Final Results

RNS Number : 6725N

Brooks Macdonald Group PLC

11 September 2013

 



11 September 2013

Brooks Macdonald Group plc

Report for the year ended 30 June 2013

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group"), the AIM listed integrated wealth management group, today announces its results for the year ended 30 June 2013.

	Year ended 30.06.2013	Year ended 30.06.2012	Increase
Statutory pre-tax profit	£10.4m	£8.5m	22%
Adjusted pre-tax profit*	£13.2m	£9.0m	47%
Revenue	£63.2m	£53.3m	19%
Earnings per share	65.76p	57.43p	15%
Total funds under management ("FUM")	£5.11bn	£3.52bn	45%
Proposed final dividend	16.0p	12.5p	28%
Total dividends	22.5p	18.5p	22%

*Adjusted is defined as before directly attributable acquisition costs for Spearpoint Limited and the amortisation of acquired client relationships

Business Highlights: 

·      Year on year increase of 45% in discretionary FUM to £5.11bn driven by acquisitions, performance and organic growth in distribution, capacity, strategic alliances and investment capability

·      Organic growth of over 15% (stripping out market growth and acquisitions)

·      Acquisitions during the year of Spearpoint and Park Street introducer businesses

·      Brooks Macdonald Funds grew funds under management to £390m (2012: £148m) including the acquired Spearpoint funds 

·      Property assets under administration, managed by Braemar Estates, grew 20% to £1.04bn (2012: £865m)

·      Third party assets under administration are now in excess of £140m (2012: £50m)

·      A proposed final dividend of 16p (2012: 12.5p) per share payable on 18 October 2013 to shareholders on the register on 20 September 2013.

·      22% increase in dividends proposed for the year of 22.5p (2012:18.5p)

Commenting on the results and outlook, Chris Macdonald, CEO, said:

"This has been a year of considerable expansion for the Group against a backdrop of significant regulatory changes. I am pleased to report that we have seen growth across all five of our businesses over the course of the financial year.

"For the coming year our outlook for investment returns remains cautiously optimistic. We believe that there will be a more stable background for regulatory change, that there will continue to be margin pressures on non-bespoke services and that there will be numerous growth opportunities for the Group.  Despite the short term margin pressures highlighted, we are a progressive business and therefore will continue to invest for the future.

"I am pleased to report further organic growth in funds under management in the early months of the new financial year.  The Board remains confident for the future prospects of the Group."

An analyst meeting will be held at 9.15 for 9.30am on 11 September at the offices of MHP Communications, 60 Great Portland Street, London, W1W 7RT. Please contact Giles Robinson on 020 3128 8788

or e-mail [e-mail] for further details

Enquiries to:

Brooks Macdonald Group plc

www.brooksmacdonald.com

Chris Macdonald, Chief Executive                                                                                                                020 7499 6424

Simon Jackson, Finance Director

Canaccord Genuity Limited                                                                                                                          020 7523 8350

Bruce Garrow / Joe Weaving         

MHP Communications                                                                                                                                   020 3128 8100

Reg Hoare / Barnaby Fry / Simon Hockridge / Giles Robinson

Notes to editors

Brooks Macdonald Group plc is an AIM listed, integrated, wealth management group. The group consists of six principal companies: Brooks Macdonald Asset Management  Limited, a discretionary asset management business; Brooks Macdonald Funds Limited, a fund management business; Brooks Macdonald Financial Consulting Limited, a financial advisory and employee benefits consultancy; Brooks Macdonald Asset Management (International) Limited, a Jersey and Guernsey based provider of discretionary investment management and stockbroking; Brooks Macdonald Retirement Services (International) Limited, a Jersey and Guernsey based retirement planning services provider; and Braemar Estates (Residential) Limited, an estate management company.

Brooks Macdonald Group plc

Report for the year ended 30 June 2013

Chairman's Statement

This has been another year of considerable progress for the Group.

Profit before tax has increased by 22% from £8.52m to £10.40m, and earnings per share by 15% from 57.43p to 65.76p. This is after charging £1.0m of costs incurred in the acquisition of Spearpoint, the Channel Islands fund management business now renamed Brooks Macdonald International.

