Half Yearly Report

RNS Number : 0197D

Brooks Macdonald Group PLC

16 March 2011

 



BROOKS MACDONALD GROUP PLC

Interim results for the six months ended 31 December 2010

Brooks Macdonald Group plc (the "Group"), the AIM listed integrated wealth management group, today announces its unaudited interim results for the six months ended 31 December 2010.

Highlights

	Six months to  31.12.10	Six months to 31.12.09	% Change	Year ended 30.06.10
Revenue	£25.07m	£16.39m	Up 53%	£35.1m
Pre-tax profits	£3.06m*	£2.47m	Up 24%	£5.68m
Earnings per share	20.26*	18.85p	Up 8%	38.10p
Interim Dividend	5p	3p	Up 67%	9p
Funds under management	£2.689bn	£1.852bn	Up 46%	£2.186bn

     *These figures are stated after a charge of £545,000 levied under the Financial Services Compensation Scheme.

        In respect of the failure of Keydata Services

·      Strong performance in all areas of the business

·      Rise in interim dividend well covered by earnings: Board's intention to recommend a larger final dividend in October

·      Funds business to be launched in the summer, combining specialist funds acquired with Braemar Group in July 2011 with 4 existing Brooks Macdonald funds

·      FUM growth of over £500 million in the six month period

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

"The Company has had another strong period with growth across all of its activities, underpinned by continued strong performance from our fund management teams and the support received from the professional intermediary market.  We continue to look to grow and invest across the business confident that the Group is well positioned for the opportunities ahead, including those presented by the Retail Distribution Review." 

Enquiries to:

Brooks Macdonald Group plc      [phone]

Chris Macdonald, Chief Executive

Simon Jackson, Finance Director

Collins Stewart Europe Limited    [phone]

Bruce Garrow/Seb Jones

Bankside Consultants                [phone]

Simon Rothschild/Louise Mason

Note to Editors

Brooks Macdonald Group plc is an AIM listed integrated wealth management group. The group consists of three principal companies: Brooks Macdonald Asset Management Limited, a discretionary asset management business; Brooks Macdonald Financial Consulting Limited, a financial advisory and employee benefits consultancy; and Braemar Group Limited, a specialist property fund and estate management company.

Brooks Macdonald Asset Management provides a bespoke, fee based, investment management service to private high net worth individuals, charities and trusts. It also provides in-house custody, nominee and dealing services and has offices in London, Manchester, Hampshire, Tunbridge Wells, and Edinburgh.

Brooks Macdonald Financial Consulting is  located in London and provides fee based, independent advice to high net worth individuals, families and businesses.

Braemar Group operates from Hale, Cheshire. It designs and manages specialist funds in the property sector and manages property assets on behalf of the funds and other clients.
 

The Brooks Macdonald Group has developed under stable management since formation in 1991 and, including Braemar Group, now has in excess of 240 staff throughout the UK. The group shares are listed on AIM, with management and staff retaining considerable ownership of the business.

Brooks Macdonald Group plc

Results for the six months ended 31 December 2010

Chairman's Statement

Our results for the first six months of the financial year show continued growth, both in the size of the business and its profitability.

Turnover rose to £25.1million, an increase of 53%, and profit before tax to £3.06 million compared with £2.47million in the first half of last year. Earnings per share have risen from 18.85p to 20.26p.

These results are after charging £545,000, being the levy imposed on Brooks Macdonald (in common with all other wealth managers) under the Financial Services Compensation Scheme. The levy arises from the failure of Keydata Investment Services and other intermediary firms. The results benefited from a change in billing frequency from six to three months in arrears which came into effect for most of our clients during this period.

Last year we announced our maiden interim dividend of 3p per share and following these strong results the board has decided to declare an interim dividend for 2011 of 5p per share payable to shareholders on 21 April 2011 with a record date of 25 March 2011. We have a strong balance sheet and it remains the board's intention to recommend a larger final dividend for the full year.

