Final Results

RNS Number : 1443M

Brooks Macdonald Group PLC

13 September 2012

 



13 September 2012

Brooks Macdonald Group plc

Report for the year ended 30 June 2012

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 2012.

Financial Highlights

	Year Ended 30.06.12	Year Ended 30.06.11	Change
Pre-tax profit	£8.5m	£7.3m	17%
Revenue	£53.3m	£52.2m	2%
Basic earnings per share	57.94p	51.92p	12%
Total funds under management ("FUM")	£3.52bn	£2.97bn	19%
Final proposed dividend	12.5p	10p	25%
Total dividends	18.5p	15p	23%

Business Highlights:

·    Year on year increase of 19% in discretionary FUM to £3.52bn driven by acquisitions, performance and organic growth in distribution, capacity, strategic alliances and investment capability.

·    Brooks Macdonald Funds grew funds under management to £148m (2011: £101m 2011) an increase of 47% 

·    Property assets under administration, managed by Braemar Estates, grew to £865m (2011: £750m) a growth of 15%

·    Third party assets under administration, a new revenue stream, are now in excess of £50m (2011: nil)

·    23% increase in proposed dividends for the year of 18.5p (2011:15p)

·    Acquisitions during the year of Clarke Willmott's Investment management team and since the year end of Park Street London Limited introducer business, both funded out of the Group's own cash resources  

·    Braemar Estates appointed property manager of £50m Ground Rents Income Fund plc since the year end

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

"Last year was tough but successful.  We believe that market conditions will remain volatile and, given the onset of RDR, that we are entering a period of significant change in the distribution landscape for financial services. We are fortunate that the Group is well positioned, financially stable and with a large number of exciting opportunities.

"We have had an encouraging start to the new financial year with funds under management continuing to grow, enhanced by Braemar's appointment as property manager of the Ground Rents Income Fund plc and we look forward with confidence

An analyst meeting will be held at 9.15 for 9.30am on 13 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 / Sebastian Jones

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 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 the Braemar Group which acts as a fund manager, under the name of Brooks Macdonald Funds and manages property assets on behalf of the funds and other clients.

Brooks Macdonald Group plc

Results for the year ended 30 June 2012

Chairman's Statement

In a year of poor investment markets, fragile investor sentiment and considerable regulatory change, I am pleased to report continued progress for the group.

Profit before tax has increased by 17% from £7.29m to £8.52m. Earnings per share are 57.94p compared with 51.92p, an increase of 12%.

The board is recommending a final dividend of 12.5p per share which, if approved by shareholders, will result in total dividends for the year of 18.5p per share. This represents an increase of 23% over last year's dividends of 15p per share.

Our discretionary funds under management as at 30 June 2012 were £3.52 billion, a rise of 19% (30 June 2011: £2.97bn) over the twelve months. By comparison the APCIMS Balanced index fell by 2% and the FTSE 100 by over 6% during that period. Included in this figure is Brooks Macdonald Funds which had funds under management of £148m at the year end (£101m June 2011). 

Property assets under administration, managed by Braemar Estates, grew to £865m, an increase of 15% (£750m June 2011) over the financial year and third party assets under administration are now in excess of £50m. We intend to report our property assets under administration and our third party assets under administration every six months, while continuing to report on a quarterly basis our discretionary funds under management including those in our Funds business.

During the year we completed the acquisition of the Investment Management department of Clarke Willmott LLP which has formed the nucleus of our new office in Taunton. This acquisition added £114m to funds under management. In April we opened our seventh regional office in York. Since the year end we have acquired Park Street London Limited, a long term introducer of funds and clients to the group. These acquisitions have been funded from the group's own cash resources.

In addition to these acquisitions the Group has continued to invest significantly in its future.   Our Funds business has made good progress, particularly since the year end with the appointment of Braemar Estates as the property manager for the newly launched Ground Rents Income Fund plc, which raised some £50m on flotation. In April we became an Application Service Provider, enabling us to offer third party administration services. We are optimistic about the long term potential of this new revenue stream. 

The economic outlook remains challenging, markets are lacklustre and the launch of the Retail Distribution Review in January 2013 will lead to significant changes. Enhanced regulation is involving the industry in materially greater cost. Despite the difficult macroeconomic outlook the group continues to make good headway whilst striving to ensure that we deliver strong risk adjusted returns for our clients in a service-led and transparent environment.