The board is recommending a final dividend of 16p per share which, if approved by shareholders, will result in total dividends for the year of 22.5p. This represents an increase of 22% over last year's total dividends of 18.5p per share. The final dividend will be paid on 18 October 2013 to shareholders who are on the register at the close of business on 20 September 2013.

Spearpoint became part of the Group in November 2012, our first venture outside the UK, which will be the focus of what we hope will be a significant offshore business. We now have offices in Jersey and Guernsey, with two businesses: Asset Management and Retirement Services. The acquisition was in part funded by a successful share placing with institutional investors raising over £21m, the first fund raising by the Group since our shares were admitted to AIM in 2005.

Our discretionary funds under management had a strong year and as at 30 June 2013 totalled £5.11bn (2012: £3.52bn), a rise of 45% over the 12 month period. Net of the Spearpoint acquisition, this represents an increase of 25.6%, compared to growth of 9.8% in the APCIMS Balanced Index over the same period.

Property assets under administration grew to £1.04bn, an increase of 20% (2012: £865m) and third party assets under administration are now in excess of £140m (2012: £50m). In addition, as a result of the acquisition of Spearpoint, we had advisory funds under management of £348m at the year end.

In addition to these acquisitions the Group has continued to grow organically and invest for the future. The number of professional introducers using our asset managers continues to rise, we have recruited quality new fund managers and consultants and we continue to invest in our trainee programme, investment management process and IT systems.

The last year has been a year of considerable progress but also of change. The introduction of the Retail Distribution Review in January, something that we supported, has led to changes across the whole industry and to continued rises in regulatory costs. Together with a re-pricing of our Managed Portfolio Service ('MPS') and with the investments highlighted above, as we indicated in July this year, this will lead to an adverse effect on our margins in the new financial year.

In spite of these changes we remain focussed on maintaining performance levels for our clients, our staff and our shareholders and are pleased with the significant progress achieved by the Group over the last financial year and look forward to the future with confidence.

Christopher Knight

Chairman

10 September 2013

Brooks Macdonald Group plc

Report for the year ended 30 June 2013

Chief Executive's Review

Introduction

This has been a year of considerable expansion for the Group against a backdrop of significant regulatory changes and our success over the last year has only been possible with the continued hard work and professionalism of all our staff together with the support of our professional introducers and shareholders. I would like to thank all parties for their significant contributions to these results.

I am pleased to report that we have seen growth across all of our existing businesses (Asset Management, Financial Consulting, Property Management, Investment Services and Funds) over the course of the financial year.

Funds under management

Our discretionary funds under management went through a significant landmark in the year going through £5bn. As at 30 June 2013 this had risen to £5.11bn, a rise of 45% over the twelve month period supported by rising investment markets and the acquisition of Spearpoint. Stripping out market growth and the acquisition this amounted to organic growth at over 15% over the year. A large proportion of our new business is introduced by professional intermediaries and we remain firmly committed to maintaining this strategy.

We have three principal offerings: our Bespoke Portfolio Service ('BPS') for high net worth individuals (whether this be private portfolios, Self Invested Personal Pensions or Trusts); Managed Portfolio Service ('MPS'), which caters for smaller portfolios on a modular basis; and our Funds business, which offers units in a number of funds. The dynamics behind all three services are becoming increasingly different in part due to RDR but also due to significant changes in the distribution landscape. BPS has not changed in that we offer a complete investment management service to high net worth clients including custody of assets. Whilst the popularity of MPS continues, custody and the use of platforms have altered the pricing of the service and to this end we have reacted to the changes in the industry and rebased our fees for this service.

In our Funds business we continue to offer highly niche funds or unitised versions of our MPS range of risk rated portfolios and this continues to gain momentum with £390m (£329m net of the acquisition) under management at the year end, growing from £148m at the end of June 2012.

Strategies for growth

Our expansion has always revolved around organic growth, ongoing investment in the business and both service and performance development.

This past year has been no different in that we completed two acquisitions, the first in July 2012 when we acquired JPAM Limited - a long term introducer - and the second in November 2012 when we acquired Spearpoint. The latter comprised two businesses: Investment Management and Retirement Services. It was a substantial step forward for the Group giving us the opportunity to expand our 'footprint' outside the UK. The first seven months since acquisition have been focused around integrating the business into the wider group. Going forward our collective aim is to grow the business around BPS, advisory services, retirement advice and later this year the launch of an offshore 'MPS' offering. The acquisition and integration has been successful and has taken a lot of hard work from all parties but I would like to thank the staff of Spearpoint for their considerable endeavours in making this possible.

