Half Yearly Report

RNS Number : 8584Z

Brooks Macdonald Group PLC

13 March 2013

 



13 March 2013

BROOKS MACDONALD GROUP PLC

Half Year Report for the six months ended 31 December 2012

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group"), the AIM listed integrated wealth management group, today announces its half year report for the six months ended 31 December 2012.

Financial Highlights

	Half Year ended 31.12.12	Half Year ended 31.12.11	Change
Adjusted pre-tax profit	£5.31m	£4.08m	30%
Pre tax profit*	£4.26m	£4.08m	4%
Revenue	£31.46m	£25.61m	23%
Adjusted earnings per share	34.56p	26.44p	31%
Basic earnings per share*	25.35p	26.44p	(4)%
Total discretionary funds under management ("FUM")	£4.620bn	£3.205bn	44%
Interim dividend	6.5p	6p	8%

*stated after Spearpoint acquisition costs of £1.05m

Business Highlights:

·      Acquisition of Spearpoint completed in the period:

o  Added discretionary funds under management of £686m, including Funds totalling £85m, together with advisory assets of £357m

·      Successful placing raising £21.5m to fund the majority of the initial consideration for Spearpoint

·      Strong growth in discretionary funds since 30 June 2012:

o  £1.1bn total growth (an increase of 31%) including Spearpoint 

o  £414m organic and market growth (an increase of 11.8%) excluding Spearpoint

o  APCIMS Balanced index grew by 4.1% over the period

·      Brooks Macdonald Funds now incorporates the restructured, former Spearpoint funds:

o  Total funds under management of £323m at half year end

o  £244 million net of the Spearpoint Funds (31 December 2011: £114 million)

·      Property assets under administration, managed by Braemar Estates, grew to £885m (31 December 2011: £780m) an increase of 14%

·      Third party assets under administration, a new revenue stream, are now in excess of £100m (31 December 2011: nil)

·      Interim dividend increased 8% to 6.5p (2011: 6p) reflecting the Board's continued confidence in the Group's progress and its strongly cash generative nature. The dividend is payable on 18 April 2013 to shareholders on the register at 22 March 2013.

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

"The half year has been another successful period of growth across the Group, culminating in our acquisition of Spearpoint in November. We are excited about the enhanced capabilities this gives to our Group offering and the opportunities going forward.

"We have had an encouraging start to our second half and look forward with confidence. Since the period end funds under management have continued to grow, with the additional benefit of higher equity markets.  We remain focused on completing the successful integration of Spearpoint and anticipate it beginning to contribute to our growth in the second half of the calendar year." 

An analyst meeting will be held at 9.15 for 9.30am on 13 March 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  / 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 retirement planning services provider and Braemar Estates (Residential) Limited, an estate management company.

Introduction

The Group has made considerable progress over the last six months with the acquisition of Spearpoint, a placing that raised £21.5m to fund the majority of the initial consideration and continued growth in funds under management and profits. This was all achieved in a period of considerable regulatory change. Spearpoint is already proving to be good synergistic fit with the Group's existing growth strategies.

Results

Profit before tax has risen to £4.26m although this includes non-recurring acquisition costs of £1.05 million. Stripping out these one off costs, adjusted like for like profits were £5.31m compared with £4.08m for the corresponding period twelve months ago. Adjusted earnings per share on the same basis were 34.56p compared to 26.44p last year, an increase of 31%. Reported earnings per share were 25.35p (2011: 26.44p).

Cash balances at the end of the period were £14.5m. This compares to net cash of £9.5m as at 31 December 2011 and £13.5m as at 30 June 2012.

Dividend

The Board has declared an interim dividend of 6.5p. This is an increase of 8% compared with last year's interim dividend of 6p, reflecting the Board's continued confidence in the Group's progress and its strongly cash generative nature. The interim dividend will be paid on 18 April 2013 to shareholders on the register on 22 March 2013.