Christopher Knight

Chairman

12 September 2012

Brooks Macdonald Group plc

Results for the year ended 30 June 2012

Chief Executive's review

Introduction

I would like to start this review by thanking all members of staff, our strategic partners and professional introducers for all their hard work and support over the last financial year. Against a very tough economic background, the group has continued to grow successfully. None of this would have been possible without the commitment, professionalism and diligence of our colleagues.

Funds under management

Our discretionary funds under management rose 19% to £3.52 billion during the financial year against declining investment markets. This growth reflects a combination of continued support from the professional intermediary market, the launch of our Funds business, an acquisition and solid investment performance. 

Our new business is largely introduced from our 11 strategic alliances and from over 420 Professional Intermediary firms based throughout the UK. Whilst investment conditions remain volatile, the need for professional bespoke investment management for high net worth individuals remains high. This is supported by the continued growth of the Self Invested Personal Pension ('SIPP') market place and the rising demand for our Managed Portfolio Service (to cater for clients with smaller investment portfolios not requiring a bespoke service).

Our Funds business has continued to gain traction over the year and since the year end. We have seven funds; four niche funds and three generalist risk based fund of funds. As well as having good performance records, our niche funds are attracting interest in part due to challenging market conditions. This was highlighted by Braemar being appointed as property manager of the Ground Rents Income Fund plc and rising interest in our recently launched UK Farming fund. 

Strategies for growth

Our growth plans revolve around organic growth, investment and service development. In all three areas we have seen continued progress over the financial year. Our organic growth has been focused on the recruitment of high quality staff, growth of Braemar Estates and Financial Consulting and a sharp increase in the number ofStrategic Partners and introducing Professional Intermediaries.

The investments we have made, Brooks Macdonald Funds apart, have been via the acquisition of the Investment Management team of Clarke Willmott LLP, the establishment of our Taunton office in November and the establishment of our York office in April. This has continued, post the year end, with the acquisition of Park Street London Limited. We will continue to assess appropriate acquisition opportunities as they arise and will maintain our rigorous search for quality with regards to any investment opportunity.

Our move to becoming an Application Service Provider has also involved a considerable investment as well as significant internal resource. This is both an investment and a considerable service development. In Easter this year the project completed; it will allow significant 'back office' scale as well as giving us the capacity to take on third party administration. Whilst the latter is still in very early development, I am pleased that third party assets under administration are already in excess of £50m.

We continue to invest in our people and promotion of our strong culture. Total staff numbers grew from 248 to 282 in the year, including an increase in investment managers from 43 to 55 as well as the recruitment of additional trainees. Such additional capacity is vital to provide the headroom for further growth in funds under management.

Regional presence

Whilst London remains our largest office, we now have seven regional offices. Our first office outside London was Hampshire followed by Manchester, Tunbridge Wells, Edinburgh and then an office in Hale following the acquisition of Braemar plc in 2010. We have enjoyed considerable success in all our offices, and the opening of offices in Taunton and shortly afterwards in York in the financial year under review not only gives us further regional growth opportunities but also increases our coverage for both clients and professional intermediaries alike. In both cases the new offices have started well.

We continue to consider opportunities to open new offices whether by acquisition of businesses or teams, such as in Taunton, or by organic investment, such as in York.

Regulation

In January 2013 the Retail Distribution Review ('RDR') comes into force. This is a complex piece of regulation with the desired outcomes of greater consumer clarity, transparency of charges, greater professional standards and a more robust financial regulatory regime. We are public in our support of these outcomes and whilst there has been a significant amount of work done to date, and more necessary ahead of RDR, we remain excited about the opportunities that it will bring.

Our Asset Management business will, under RDR, be Restricted, advising only on Investment Management, whereas our Consulting business will be Independent, advising where appropriate on all aspects of financial planning.

Brand

As a business we have a strong culture based around high standards, a team orientated approach and a passion for delivering service and performance to our clients. Over the last year we have increased our focus on this and I was delighted when we were included in the Sunday Times 100 Best Companies to work for and were the highest placed company in the financial services industry.

In terms of performance and service awards, Brooks Macdonald Financial Consulting was named in the Private Client Practitioner Top 25 IFA Companies 2012 list. Brooks Macdonald Asset Management ("BMAM") was named as the winner of the Incisive Media Gold Standard Award for Portfolio Management and Best Discretionary Adviser at this year's Investment Week Fund Manager of the Year Awards. BMAM also achieved a Defaqto 5 Star Rating for its Bespoke Portfolio Service and Managed Portfolio Service - one of only five companies to have achieved 5 Star Ratings in both of the discretionary management categories.