PricewaterhouseCoopers were appointed as our auditors in November 2010 and have carried out an independent review of these results. We will seek shareholders' approval for their reappointment at our AGM later in the year.

The group set out in its 2010 annual report and financial statements the principal risks and uncertainties that could impact its performance; these remain unchanged since the annual report was published. The group operates a structured risk management process, which indentifies and evaluates risks and uncertainties and review mitigation activity.

As already announced, discretionary funds under management at 31 December 2010 were £2.689 billion, an increase of £500 million or 23% over the six month period. This was supported by markets where the APCIMS balanced index rose by 15.22%. This is a rise of £838 million or 46% over twelve months. The APCIMS balanced index over the same 12 month period has risen 9.29%.

Simon Wombwell, who has been a non-executive director of Brooks Macdonald for nine years, became an executive director in February this year. Simon, a former head of Sales and Marketing at Scottish Widows Investment Partnership, will take charge of the funds business we intend to launch this summer, subject to FSA approval of our plans. The business will initially consist of the Braemar funds we acquired in July and our existing four Brooks Macdonald funds. We believe this is an exciting development for the group as we widen our wealth management proposition. The Braemar property management business has continued to perform well, with property assets under administration growing from £500 million to over £650 million since we acquired Braemar.

Performance of clients' assets in a risk controlled environment, service and innovation remain core to the group's success. Over the coming months we are investing in further improvements to our back office functionality, our reporting to clients and our support programmes for our Strategic Alliance partners and our top end intermediaries.

We enter our twentieth year with confidence - confident in the continuing growth of the business, in the support we receive from the intermediary market and in the opportunities we see for Brooks Macdonald from the changes that RDR will bring to the financial services marketplace.

Christopher Knight

Chairman

15 March 2011                    

Brooks Macdonald Group plc

Condensed consolidated statement of income and statement of comprehensive income

	Note	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June 2010 (audited)
		£	£	£
Revenue		25,068,448	16,385,333	35,108,634
Administrative costs	3	(22,005,136)	(13,936,647)	(29,500,860)
Operating  profit		3,063,312	2,448,686	5,607,774
Finance income		58,639	35,921	105,676
Finance costs		(62,756)	(12,395)	(30,987)
Profit before income tax		3,059,195	2,472,212	5,682,463
Income tax expense	4	(938,504)	(576,483)	(1,825,642)
Profit for the period attributable to owners of the parent		2,120,691	1,895,729	3,856,821
Other comprehensive income
Gain on acquisition of subsidiary		-	9,300	-
Total comprehensive income for the period		2,120,691	1,905,029	3,856,821
Earnings per share for the profit attributable to owners of the parent	5
Basic earnings per share		20.26p	18.85p	38.10p
Diluted earnings per share		19.46p	18.14p	36.31p

Brooks Macdonald Group plc

Condensed consolidated balance sheet

	Note	31 December 2010 (unaudited)	31 December 2009 (unaudited)	30 June 2010 (audited)
		£	£	£
Assets
Non-current assets
Intangible assets	7	6,486,026	1,890,769	1,892,145
Property, plant and equipment	8	2,193,929	1,613,614	2,042,002
Investment properties	9	-	-	-
Available for sale financial assets	10	-	-	194,177
Held to maturity investments		10,007	-	-
Deferred income tax assets		1,694,571	403,502	1,261,307
Total non current assets		10,384,533	3,907,885	5,389,631
Current assets
Trade and other receivables		8,398,420	2,827,754	3,793,191
Cash and cash equivalents		12,541,494	12,469,386	14,374,719
Total current assets		20,939,914	15,297,140	18,167,910
Total assets		31,324,447	19,205,025	23,557,541
Liabilities
Non-current liabilities
Provisions	12	-	(738,114)	(756,706)
Other non current liabilities		(4,688)	(10,939)	(7,811)
Total non current liabilities		(4,688)	(749,053)	(764,517)
Current liabilities
Trade and other payables		(13,364,260)	(6,912,915)	(8,692,726
Current income tax liabilities		(1,000,393)	(1,257,493)	(1,313,120)
Provisions	13	(1,165,408)	(332,710)	(377,110)
Total current liabilities		(15,530,061)	(8,503,118)	(10,382,956)
Net assets		15,789,698	9,952,854	12,410,068
Equity
Share capital		105,691	101,708	102,451
Share premium account		3,695,230	1,865,974	2,012,427
Other reserves		2,349,854	1,237,438	1,790,739
Retained earnings		9,638,923	6,747,734	8,504,451
Total equity		15,789,698	9,952,854	12,410,068