Discretionary funds under management

It has been our policy to announce our discretionary funds under management every quarter. In addition we now announce our advisory assets, property assets and third party assets under administration every quarter.

Discretionary funds under management as at 31 December 2012 totalled £4.62bn. This represents an increase of £1.1bn, or 31%, over the six months and net of the acquisition of Spearpoint, a rise of £414m, or 11.8%. Over the same period the APCIMS Balanced index grew by 4.1%. Included in these figures is our Funds business (now incorporating the former Spearpoint funds) that now has £323m under management.

Other than the acquisition this performance was also driven by the continued growth of our Funds business, strong risk adjusted returns and new business. The acquisition added £686m of discretionary funds under management, net new business accounted for £261m and portfolio returns £153m.

Property assets and other funds under management and administration

Our property assets under administration, managed by Braemar Estates, rose to £885m. This was in spite of asset valuations declining by 5% and compares with £780m 12 months ago and around £500m at the time of acquisition of Braemar in June 2010.

Advisory assets which were acquired as part of the Spearpoint acquisition totalled £373m as at 31 December 2012.

Third party assets under management have also grown to be in excess of £100m at the end of the six month period.

Business review

This has been a period of significant change for the Group as well as continuing growth across the business. Our total assets under management, advice and management totalled over £6bn with each part of the Group contributing strongly to the increase in funds and revenue.

In November we completed the placing of 1,869,566 new shares raising £21.5m at 1150p per share, which together with the issue of 418,627 new shares to the vendors enabled the Group to acquire Spearpoint, a Jersey and Guernsey based provider of discretionary fund management with stockbroking and retirement planning capabilities, for an initial consideration of £23.1m. I would like to take this opportunity to thank those shareholders who participated in the placing, including a number of new institutional shareholders.

The acquisition of Spearpoint was a major step forward for the Group and captured an opportunity we had been seeking for a number of years. It adds scale, offshore and international capability together with the acquisition of a strong investment management and pensions team.

Whilst still early days in the integration process, considerable progress has been made. The rebranding of the business has been completed with the launch of Brooks Macdonald International (which is divided into Asset Management, Employee Benefits and Retirement Services) and work is underway in system integration, marketing, investment management processes and launching a new business development strategy. However, the most important aspect is the integration of the team into the Group which I am pleased to report has gone extremely well.

The Retail Distribution Review ('RDR') led to a huge amount of system development and 'repapering' over the period and the latter continues into the second half of our financial year. Whilst this is legislation we welcome it has led to increased one off and ongoing costs for regulation. In addition to these costs we have continued to invest in the business with investments into system development, the investment management and research process and our funds business.

Investment markets remained volatile in the six months and against this back drop Asset Management had a strong period of performance and inflows, which has been supported since the start of 2013 with stronger investment markets. We remain fully committed to working with professional intermediaries in the provision of discretionary investment management services and are grateful for their continued support.

Our Funds business also continues to grow. The Spearpoint funds business has been integrated and a successful reconstruction was completed just prior to Christmas which has led to the launch of two new income funds. Whilst the investment into the business will continue this financial year, through these initiatives we are now in a stronger position for 2013 and beyond.

Financial Consulting increased its revenue compared to the corresponding period twelve months ago and likewise over the preceding six months, aided strongly by employee benefits consulting that is supported by the legislative changes around pension 'auto enrolment'.

Critical to the successful execution of our growth strategies is the continuing investment in our people and the promotion of our strong culture. This was reflected in Brooks Macdonald being listed as the 30th best place to work in the recent Sunday Times' 100 Best Companies To Work For 2013 survey, many awards for our fund management performance and an increase in our headcount. Total staff numbers grew from 282 to 361 in the period, including 60 that joined with Spearpoint and an increase in investment managers from 55 to 67. This provides the capacity for further growth in funds under management.