A highlight of the year has been our three year sponsorship of Middlesex County Cricket Club. This has already raised our profile and has benefited our marketing activity and increased our web-site traffic. We have also continued to support schools and sports clubs via sponsorship and this now exceeds 50 teams. The Brooks Macdonald Foundation has supported over 25 charities in the last year. Increasing our profile and being supportive to communities is very much a journey but we have made significant progress over the year.

Summary and Outlook

Last year was tough. We believe that market conditions will remain volatile and, given the onset of RDR, we are entering a period of significant change in the distribution landscape for financial services. We are fortunate that the Group is well positioned, financially stable and with a large number of exciting opportunities. It is this together with the quality and commitment of our staff that allows us to look forward with continued confidence.

We have had an encouraging start to the new financial year with funds under management continuing to grow, enhanced by Braemar's appointment as property manager of Ground Rents Income Fund plc. We are confident of maintaining our track record of growth. 

Chris Macdonald

Chief Executive

12 September 2012

Brooks Macdonald Group plc

Results for the year ended 30 June 2012

Business review

Group overview

The group has had another successful year with pre-tax profits increasing by 17% in the year to over £8.5m. Basic earnings per share have risen from 51.92p per share last year to 57.94p for the year ended 30 June 2012.

The group has no borrowings and at 30 June 2012 its cash balances totalled £13.5m.

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 the Clarke Willmott investment management team in October 2011.

Funds under management (£m)	Year end 30 June 2012
At 1 July 2011	2,969
Inflows - organic	593
- acquired Clarke Willmott	114
Outflows - market adjustment & withdrawals¹	(156)
At 30 June 2012	3,520
Underlying rate of total net growth	18.55%

¹ 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 19% of funds compares to a fall in the APCIMS Balanced index of 2% and a fall in the FTSE 100 index of 6% over the same period. This also represents a continued growth in funds under management over the last five years as shown below:

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. The fee income includes a share of fees paid to introducers and these payments are shown within the administrative expenses of the division.

On 1 January 2013 the Retail Distribution Review (RDR) will come into force and this will change the way in which both the fee income and the corresponding share of the fee due to the introducer are reported. Under RDR any payment due to the introducer will in future be payable directly on the instruction of the client. Therefore, these payments will not form part of the administrative costs of the division and, where applicable, there will be a corresponding reduction in the fee income.

During the year there was a significant investment in the back office functions of the division whereby we took further functions of the investment management process in house and successfully became an Application Service Provider. This gave us an improved overall service to our clients, increased internal capacity and provided the opportunity to take on third party administration services.

As stated above, on 31 October 2011 we acquired £114m of funds under management through the purchase of the client relationship contracts of Clarke Willmott LLP, based in Taunton, for an initial cash consideration of £1.985m. The total consideration is based on a multiple of funds under management with deferred cash payments due at 12 months and 24 months after the completion date.  The current best estimate of the total consideration is £4.2m.

Following the end of the financial year we completed the acquisition of Park Street London Limited, a long term introducer of funds and clients to the investment management division, for an estimated maximum cash consideration of £4.4m payable in instalments over a three year period. 

Brooks Macdonald Funds and Braemar Estates

It has been a significant year for Brooks Macdonald Funds with the restructuring of the funds and the continued development of distribution through institutional investors, professional advisers and platforms in the UK. We now have seven funds which are showing good performance. These funds have attracted new investment throughout the year resulting in an overall increase in total funds under management to £148m - a rise of 46% over the year.

Braemar Estates has continued its growth in the property management sector with growth in the value of assets under administration to £865m from £750m in June 2011. This has grown substantially from £450m in October 2010 when the business was acquired. Following the year end Braemar Estates was appointed as the manager of the £50m Ground Rents Income Fund plc.

Financial Consulting

The financial consulting division has continued to deliver fee based financial planning and ancillary services to high net worth individuals and employee benefit consultancy to a range of small to medium sized enterprises.

During the year the division saw a small increase in turnover and an improvement in the margin of the business and it is well positioned for the advent of RDR.