Brooks Macdonald Group plc

Condensed consolidated cash flow statement

	Note	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year  ended 30 June 2010 (audited)
		£	£	£
Cash flows from operating activities
Cash generated from operations	14	3,412,304	6,514,533	10,432,064
Taxation paid		(1,301,613)	(164,833)	(1,709,681)
Net cash inflows from operating activities		2,110,691	6,349,700	8,722,383
Cash flows from investing activities
Purchase of property, plant and equipment		(437,734)	(364,184)	(1,053,043)
Purchase of intangible assets		(281,947)	(1,594,662)	(210,629)
Purchase of held to maturity investment		(1,000)	-	-
Acquisition of subsidiary company, net of cash acquired		(2,871,323)	-	(848,184)
Interest received		58,639	35,921	105,676
Other interest paid		(45,595)	-	(30,987)
Proceeds of sale of land and buildings		60,000	-	-
Proceeds of sale of investments and investment  properties		612,000	-	-
Purchase of available for sale asset		-	-	(194,177)
Disposal of available for sale asset		194,177	-	-
Net cash outflow used in investing activities		(2,712,783)	(1,922,925)	(2,231,344)
Cash flows from financing activities
Proceeds of issue of shares		288,086	246,217	393,413
Purchase of own shares by employee benefit trust		(355,513)	-	-
Repayment of borrowings	15	(533,000)	-	-
Dividends paid to shareholders		(630,706)	(550,893)	(857,020)
Net cash outflow used in financing activities		(1,231,133)	(304,676)	(463,607)
Net (decrease)/increase in cash and cash equivalents		(1,833,225)	4,122,099	6,027,432
Cash and cash equivalents at start of period		14,374,719	8,347,287	8,347,287
Cash and cash equivalents at end of period		12,541,494	12,469,386	14,374,719

Brooks Macdonald Group plc

Condensed consolidated statement of changes in equity from 1 July 2009 to 31 December 2010

	Share capital	Share premium account	Share option  reserve	Merger reserve	Retained  earnings	Total
	£	£	£	£	£	£
At 1 July 2009	100,162	1,621,303	881,719	191,541	5,284,275	8,079,000
Comprehensive income
Profit for the period	-	-	-	-	1,895,729	1,895,729
Other comprehensive income
Gain on acquisition of subsidiary					9,300	9,300
Transfer	-	-	(109,323)	-	109,323	-
Total comprehensive income	-	-	(109,323)	-	2,014,352	1,905,029
Transactions with owners
Issue of shares	1,546	244,671	-	-	-	246,217
Share options	-	-	93,300	-	-	93,300
Share options deferred taxation	-	-	180,201	-	-	180,201
Dividends paid	-	-	-	-	(550,893)	(550,893)
At 31 December 2009	101,708	1,865,974	1,045,897	191,541	6,747,734	9,952,854
Comprehensive income
Profit  for the period	-	-	-	-	1,951,792	1,951,792
Other comprehensive income
Transfer	-	-	(111,052)	-	111,052	-
Total comprehensive income	-	-	(111,052)	-	2,062,844	1,951,792
Transactions with owners
Issue of shares for cash	743	146,453	-	-	-	147,196
Share options	-	-	157,864	-	-	157,864
Share options deferred taxation	-	-	506,489	-	-	506,489
Dividends paid	-	-	-	-	(306,127)	(306,127)
At 30 June 2010	102,451	2,012,427	1,599,198	191,541	8,504,451	12,410,068