Our organic growth has been strong across the Group. This growth continues to be supported by professional intermediaries and more recently by a number of institutional investors that have backed our new fund launches. We now have over 540 firms introducing work to the firm from across the UK. This is supported by all our regional offices and is something we wish to repeat offshore through our offices in Jersey and Guernsey. Our largest office remains our headquarters in London but we now have bases in Hampshire, Manchester, Tunbridge Wells, Edinburgh, Hale (where our property management business, Braemar Estates, is based), Taunton, York, Jersey and Guernsey. We will be opening an office in the Midlands (in Leamington Spa) in mid September, thus ensuring that we can support professional intermediaries and clients alike in every region in the UK.

Our staff numbers have increased over the year from 282 to 376. We have recruited at all levels across the Group including senior management (for example Chris March being appointed as CEO of our Estates business), further trainees (in Funds, Asset Management and Financial Consulting) and in central services. Whilst we continue to grow it is imperative we both build for future capacity but also retain the very strong culture of the business.

We continue to invest in service and performance development. This ranges from 'central' infrastructure spending (upgrading of our existing IT to hosting our data in third party data centres and web development), the re-papering of all our clients with the recent developments around suitability of advice and further resources in investment research and monitoring. In the last example I am pleased that we have continued to perform well for our clients providing strong risk adjusted returns.

The growth of SIPPs continues and this is now further supported by legislative change around auto enrolment. We will be looking to launch a specific auto enrolment service later this year utilising our own funds and this will apply both on and offshore. This is an opportunity we are increasingly excited about.

Our brand development has also continued to gain traction. Over the last three years we have focussed most of our endeavours on the professional intermediary market. We will certainly continue this whilst also focusing on increasing our brand recognition with our underlying clients. I am also pleased that once again we featured in the Sunday Times 100 Best Companies to work for, were awarded 5 star ratings from Defaqto for both MPS and BPS and were also awarded Private Client Investment Manager of the year (AQC) and the Best Wealth Management Firm UK (Wealth Advisor Awards).

Regulation

On 1 January 2013 the Retail Distribution Review ('RDR') came into force. This was a substantial change to the whole of the financial services industry with a focus on transparency of charging, greater consumer clarity and the raising of professional standards and corporate stability. These are changes that we fully support but the costs associated with increased regulation have become and remain substantial. Whilst we feel that these costs have peaked in terms of percentage of turnover they have not been passed on to clients. This is something that we and, we believe, the whole of the industry will have to consider over the coming years.

Summary and Outlook

I will repeat the comments I made in my review in 2012, that the last year was a tough one. Investment markets were supportive but the quantum of change, particularly in the distribution of financial services and regulation, meant that the business had to be highly dynamic. I am pleased that against this backdrop the Group made substantial progress.

For the coming year our outlook for investment returns remains cautiously optimistic. We believe that there will be a more stable background for regulatory change, that there will continue to be margin pressures on non-bespoke services and that there will be numerous opportunities for the Group. Despite the short term margin pressures we have flagged, we are a progressive business and therefore will continue to invest for the future.

I am pleased to report further organic growth in funds under management in the early months of the new financial year. The Board remains confident for the future prospects of the Group.

Chris Macdonald

Chief Executive

10 September 2013

Brooks Macdonald Group plc

Report for the year ended 30 June 2013

Business Review

Group overview

The Group has had strong year of growth, audited pre-tax profits increasing by 22% in the year to £10.4m and basic earnings per share increasing from 57.43p per share last year to 65.76p for the year ended 30 June 2013.

The Group has no borrowings and at 30 June 2013 its cash balances totalled £18.4m. The detailed movement in group cash balances is shown in the Consolidated Statement of Cash Flows.

Investment Management

The investment management division principally provides discretionary investment management services to private investors, charities and trusts. Despite difficult economic and investment conditions during the financial year the division has continued to grow funds under management both organically and through the acquisition of Spearpoint Limited in November 2012.