Brooks Macdonald Group plc

Consolidated Income Statement for the year ended 30 June 2012

	Note	2012		2011
			£'000		£'000
Revenue			53,288		52,178
Administrative expenses			(44,886)		(44,950)
Operating profit			8,402		7,228
Finance income			166		148
Finance cost			(48)		(87)
Profit before taxation			8,520		7,289
Taxation			(2,264)		(1,846)
Profit for the year attributable to owners of the parent			6,256		5,443
Earnings per share
Basic	2		57.94p		51.92p
Diluted			57.08p		50.51p
Consolidated Statement of  Comprehensive Income for the year ended 30 June 2012
Profit for the year attributable to owners of the parent			6,256		5,443
Revaluation of available for sale investments			27		45
Total comprehensive income for the year, net of tax attributable to owners  of the parent			6,283		5,488

Brooks Macdonald Group plc

Consolidated Statement of Financial Position as at 30 June 2012

		2012			2011
			£'000		£'000
Assets
Non-current assets
Intangible assets			10,432		6,023
Property, plant and equipment			2,367		1,892
Available for sale financial assets			1,657		1,561
Deferred tax assets			-		1,495
Total non-current assets			14,456		10,971
Current assets
Trade and other receivables			12,780		9,861
Cash and cash equivalents			13,489		16,808
Total current assets			26,269		26,669
Total assets			40,725		37,640
Liabilities
Non-current liabilities			(1,402)		(628)
Current liabilities
Trade and other payables			(13,845)		(16,899)
Current tax liabilities			(79)		(25)
Provisions			(1,689)		(1,037)
Total current liabilities			(15,613)		(17,961)
Net assets			23,710		19,051
Financed by:
Equity
Share capital			109		108
Share premium account			4,423		4,126
Other reserves			2,988		2,563
Retained earnings			16,190		12,254
Total equity			23,710		19,051

Approved and authorised for issue by the board of directors on 12 September 2012.

.

Brooks Macdonald Group plc

Consolidated Statement of cash flows for the year ended 30 June 2012

		2012		2011
			£'000		£'000
Cash inflow from operating activities
Cash generated from operations			3,571		10,764
Interest paid			-		(52)
Taxation paid			(1,460)		(2,492)
Net cash generated from operating activities			2,111		8,220
Cash flow from investing activities
Purchase of property, plant and equipment			(1,215)		(484)
Purchase of intangible assets			(2,113)		(402)
Sale of held to maturity investment			-		9
Acquisition of subsidiary company, net of cash acquired			-		(2,871)
Purchase of available for sale asset			(63)		(1,500)
Disposal of available for sale asset			-		194
Proceeds of sale of plant, property and equipment			6
Proceeds of sale of land and buildings			-		60
Proceeds of sale of investment property			-		612
Interest received			166		148
Proceeds of sale of acquired relationships			-		401
Net cash used in investing activities			(3,219)		(3,833)
Cash flows from financing activities
Proceeds of issue of shares			298		721
Purchase of own shares by employee benefit trust			(785)		(981)
Repayment of borrowings			-		(533)
Dividend paid to shareholders			(1,724)		(1,161)
Net cash used in financial activities			(2,211)		(1,954)
Net  (decrease)/increase in cash and cash equivalents			(3,319)		2,433
Cash and cash equivalents at start of year			16,808		14,375
Cash and cash equivalents at end of year			13,489		16,808

Note 1 Basis of accounting and preparation

The 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 consolidated financial statements have been prepared under the historical convention, as modified by the revaluation of available-for-sale financial assets and financial liabilities at fair value through profit and loss.

Note 2 Earnings per share

Basic earnings per share are calculated by dividing the Group profits after tax of £6.256m by 10.8m, the weighted average number of ordinary shares in issue over the year ended 30 June 2012. The resultant earnings per share for the year are 57.94p.

Note 3 Dividend

The final dividend is payable on 24 October 2012 to shareholders on the register at the close of business on 21 September 2012 subject to approval by the shareholders at the Annual General Meeting.

Note 4 Statutory accounts

The financial information set out above does not constitute a full financial statement of the Group's affairs for the years ended 30 June 2012 or 2011 but it is derived from those accounts. The Group's auditors have reported on the full accounts of each year and have accompanied them with an unqualified report.

The statutory accounts will be delivered to the Registrar of Companies following the Brooks Macdonald annual general meeting to be held at the Group's head office on 19 October 2012

 

END

 

 

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