Brooks Macdonald Group plc

Condensed consolidated statement of changes in equity from 1 July 2009 to 31 December 2010 (continued)

	Share capital	Share premium account	Share option  reserve	Merger reserve	Treasury shares	Retained  earnings	Total
	£	£	£	£	£	£	£
At 30 June 2010	102,451	2,012,427	1,599,198	191,541	-	8,504,451	12,410,068
Comprehensive income
Profit and total comprehensive income for the period	-	-	-	-	-	2,120,691	2,120,691
Total comprehensive income	-	-	-	-	-	2,120,691	2,120,691
Transactions with owners
Issue of shares	3,240	1,682,803	-	-	-	-	1,686,043
Share options	-	-	176,227	-	-	-	176,227
Purchase of own shares by employee benefit trust	-	-	-	-	(355,513)	-	(355,513)
Share options deferred taxation	-	-	382,888	-	-	-	382,888
Dividends paid	-	-	-	-	-	(630,706)	(630,706)
At 31 December 2010	105,691	3,695,230	2,158,313	191,541	(355,513)	9,994,436	15,789,698

Brooks Macdonald Group plc

Notes to the condensed consolidated accounts

for the six months ended 31 December 2010

1.     Basis of preparation

These accounts for the half year are presented in accordance with IAS 34 "Interim Financial Reporting". The accounts have been prepared on basis of the accounting policies, methods of computation and presentation set out in the group's consolidated accounts for the year ended 30 June 2010 except as stated below. The half year accounts should be read in conjunction with the group's consolidated accounts for the year ended 30 June 2010, which has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The information in this announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The group's accounts for the year ended 30 June 2010 have been reported on by the auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not draw attention to any matters by way of emphasis. It also did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Accounting policies

With the exception of the Employee Benefits Trust, all changes in the accounting policies are in relation to the acquisition of Braemar Group Limited. All other accounting policies remain consistent with those stated in the financial statements for the year ended 30 June 2010.

Fees, commission and interest

Where amounts are due conditional on the successful completion of fund raising for investment vehicles revenue is recognised where in the opinion of the directors, there is a reasonable certainty that sufficient funds have been raised to enable the successful operation of that investment vehicle. Amounts due on an annual basis for the management of third party investment vehicles are recognised on a time apportioned basis.

Intangible assets

Software costs are amortised over their estimated useful life of four years on a straight line basis.

Property, plant and equipment

Depreciation is calculated to write down the cost of the assets to their estimated residual values of each asset over their estimated useful life on a straight line basis as follows:

Long leasehold property - 50 years

Fixtures, fittings, motor vehicles and equipment -15%-25% per annum

Investment properties

Investment property comprises non owner occupied buildings held to earn rentals and for capital appreciation. Investment property is carried at fair value and is restated at each balance sheet date. Changes in fair values are recognised in the statement of comprehensive income in the period in which the changes arises.

Financial instruments

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on the balance sheet at fair value when the group becomes a party to the contractual provisions of the instrument.

Held-to-maturity investments

Held-to-maturity investments are measured at amortised cost.

 

Carried interest receivable

The group earns a performance fee, carried interest receivable, on funds it manages on behalf of its investors. Carried interest receivable is recognised where, at the balance sheet date, the performance criteria have been met based on the valuations of funds. Carried interest that has been earned, but where the amounts are not yet for payment, is discounted to its present value.

Employee Benefit Trust (EBT)

The company provides finance to an EBT to purchase the company's shares on the open market to meet its obligation to provide shares when an employee exercises their options or awards. The administration and finance costs connected with the trust are charged to the income statement. The cost of the shares held by the EBT is deducted from equity. A transfer is made between other reserves and retained earnings over the vesting periods of the related share options or awards to reflect the ultimate proceeds receivable from employees on exercise. The Trustees have waived their rights to receive dividends on the shares.

