Interim Results

Brooks Macdonald Group PLC 14 March 2008 Brooks Macdonald Group plc Interim Results for the six months ended 31 December 2007 Chairman's Statement I am pleased to report a strong set of results for the first half of our financial year, the six months ended 31 December 2007. Our results are prepared for the first time under policies consistent with International Financial Reporting Standards (IFRS). As a consequence, results for the comparative periods have been restated to reflect this adoption. None of the IFRS restatements is material. On turnover for the period of £7.6 million, an increase of 50% over the corresponding period last year, we have achieved pre-tax profits of £863,000, a rise of 69%. Brooks Macdonald Asset Management funds under management have increased from £915 million at 30 June to £1,052 million at 31 December. As well as being a landmark for the company, moving through £1 billion of funds under management, this has been particularly pleasing considering the market backdrop. Funds under management over the six months rose 14.9% whilst the FTSE100 declined 1.55% over the period. This growth represents a combination of strong investment performance and new business. This is coupled with increased exposure in the professional intermediary market, the continued growth of the SIPP market and demand from private investors for a truly bespoke investment service. Brooks Macdonald Financial Consulting has increased turnover significantly. Bearing in mind that a significant proportion of the fee income is orientated towards the tax year end, this is a pleasing performance. The company has continued to increase its profile in the legal and accountancy sectors, most notably in the South East, and this together with the sustained growth of the employee benefits team bodes well for the future. Brooks Macdonald Services, our dealing, nominee and custody services company, continues to deliver, with the result that over the last six months the Group has started to see the real benefits of providing these services 'in house'. As well as allowing us to maintain high service standards it allows the business to scale materially and provides operational leverage. The economic outlook is more challenging than it has been for some time but with the strength of our distribution and our excellent team we look forward to the next six months and beyond with confidence Christopher Knight Chairman 14 March 2008 Brooks Macdonald Group plc Consolidated Income Statement for the six months ended 31 December 2007 Note 31 December 2007 31 December 30 June 2007 (unaudited) 2006(unaudited) (unaudited) £ £ £ Revenue 7,599,892 5,089,023 12,070,569 Administrative costs (7,114,561) (4,826,485) (11,058,555) 485,331 262,538 1,012,014 Other operating income 39,465 74,265 153,624 Operating profit 524,796 336,803 1,165,638 Finance income 338,159 174,602 434,694 Profit before taxation 862,955 511,405 1,600,332 Taxation 2 (242,174) (163,200) (437,246) Profit for the period 620,781 348,205 1,163,086 Earnings per share 3 Basic earnings per share 6.32p 3.55p 11.85p Diluted earnings per share 5.77p 3.28p 10.99p Brooks Macdonald Group plc Consolidated Balance Sheet as at 31 December 2007 Note 31 December 2007 31 December 30 June 2007 (unaudited) 2006(unaudited) (unaudited) £ £ £ Assets Non current assets Property, plant and equipment 631,093 205,895 465,769 Intangible assets 5 444,189 298,216 232,395 Total non current assets 1,075,282 504,111 698,164 Current assets Trade and other receivables 2,407,387 2,874,683 2,873,536 Deferred taxation 98,883 - 66,057 Financial assets 37 37 37 Cash and cash equivalents 5,205,122 2,683,518 4,956,120 Total current assets 7,711,429 5,558,238 7,895,750 Total assets 8,786,711 6,062,349 8,593,914 Current liabilities Trade and other payables (2,998,636) (2,073,427) (3,583,333) Current tax liabilities (781,720) (428,986) (506,567) Total current liabilities (3,780,356) (2,502,413) (4,089,900) Non current liabilities Provisions 6 (194,800) (208,134) (204,990) Other non current liabilities (23,439) (26,563) (20,313) Total non current liabilities (218,239) (234,697) (225,303) Net assets 4,788,116 3,325,239 4,278,711 Financed by: Equity Share capital 98,131 98,131 98,131 Share premium account 1,365,910 1,365,910 1,365,910 Other reserves 521,151 273,141 411,732 Retained earnings 2,802,924 1,588,057 2,402,938 Total equity 4,788,116 3,325,239 4,278,711 Brooks Macdonald Group plc Consolidated Cash Flow Statement for the six months ended 31 December 2007 Note Six months ended Six months ended Year ended 31 December 31 December 30 June2007 2007(unaudited) 2006(unaudited) (unaudited) £ £ £ Cash inflow/(outflow) from operating activities Cash generated from operations 7 597,462 (509,137) 2,053,063 Taxation received /(paid) - 4,275 (258,245) Net cash from /(used in) operating 597,462 (504,862) 1,794,818 activities Cash flow from investing activities (254,030) (73,251) (426,242) Purchase