Summary and Outlook

In a period of considerable change we are pleased with the progress the Group has made. We now have an offshore presence which will give the Group potential to expand outside the UK, our brand recognition is increasing and we are seeing growth in Asset Management, Financial Consulting, Funds and our Estates businesses. There remain margin pressures in the industry and regulatory changes and additional costs will continue but our strategies for growth remain robust.

We have had an encouraging start to our second half and look forward with confidence. Since the period end funds under management have continued to grow, with the additional benefit of higher equity markets. We remain focused on completing the successful integration of Spearpoint and anticipate it beginning to contribute to growth in the second half of the calendar year.

Christopher Knight

Chairman

Condensed Consolidated Statement of Comprehensive Income for the six months ended 31 December 2012
	Note	Six months ended 31 Dec 2012  (unaudited)	Six months ended 31 Dec 2011  (unaudited)	Year ended 30 Jun 2012  (audited)
		£'000	£'000	£'000
Revenue		31,456	25,611	53,288
Administrative costs	5	(27,174)	(21,571)	(44,886)
Operating profit		4,282	4,040	8,402
Analysed as:
Operating profit before exceptional items		5,329	4,040	8,402
Costs of acquiring subsidiary companies	5	(1,047)	-	-
Operating profit after exceptional items		4,282	4,040	8,402
Finance income		90	64	166
Finance costs		(114)	(28)	(48)
Profit before tax		4,258	4,076	8,520
Analysed as:
Profit before tax and exceptional items		5,305	4,076	8,520
Costs of acquiring subsidiary companies	5	(1,047)	-	-
Profit before tax		4,258	4,076	8,520
Taxation	6	(1,376)	(1,221)	(2,264)
Profit for the period attributable to equity holders of the Company		2,882	2,855	6,256
Other comprehensive income:
Revaluation of available for sale financial assets		-	7	27
Total comprehensive income for the period		2,882	2,862	6,283
Earnings per share*
Basic	7	25.35p	26.44p	57.43p
Diluted	7	25.01p	25.86p	56.58p

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

The accompanying notes form an integral part of these interim consolidated financial statements.

Condensed Consolidated Statement of Financial Position as at 31 December 2012
	Note	31 Dec 2012 (unaudited)	31 Dec 2011 (unaudited)	30 Jun 2012 (audited)
		£'000	£'000	£'000
Assets
Non-current assets
Intangible assets	9	45,838	10,095	10,432
Property, plant and equipment	10	2,350	2,222	2,367
Available for sale financial assets	11	1,643	1,571	1,657
Deferred tax assets		792	860	668
Total non-current assets		50,623	14,748	15,124
Current assets
Trade and other receivables		18,227	11,310	12,780
Cash and cash equivalents		14,489	9,537	13,489
Total current assets		32,716	20,847	26,269
Total assets		83,339	35,595	41,393
Liabilities
Non-current liabilities
Deferred consideration	13	(5,769)	(926)	(959)
Deferred tax liabilities		(4,790)	-	(693)
Other non-current liabilities		(121)	(220)	(418)
Total non-current liabilities		(10,680)	(1,146)	(2,070)
Current liabilities
Trade and other payables		(14,285)	(12,125)	(13,845)
Current tax liabilities		(1,160)	(190)	(79)
Provisions	14	(5,002)	(1,781)	(1,689)
Total current liabilities		(20,447)	(14,096)	(15,613)
Net assets		52,212	20,353	23,710
Equity
Share capital		133	109	109
Share premium account		31,501	4,232	4,424
Other reserves		3,526	2,564	2,988
Retained earnings		17,052	13,448	16,189
Total equity		52,212	20,353	23,710

The condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 12 March 2013, signed on their behalf by:

C A J Macdonald                                                                             S J Jackson

Chief Executive                                                                               Finance Director

Company registration number: 4402058

The accompanying notes form an integral part of these interim consolidated financial statements.