The EBT is considered to be a Special Purpose Entity (SPE) where the substance of the relationship between the group and the SPE indicates that the SPE is controlled by the group - in substance, the activities of the trust are being conducted on behalf of the group according to its specific business needs in order to obtain benefits from its operation. On this basis, the assets held by the trust are consolidated into the group's financial statements.

2.     Segmental information

For management purposes the group's activities are organised into three operating divisions: investment management, financial planning, and with the acquisition of Braemar Group Limited on 6 July 2010, niche fund and property management. The group's other activity, offering nominee and custody services to clients, has been included in investment management. These divisions are the basis on which the group reports its primary segmental information. There has been no impact on the comparative figures.

Revenues and expenses are allocated to the business segment that originated the transaction. Revenues and expenses that are not directly originated by a business segment are reported as unallocated. Centrally incurred expenses are allocated to business segments on an appropriate pro-rata basis. Segmental assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet.
 

Period ended 31 December 2010 (unaudited)		Investment management	Financial planning	Braemar Group	Total
		£	£	£	£
Total segment revenues		23,556,609	1,280,802	1,469,019	26,306,430
Inter segment revenues		(950,083)	(287,899)	-	(1,237,982)
External revenues		22,606,526	992,903	1,469,019	25,068,448
Segmental result		5,160,015	19,049	(274,691)	4,904,373
Unallocated items					(1,845,178)
Profit before income tax					3,059,195
Income tax expense					(938,504)
Profit for the period					2,120,691
At 31 December  2010
Segment assets		11,253,708	3,214,824	1,273,304	15,741,836
Unallocated assets					15,582,611
Total assets					31,324,447
Segment liabilities		11,394,258	1,356,426	715,406	13,466,090
Unallocated liabilities					2,068,659
Total liabilities					15,534,749

Period ended 31 December  2009 (unaudited)		Investment management	Financial planning	Braemar Group	Total
		£	£	£	£
Total segment revenues		16,243,543	1,248,090	-	17,491,633
Inter segment revenues		(807,106)	(299,194)	-	(1,106,300)
External revenues		15,436,437	948,896	-	16,385,333
Segmental result		4,405,832	47,241	-	4,453,073
Unallocated items					(1,980,861)
Profit before income tax					2,472,212
Income tax expense					(576,483)
Profit for the period					1,895,729
At 31 December 2009
Segment assets		10,205,522	2,356,589	-	12,562,111
Unallocated assets					6,642,914
Total assets					19,205,025
Segment liabilities		5,732,688	1,558,601	-	7,291,289
Unallocated liabilities					1,960,882
Total liabilities					9,252,171

Year  ended 30 June 2010 (audited)		Investment management	Financial planning	Braemar Group	Total
		£	£	£	£
Total segment revenues		34,556,615	2,738,212	-	37,294,827
Inter segment revenues		(1,632,254)	(553,939)	-	(2,186,193)
External revenues		32,924,361	2,184,273	-	35,108,634
Segmental result		7,813,507	43,683	-	7,857,190
Unallocated items					(2,174,727)
Profit before income tax					5,682,463
Income tax expense					(1,825,642)
Profit for the year					3,856,821
At 30 June 2010
Segment assets		7,102,048	3,169,784	-	10,271,832
Unallocated assets					13,285,709
Total assets					23,557,541
Segment liabilities		6,776,649	1,457,009	-	8,233,658
Unallocated liabilities					2,913,815
Total liabilities					11,147,473

Geographical segments

The group's operations are all located in the United Kingdom.

3.      Administrative costs

In January 2011 the group received invoices from the Financial Services Authority for the Financial Services Compensation Scheme Levy in respect of the 2010/2011 levy year. The levy charged in these invoices amounted to £544,867. This amount has been charged to the income statement. The group has been advised that a further levy in respect of the 2010/2011 may be levied, no provision has been made for this in the income statement.