of property, plant and equipment Purchase of intangible assets (211,794) (298,216) (232,395) Interest received 338,159 174,602 434,694 Net cash from/ (used in) investing (127,665) (196,865) (223,943) activities Cash flows from financing activities Dividends paid to shareholders (220,795) (147,197) (147,197) (220,795) (147,197) (147,197) Net cash used in financing activities 249,002 (848,924) 1,423,678 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at start 4,956,120 3,532,442 3,532,442 of period Cash and cash equivalents at end of 5,205,122 2,683,518 4,956,120 period Brooks Macdonald Group plc Consolidated statement of changes in equity from 1 July 2007 to 31 December 2007 Share Share Share option Merger Retained Total capital premium reserve earnings account reserve (restated) £ £ £ £ £ £ At 1 July 2006 (unaudited) 98,131 1,365,910 54,000 191,541 1,387,049 3,096,631 Profit for the year - - - - 1,163,086 1,163,086 Dividends paid - - - - (147,197) (147,197) Share option movement - - 166,191 - - 166,191 At 30 June 2007 98,131 1,365,910 220,191 191,541 2,402,938 4,278,711 (unaduited) Profit for the period - - - - 620,781 620,781 Dividends paid - - - - (220,795) (220,795) Share option movement - - 109,419 - - 109,419 At 31 December 2007 98,131 1,365,910 329,610 191,541 2,802,924 4,788,116 (unaduited) Brooks Macdonald Group plc Financial Statements for the six months ended 31 December 2007 Notes General Information The interim financial information for the six months ended 31 December 2007 has been prepared under International Financial Reporting Standards (IFRS). Explanation of transition to IFRS This is the first period for which the group has presented its financial statements under IFRS. The last statements under UK Generally Accepted Accounting Practice (GAAP) were for the year ended 30 June 2007. The date of transition to International Financial Reporting and Accounting Standards was 1 July 2006 and all comparative information in these financial statements has been restated to reflect the Group's adoption of International Financial Reporting and Accounting Standards. The adoption of IFRS has resulted in no changes between the financial statements prepared in accordance with UK GAAP and IFRS. The financial statements for the year ended 30 June 2007 have been derived from audited UK GAAP information adjusted for the impact of IFRS and is therefore unaudited. The financial information for the period ended 31 December 2006 has been derived from unaudited UK GAAP information adjusted for the impact of IFRS. The interim information, together with the comparative information contained in this report for the year ended 30 June 2007, does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. However, the information has been reviewed by the Company's auditors, and their report appears at the end of the interim financial report. The UK GAAP statutory accounts for the year ended 30 June 2007 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. A copy of this statement is being forwarded to all shareholders. 1. Principal accounting policies (a) Accounting conventions The financial statements for the year ending 30 June 2008 will be prepared in accordance with IFRS. This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting for the first time. (b) Revenue Fees and commissions Portfolio and other management advisory and service fees are recognised over the period the service is provided. Commissions receivable and payable are accounted for in the period the service is provided. The dealing fees arising from the sale and purchase of securities on behalf of clients is recognised according to the settlement date. (c) Property, plant and equipment Property, plant and equipment is included in the balance sheet at cost less accumulated depreciation and any provisions for impairment. Provision is made for depreciation on all property, plant and equipment at rates calculated to write off the cost or valuation, less estimated residual value, of each asset over its expected useful life, as follows: Fixtures and fittings - 15% per annum Equipment - 20% per annum (d) Taxation Current tax is the tax payable on the taxable income for the year, using tax rates applicable at the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for the taxable temporary differences and deferred tax assets are recognised to the extent that taxable profits will be available against which deductible temporary differences can be utilised. (e) Defined contribution retirement scheme. Contributions in respect of the Group's defined contribution retirement scheme are charged to the profit and loss account as they fall due. (f) Operating lease payments Rents due under operating leases are charged to the profit and loss account on a straight line basis over the term of the lease. The group benefited from a rent-free period under the terms of the current property lease. In accordance with SIC15 Operating Leases Incentives, the