	Funds under management (£m)
At 1 July 2012	3,520
Inflows   - net new discretionary business*	574
- acquired through Spearpoint Limited	650
- market movement	366
At 30 June 2013	5,110
Underlying rate of total net growth	45.17%

* Clients leaving and capital or income withdrawals of larger than £50,000 for bespoke portfolio service and larger than £20,000 for managed portfolio service

The underlying rate of growth of 45% of funds compares to an increase in the APCIMS Balanced index of 10% and an increase in the FTSE 100 index of 12% over the same period and represents a continued growth in funds under management over the last five years.

The financial performance of the division is driven mainly by the total funds under management and the net growth in new funds achieved over the year.

For the first six months of the year, fee income includes the share of fees paid to introducers and their payments are shown within the administrative expenses of the division. Following the introduction of the Retail Distribution Review ('RDR') on 1 January 2013 there has been a change in the reporting of the fee income and the corresponding share of the fee due to the third party introducer, if applicable. Under RDR any payment due to the introducer is payable on the instruction of the client from their client bank account and the Group will simply become a facilitator for these payments. They will no longer form part of the administrative costs of the division and there will be a corresponding reduction in fee income.

The impact of RDR on fee income and administrative costs for the division as described above has only impacted on the second half the financial year ended 30 June 2013 and has not affected arrangements with all introducers. Some introducers have made the decision to retain an "old book" of business whereby the fee charged by the division continues to include the share of the fee payable to the introducer with the corresponding payment included within the administrative expenses of the division. The impact of this change to RDR on the results of the division is a reduction of approximately £5.9m of income with a matched reduction in administrative costs.

There has been continued development and investment in the back office functions in order to increase the efficiency and to further enhance the overall service both to our own clients and to those using our third party administration services.

On 19 November 2012 we completed the acquisition of Spearpoint Limited (now re-named Brooks Macdonald Asset Management (International) Limited ('BMI')) together with Spearpoint Retirement Services Limited (now re-named Brooks Macdonald Retirement Services (International) Limited ('BMRS')) for an initial consideration of £22.5m (excluding the value of net assets acquired) with an additional projected deferred payment of £4.3m due in November 2014. BMI is a Jersey and Guernsey based integrated wealth management company and in addition to the discretionary funds of £650m shown above, BMI also had advisory funds of £450m and offers execution only and foreign exchange services to its clients.

The acquisition of BMI has added further scale and a significantly enhanced offshore capability for our clients.

Brooks Macdonald Funds and Braemar Estates

It has been a year of considerable growth for Brooks Macdonald Funds with total funds under management increasing significantly from £148m to £390m at 30 June 2013 following a rise of 46% in the previous year to 30 June 2012. This growth was achieved both organically through new investment in the existing seven funds as well as by the acquisition of BMI which added a total £65m in a further five funds through an offshore Dublin OEIC.

Braemar Estates has continued its growth in the property management sector with the value of assets under administration breaking through £1bn during the year to £1,040m at 30 June 2013, an increase of over 20% in the year.

Financial Consulting

The financial consulting division has had another good year with increased revenue and profits and it particularly benefited from having a business model which required little or no change with the advent of RDR from 1 January 2013. The division continues to deliver both fee based financial planning to high net worth individuals and employee benefits consultancy to small and medium sized employers throughout the UK.

The division is starting to work with BMRS in Jersey and Guernsey, which was acquired in conjunction with BMI as described above and it is also benefitting from the expansion in the existing group office network, with the provision of employee benefits being a particular growth area due to the requirements of auto-enrolment for all UK employers.

Brooks Macdonald Group plc

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2013

	Note	2013	2012
		£'000	£'000
Revenue		63,159	53,288
Administrative costs		(52,661)	(44,886)
Operating profit		10,498	8,402
Analysed as:
Operating profit before exceptional items		11,545	8,402
Costs of acquiring subsidiary companies		(1,047)	-
Operating profit after exceptional items		10,498	8,402
Finance income		179	166
Finance costs		(279)	(48)
Profit before tax		10,398	8,520
Analysed as:
Profit before tax and exceptional items		11,445	8,520
Costs of acquiring subsidiary companies		(1,047)	-
Profit before tax		10,398	8,520
Taxation		(2,368)	(2,264)
Profit for the year attributable to owners of the parent		8,030	6,256
Other comprehensive income:
Revaluation of available for sale financial assets		(9)	27
Total comprehensive income for the year net of tax attributable to owners of the parent		8,021	6,283
Earnings per share*
Basic	2	65.76p	57.43p
Diluted		65.16p	56.58p