4.      Taxation

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended     30 June 2010 (audited)
	£	£	£
United Kingdom taxation	1,223,161	655,000	2,152,642
Under provision in prior years	12,070	-	66,964
Deferred taxation	(296,727)	(78,517)	(393,964)
	938,504	576,483	1,825,642

5.         Earnings per share

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June 2010  (audited)
	£	£	£
Earnings attributable to ordinary   shareholders	2,120,691	1,895,729	3,856,821
	Number	Number	Number
Weighted average number of shares	10,467,953	10,056,975	10,123,097
Issuable on exercise of options	432,143	391,488	500,051
Diluted earnings per share denominator	10,900,096	10,448,463	10,623,148
Basic earnings per share	20.26p	18.85p	38.10p
Diluted earnings per share	19.46p	18.14p	36.31p

6.         Dividends

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June 2010 (audited)
	£	£	£
Paid interim dividend on ordinary shares	-	-	306,127
Paid final dividend on ordinary shares	630,706	550,893	550,893
	630,706	550,893	857,020

An interim dividend of 5p per share was declared by the board on 15 March 2011 and has not been included as a liability as at 31 December 2010. This interim dividend will be paid on 21 April 2011.

7.          Intangible assets

	Goodwill	Software	Acquired client relationships	Acquisition of new teams of fund managers	Total
	£	£	£	£	£
Cost
Cost 1 July 2009			-	1,285,330	1,285,330
Additions	-	-	1,594,662	-	1,594,662
Cost at 31 December 2009	-	-	1,594,662	1,285,330	2,879,992
Additions	-	-	-	210,629	210,629
Disposals	-	-	(9,300)	-	(9,300)
Cost at 30 June 2010			1,585,362	1,495,959	3,081,321
Additions	3,592,385	70,458	830,000	250,000	4,742,843
Cost at 31 December 2010	3,592,385	70,458	2,415,362	1,745,959	7,824,164
Amortisation
At 1 July 2009	-	-	-	878,481	878,481
Charge for the period	-	-	-	110,742	110,742
At 31 December 2009	-	-	-	989,223	989,223
Charge for period	-	-	88,592	111,361	199,953
At 30 June 2010	-	-	88,592	1,100,584	1,189,176
Charge for period	-	9,627	71,488	67,847	148,962
At 31 December 2010	-	9,627	160,080	1,168,431	1,338,138
Net book value
At 31 December 2009	-	-	1,594,662	296,107	1,890,769
At 30 June 2010	-	-	1,496,770	395,375	1,892,145
At 31 December 2010	3,592,385	60,831	2,255,282	577,528	6,486,026

8.    Property, plant and equipment

During the six months to 31 December 2010, the group acquired assets with a cost of £572,790 (six months ended 31 December 2009: £364,184, year ended 30 June 2010: £1,053,043). Assets with a net book value of £60,000 were disposed of in the six months ended 31 December 2010 (31 December 2009: £nil: 30 June 2010: £nil), resulting in a gain on disposal of £nil (31 December 2009: £nil, 30 June 2010: £nil)

9.   Investment properties

Investment properties of £607,000 were acquired through business combination. The investment properties were disposed of during the period at a profit of £5,000.