benefit is being allocated over the shorter of the lease term and the date of the market valuation as specified in the lease. During the rent-free period a rental charge has been recognised in the profit and loss account and accrued as a liability in the balance sheet. (g) Foreign currency translation Foreign currency transactions are translated using the exchange rate prevailing at the transaction date. Foreign exchange gains and losses resulting from settlement of such transactions and from the translation of period end monetary assets and liabilities are recognised in the income statement. (h) Share-based payments - IFRS 2 The Group has applied the requirements of IFRS 2 Share-based Payments and has adopted the requirements of IFRIC 11 in respect of share-based payments. Equity settled share based payments are measured at fair value at the date of grant. The fair value at the grant date of the equity settled share based instrument is expensed on a straight line basis over the vesting period based on the group's estimate of the number of shares that will eventually vest . (i) Business Combinations On 28 January 2004, the Company acquired 100% of the issued ordinary share capital of Brooks Macdonald Financial Consulting Limited by means of a share for share exchange as part of a group reorganisation. The Group has taken advantage of the exemption in IFRS 1 and has decided not to apply IFRS 3 to business combinations prior to the date of transition to IFRS. In particular the merger undertaken in 2004 as accounted for under UK GAAP has not been reclassified as an acquisition. (k) Trade receivables Trade receivables are measured at the initial recognition at fair value and are subsequently carried at the lower of original fair value and their recoverable amount. Appropriate allowances for the estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. (l) Cash and cash equivalents Cash comprises cash on hand and demand deposits which may be accessed without penalty. Cash equivalents comprise short-term highly liquid investments with a maturity date of less than three months from the date of acquisition. (m) Intangible assets Other intangible assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to Profit and Loss on a straight line basis over the estimated useful lives of the intangible asset. The estimated useful life is as follows: Buyout of funds - over five years 3. Earnings per share Six months ended Six months ended 31 Year ended 31 December 2007 December 2006 30 June 2007 (unaudited) (unaudited) (unaudited) £ £ £ Earnings attributable to ordinary 620,781 348,205 1,163,086 shareholders No.(m) No.(m) No.(m) Weighted average number of shares and basic 9.81 9.81 9.81 earnings per share denominator Issuable on exercise of options .94 .77 .77 Diluted earnings per share denominator 10.75 10.58 10.58 Basic earnings per share 6.32p 3.55p 11.85p Diluted earnings per share 5.77p 3.28p 10.99p 4. Dividends Six months ended Six months ended 31 Year ended 31 December 2007 December 2006 30 June 2007 (unaudited) (unaudited) (unaudited) £ £ £ Paid final dividend on ordinary shares 220,795 147,197 147,197 5. Intangible Assets Intangible assets relate to payments made to key fee earners in return for an alternative commission structure and deferred payments in respect of the acquisition of new teams of fund managers. 6. Provisions 31 December 31 December 30 June 2007 2007(unaudited) 2006 (unaudited) (unaudited) £ £ £ Client compensation payments 194,800 208,134 204,990 Provisions for client compensation payments relate to the potential liability resulting from specific complaints against the Group. 7. Reconciliation of operating profit and net cash inflow from operating activities 31 December 2007 31 December 2006 30 June 2007 (unaudited) (unaudited) (unaudited) £ £ £ Operating profit 524,796 336,803 1,165,638 Depreciation 88,707 36,824 129,941 Decrease/(increase) in debtors 466,148 (913,807) (912,661) (Decrease)/increase in creditors (581,418) (11,391) 1,492,264 (Decrease)/increase in provisions (10,190) 14,834 11,690 Share based payments 109,419 27,600 166,191 Net inflow/(outflow) 597,462 (509,137) 2,053,063 8. IFRS Transition First time adoption of IFRS The transition date to IFRS from UK GAAP was 1 July 2006. The accounting policies are based on IFRS and have been applied retrospectively. There have been minor changes in terminology in respect of the changes from UK GAAP to IFRS in respect of current and comparative information. There have been no changes in respect of the profit on ordinary activities after taxation or shareholders funds for all comparatives and current year disclosure. The exception to this is the reclassification of some trade receivables to intangible assets in accordance with IAS 38. This has no impact on shareholders funds. This information is provided by RNS The company news service from the London Stock Exchange

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