2021 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            15 September 2022 
------------------------------  ----------------- 
Ex-dividend date for final 
 dividend                       22 September 2022 
------------------------------  ----------------- 
Record date for final dividend  23 September 2022 
------------------------------  ----------------- 
Annual General Meeting          27 October 2022 
------------------------------  ----------------- 
Final dividend payment date     4 November 2022 
------------------------------  ----------------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

FR GZGMLLDZGZZM

(END) Dow Jones Newswires

September 15, 2022 02:00 ET (06:00 GMT)

Brooks Macdonald (LSE:BRK)
Historical Stock Chart
From Nov 2022 to Dec 2022 Click Here for more Brooks Macdonald Charts.
Brooks Macdonald (LSE:BRK)
Historical Stock Chart
From Dec 2021 to Dec 2022 Click Here for more Brooks Macdonald Charts.