10.       Available-for-sale financial assets

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June 2010  (audited)
	£	£	£
At 1 July 2010	194,177	-	-
Transfer to cost of business acquisition	(194,177)	-	-
Additions - 8,554,638 shares in Braemar Group Limited. Since 30 June 2010, the company has acquired 100% of the issued share capital as detailed in note 11.	-	-	194,177
At 31 December 2010	-	-	194,177

11.      Business combinations - current period

On 6 July 2010, the group acquired the entire share capital of Braemar Group Limited ('Braemar') (formerly Braemar Group plc) at a price of 2.25p per ordinary share. The total consideration was £4,118,780   of which £3,032,977 was satisfied in cash in respect of 123,868,959 ordinary shares and outstanding share options in Braemar and by the issue of 139,851 new shares in Brooks Macdonald Group plc, with a value of £1,085,803, to the management of Braemar in exchange for their aggregate holding of 48,257,421 ordinary shares. Braemar has two core divisions; Braemar Securities which designs, promotes and manages niche structured financial products in the financial property sector through open ended investment companies and closed end residential funds; and Braemar Estates which manages property assets on behalf of the funds and other clients. The acquisition of this range of property funds has enabled the group to strengthen its position in the specialist fund management market. Acquisition related costs of £400,729 have been expensed in the income statement.

11.        Business combinations - current period (continued)

Purchase consideration			£
Cash paid			3,032,977
Issue of shares			1,085,803
Total purchase consideration			4,118,780
			Carrying                   amounts
			£
Cash and cash equivalents			161,654
Investment properties			607,000
Property, plant and equipment			135,056
Held to maturity investments			9,007
Trade and other receivables			775,536
Other current assets			97,534
Trade and other payables			(1,242,831)
Borrowings			(844,650)
Deferred tax liabilities			(40,413)
Net identifiable liabilities			(342,107)
Intangible assets - software			38,502
Intangible assets - client relationships			830,000
Goodwill			3,592,385
			4,118,780

       The goodwill relates to Braemar's expected future income and the synergies expected to arise after the company's acquisition of the subsidiary.

         Impact on reported results from date of acquisition

	Revenues from external customers	Loss
	£	£
Braemar Group Limited	1,469,019	(274,691)

         Net cash outflow

	Cash consideration paid	Cash in acquired company	Net cash outflow
	£	£	£
Acquisitions	(3,032,977)	161,654	(2,871,323)

11.       Business combinations - prior period

            On 4 September 2009, the company acquired the entire issued share capital of Brooks Macdonald 

            Asset Management (Tunbridge Wells) Limited, formerly Lawrence House Fund Managers Limited.

            Details of this business combination were disclosed in note 8 of the group's financial statements    

           for the year ended 30 June 2010.

12.       Deferred contingent consideration

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June 2010 (audited)
Deferred contingent consideration
At 1 July 2010	(756,706)	-	-
Transfer to current provisions (note13)	756,706	(725,719)	(725,719)
Interest charge	-	(12,395)	(30,987)
At 31 December 2010	-	(738,114)	(756,706)

Deferred contingent consideration relates to the funds acquired by Brooks Macdonald Asset Management Limited from Lawrence House Fund Managers Limited (now called Brooks Macdonald Asset Management (Tunbridge Wells) Limited). The final amount payable is dependent on the value of the funds acquired after 24 months from the date of acquisition, 4 September 2009. The deferred consideration has been fair valued based on discounted cash flows.

13.       Provisions - client compensation

	Six months ended 31 December 2010 (unaudited)	Six months ended 31 December 2009 (unaudited)	Year ended 30 June   2010 (audited)
Client compensation	£	£	£
At 1 July 2010	377,110	188,710	188,710
Movement during the period	13,000	144,000	188,400
At 31 December 2010	390,110	332,710	377,110
Deferred contingent consideration (note 12)
At 1 July 2010	-	-	-
Transfer from non-current provisions	756,706	-	-
Interest charge	18,592	-
At 31 December 2010	775,298	-	-
Total provisions at 31 December 2010	1,165,408	332,710	377,110

Client compensation provisions relate to the potential liability resulting from client complaints against the group. The complaints are assessed on a case by case basis and provisions for compensation are made where judged necessary. Complaints are on average settled within eight months from the date of notification of the complaint.

