Brooks Macdonald Group PLC – Half-year Report

Brooks Macdonald Group PLC – Half-year Report

Brooks Macdonald Group plc, the AIM listed integrated wealth management group, today announces its half-year results for the six months ended 31 December 2018.

Financial Highlights

Half year ended

31.12.2018

Half year ended

31.12.2017

Total discretionary funds under management (“FUM”)

£11.9bn

£11.7bn

Revenue (from continuing operations)

£52.0m

£48.3m

Underlying1 results (from continuing operations)

Underlying profit before tax

£9.0m

£8.3m

Underlying profit margin

17.3%

17.2%

Underlying diluted earnings per share

51.9p

46.2p

Statutory results (from continuing operations)

Statutory profit before tax

£0.5m

£0.5m

Statutory diluted earnings per share

-7.3p

-4.9p

Cash

£24.8m

£26.9m

Dividends

Interim dividend

19.0p

17.0p

 1Adjustments from statutory profit are in respect of the amortisation of client relationships; finance income / costs and changes in the fair value of deferred and contingent consideration; impairment of the carrying value of goodwill (Levitas); impairment of the carrying value of client relationships (Spearpoint); restructuring charge; disposal costs and the profit from discontinued operations (Property Management, Employee Benefits).

Business Highlights:

  • FUM of £11.9 billion at 31 December, was down 4.5% over the half year (compared to a fall of 7.0% in the MSCI WMA Balanced Index), driven by investment performance (down £799 million), partly offset by solid net new business (£241 million).
    –   Net new business was up 1.9%; within that, UK Investment Management maintained a good rate of organic growth, at 3.6%, in spite of a weak December driven by difficult market conditions and weak client sentiment
    –   The International business was affected by the previously disclosed loss of a client-facing team
    –   Investment performance continues to be robust.
  • Revenue up 7.7% versus H1 ’18
    –  Fee income continued to grow, partly reflecting higher fee revenue yield, despite lower market levels at the period end
    –  Transactional income materially affected by reduced new business flows, a relatively stable asset allocation and the ongoing trend towards all-in fees.
  • Underlying profit up 8.1% from £8.3 million to £9.0 million, supported by ongoing cost discipline.
  • Statutory profit before tax of £0.49 million reflected a £4.8 million impairment of goodwill related to the Levitas sponsorship fee, as the Group moves to a new 5-year partnership, and a £2.3 million impairment of the value of Spearpoint acquired client relationships, following the previously disclosed loss of a client-facing team. 
  • Prudent balance sheet and capital management, with capital expenditure of £0.6m (FY18: £2.9m) and dilution management undertaken to reflect the Board’s intention to restrict aggregate share dilution from employee share schemes to a maximum of 10%.
  • Interim dividend up by 11.8% to 19.0p (FY18: 17.0p).
  • Continued progress in dealing with the legacy issues announced in July 2017 relating to the former Spearpoint business:
    –  Reached agreement in principle with the new directors of the Dublin-based fund, who informed shareholders on 12 March that they had agreed Brooks Macdonald’s goodwill offer of £3.4 million and that they would call an Extraordinary General Meeting to seek shareholder approval
    –  82% of goodwill offers made to discretionary portfolio clients accepted at 31 December, accounting for 74% of the value.
  • Measures announced in January to drive efficiency and effectiveness, resulting in a material headcount reduction, while making Brooks Macdonald easier to do business with for clients and advisers
    –  Annualised cost savings of c.£4 million
    –  FY19 benefit of c.£1.5 million
    –  Associated restructuring cost of c.£3m, which will be excluded from underlying profit.
  • Alan Carruthers announced as new Chairman in February, taking over today from Christopher Knight who has been Chairman since the Group’s admission to trading on AIM in 2005.

Caroline Connellan, Chief Executive, commented:

“We delivered a good first half with growth in underlying profit against a backdrop of difficult market conditions and weaker client sentiment, caused by macroeconomic and political uncertainty.  December in particular was a challenging month but our UK Investment Management business has maintained a good level of net new business over the period, reflecting the strength of our client and adviser relationships.

“In January, we announced measures to drive efficiency and effectiveness in the business, streamlining processes, building a scalable operating model and making Brooks Macdonald easier to do business with.  These changes will deliver material cost savings, which we will start to benefit from in the second half, supporting medium-term margin improvement.

“The fundamental opportunity for our business remains strong and we continue to invest in our offering – for example, our recent new product and service launches and our new client portal, due to go live later this year.  I am pleased by the progress we have made to reinforce the foundations of our business and we are now increasingly shifting our focus to driving sustainable and value-enhancing growth.”

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