*Comparative amounts have been restated to reflect the impact of new shares issued

Brooks Macdonald Group plc

Consolidated Statement of Financial Position

as at 30 June 2013

		2013	2012
		£'000	£'000
Assets
Non-current assets
Intangible assets		44,624	10,432
Property, plant and equipment		2,421	2,367
Available for sale financial assets		1,582	1,657
Deferred tax assets		858	668
Total non-current assets		49,485	15,124
Current assets
Trade and other receivables		17,773	12,780
Cash and cash equivalents		18,440	13,489
Total current assets		36,213	26,269
Total assets		85,698	41,393
Liabilities
Non-current liabilities
Deferred consideration		(5,804)	(959)
Deferred tax liabilities		(4,498)	(693)
Other non-current liabilities		(125)	(418)
Total non-current liabilities		(10,427)	(2,070)
Current liabilities
Trade and other payables		(13,779)	(13,845)
Current tax liabilities		(1,149)	(79)
Provisions		(2,783)	(1,689)
Total current liabilities		(17,711)	(15,613)
Net assets		57,560	23,710
Equity
Share capital		133	109
Share premium account		31,868	4,423
Other reserves		3,952	2,988
Retained earnings		21,607	16,190
Total equity		57,560	23,710

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 10 September 2013, signed on their behalf by:

C A J Macdonald                                                                             S J Jackson

Chief Executive                                                                               Finance Director

Company registration number: 4402058

Brooks Macdonald Group plc

Consolidated Statement of Cash Flows

for the year ended 30 June 2013

		2013	2012
		£'000	£'000
Cash flow from operating activities
Cash generated from operations		9,518	3,571
Taxation paid		(1,661)	(1,460)
Net cash generated from operating activities		7,857	2,111
Cash flows from investing activities
Purchase of property, plant and equipment		(863)	(1,215)
Purchase of intangible assets		(617)	(2,113)
Purchase of available for sale financial assets		-	(63)
Acquisition of subsidiary companies, net of cash acquired		(20,757)	-
Interest received		179	166
Proceeds of sale of property, plant and equipment		-	6
Proceeds of sale of intangible assets		32	-
Proceeds of sale of available for sale financial assets		63	-
Net cash used in investing activities		(21,963)	(3,219)
Cash flows from financing activities
Proceeds of issue of shares		22,020	298
Purchase of own shares by employee benefit trust		(779)	(785)
Dividends paid to shareholders		(2,184)	(1,724)
Net cash generated from / (used in) financing activities		19,057	(2,211)
Net increase / (decrease) in cash and cash equivalents		4,951	(3,319)
Cash and cash equivalents at beginning of year		13,489	16,808
Cash and cash equivalents at end of year		18,440	13,489

Brooks Macdonald Group plc

Report for the year ended 30 June 2013

Notes

Note 1 - Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, IFRIC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis, except for the revaluation of available for sale financial assets such that they are measured at their fair value.

Note 2 - Earnings per share

Basic earnings per share are calculated by dividing the Group's post-tax profit for the year of £8,030,000 (2012: £6,256,000) by the weighted average number of ordinary shares in issue during the year of 12,210,418 (2012: 10,893,468). The comparative weighted average number of shares in issue and therefore basic earnings per share have been restated for the effect of shares issued at a discount to their market value as part of the Spearpoint acquisition.

Note 3 - Dividend

A final dividend for the year ended 30 June 2013 was declared by the Board of Directors on 10 September 2013 and is subject to approval by the shareholders at the Company's Annual General Meeting. It will be paid on 18 October 2013 to shareholders who are on the register at the close of business on 20 September 2013.

Note 4 - Statutory financial statements

The financial information set out above does not constitute a full financial statement of the Group's affairs for the year ended 30 June 2013, but it is derived from the statutory financial statements. The Group's auditors have reported on the full Annual Report & Accounts for the year and have issued an unqualified audit report.

The statutory accounts will be delivered to the Registrar of Companies following the Company's Annual General Meeting, to be held at the Group's head office on 17 October 2013.

 

END

 

 

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