14.       Reconciliation of operating profit

             and net cash inflow from operating

             activities

	31 December 2010 (unaudited)	31 December 2009 (unaudited)	30 June 2010 (audited)
	£	£	£
Operating profit	3,063,312	2,448,686	5,607,774
Depreciation	360,864	221,730	482,201
Amortisation of intangible assets	148,962	110,742	310,695
Surplus on sale of investments  and investment properties	(44,154)	-	-
(Increase)/decrease in receivables	(3,732,159)	679,437	(263,821)
Increase in payables	4,199,081	2,072,348	3,855,651
(Decrease)/increase in provisions	(759,829)	878,990	188,400
Share based payments	176,227	93,300	251,164
Gain on acquisition of subsidiary	-	9,300
Net inflow	3,412,304	6,514,533	10,432,064

15.       Borrowings

The company's subsidiary company, Braemar, repaid the following loans during the period:

	Amount
	£
Convertible loan notes	310,723
Northern Rock plc	225,000
Royal Bank of Scotland plc	308,000
	843,723

           The convertible loan notes were redeemable on the earlier of the date on which Braemar had sufficient working capital to enable payment and five years from the date of issue, subject to the approval of the holders of the loan notes. The loan notes accrued interest at a fixed rate of 2% above bank base rate on the date of issue, payable upon redemption or conversion of the loan notes. The loan notes were convertible into Braemar ordinary shares at 3p per share at any time or before the fifth anniversary of the issue provided the holders of the loan notes and their concert parties do not hold more than 29.99% of the entire issued share capital of Braemar. The option to convert to ordinary shares was at the discretion of the holders of the notes. The fifth anniversary of the loan notes and the final date for their repayment was in December 2010. The loan notes together with the accrued interest were repaid in full by the issue of 40,205 ordinary shares in Brooks Macdonald Group plc on the acquisition of Braemar.

           The loan from Northern Rock plc was secured by a fixed charge on an investment property for an amount of £225,000. The interest rate was fixed at 7.05% for the full five year period of the loan and the loan was repayable in full on the fifth anniversary of the loan in October 2012. The loan was repaid during the period ended 31 December 2010.

            The loan from Royal Bank of Scotland plc was secured by a fixed charge on investment property for an amount of £308,000. The loan was due for repayment in full on 13 January 2014 and the interest was set at 2.75% per annum above the Royal Bank of Scotland plc's base rate. The loan was repaid in full during the period ended 31 December 2010.

16.       Related party transactions

At 31 December 2010, some of the company's directors had taken advantage of the facility to have season ticket loans which are available to all employees, the total amount outstanding at the balance sheet date was £5,947 (31 December 2009: £5,675; 30 June 2010: £12,046).

 

17.       Share schemes

            Other share schemes

           Equity based and phantom schemes are detailed the financial statements for the year ended

           30 June 2010.

             Long Term Incentive Scheme (LTIS)

The company has made annual rewards based on certain criteria made under the LTIS to executive directors and senior executives. The conditional awards, which vest three years after grant, are subject to the satisfaction of specified performance criteria, measured over  three year performance  period. All conditional awards are at the discretion of the remuneration committee.

             Employee Benefit Trust (EBT)

Brooks Macdonald Group plc established an EBT on 3 December 2010. The Trust was established to acquire ordinary shares in the company in connection with the LTIS, as detailed above, and for other long term awards to employees. At 31 December 2010, the company had paid £375,000 to the Trust, which acquired 36,850 shares in the open market for a consideration of £355,513. In January 2011, a further 1,109 shares were acquired in the open market for a consideration of £11,381. All finance costs and administration expenses connected with the Trust are charged to Income statement as they accrue. The Trust has waived its rights to dividends.

Brooks Macdonald Group plc

Results for the six months ended 31 December 2010

Independent Review Report to Brooks Macdonald Group Plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010, which comprises the Condensed Consolidated Statement of Income and Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Cash Flow, the Condensed Consolidated Statement of Changes in Equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
15 March 2011

London

Notes:

The maintenance and integrity of the Brooks Macdonald Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the half-yearly financial report since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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