Condensed Consolidated Statement of Changes in Equity for the period 1 July 2011 to 31 December 2012
	Share capital	Share premium	Share option reserve	Merger reserve	Available for sale reserve	Treasury shares	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2011	108	4,126	2,326	192	45	(980)	13,234	19,051
Comprehensive income
Profit for the period	-	-	-	-	-	-	2,855	2,855
Other comprehensive income:
Revaluation of available for sale financial asset	-	-	-	-	7	-	-	7
Total comprehensive income	-	-	-	-	7	-	2,855	2,862
Transactions with owners
Issue of ordinary shares	1	106	-	-	-	-	-	107
Share-based payments	-	-	286	-	-	-	-	286
Share-based payments transfer	-	-	(56)	-	-	-	56	-
Purchase of own shares by employee benefit trust	-	-	-	-	-	(635)	-	(635)
Deferred tax on share options	-	-	(236)	-	-	-	-	(236)
Dividends paid (note 8)	-	-	-	-	-	-	(1,082)	(1,082)
Total transactions with owners	1	106	(6)	-	-	(635)	(1,026)	(1,560)
Balance at 31 December 2011	109	4,232	2,320	192	52	(1,615)	15,063	20,353
Comprehensive income
Profit for the period	-	-	-	-	-	-	3,401	3,401
Other comprehensive income:
Revaluation of available for sale financial asset	-	-	-	-	20	-	-	20
Total comprehensive income	-	-	-	-	20	-	3,401	3,421
Transactions with owners
Issue of ordinary shares	-	192	-	-	-	-	-	192
Share-based payments	-	-	416	-	-	-	-	416
Share-based payments transfer	-	-	(132)	-	-	-	132	-
Purchase of own shares by employee benefit trust	-	-	-	-	-	(150)	-	(150)
Deferred tax on share options	-	-	120	-	-	-	-	120
Dividends paid (note 8)	-	-	-	-	-	-	(642)	(642)
Total transactions with owners	-	192	404	-	-	(150)	(510)	(64)
Balance at 30 June 2012	109	4,424	2,724	192	72	(1,765)	17,954	23,710

Condensed Consolidated Statement of Changes in Equity for the period 1 July 2011 to 31 December 2012
	Share capital	Share premium	Share option reserve	Merger reserve	Available for sale reserve	Treasury shares	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2012	109	4,424	2,724	192	72	(1,765)	17,954	23,710
Comprehensive income
Profit for the period	-	-	-	-	-	-	2,882	2,882
Total comprehensive income	-	-	-	-	-	-	2,882	2,882
Transactions with owners
Issue of ordinary shares	24	27,077	-	-	-	-	-	27,101
Share-based payments	-	-	556	-	-	-	-	556
Share-based payments transfer	-	-	(108)	-	-	-	108	-
Purchase of own shares by employee benefit trust	-	-	-	-	-	(779)	-	(779)
Deferred tax on share options	-	-	90	-	-	-	-	90
Dividends paid (note 8)	-	-	-	-	-	-	(1,348)	(1,348)
Total transactions with owners	24	27,077	538	-	-	(779)	(1,240)	25,620
Balance at 31 December 2012	133	31,501	3,262	192	72	(2,544)	19,596	52,212

The accompanying notes form an integral part of these interim consolidated financial statements.

Condensed Consolidated Statement of Cash Flows for the six months ended 31 December 2012
	Note	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
		£'000	£'000	£'000
Cash flow from operating activities
Cash generated from operations	15	3,643	(2,180)	3,571
Taxation paid		(561)	(660)	(1,460)
Interest paid		-	(28)	-
Net cash generated from / (used in) operating activities		3,082	(2,868)	2,111
Cash flows from investing activities
Purchase of property, plant and equipment		(353)	(717)	(1,215)
Purchase of intangible assets		(601)	(2,140)	(2,113)
Purchase of available for sale assets		-	-	(63)
Acquisition of subsidiary companies, net of cash acquired		(20,757)	-	-
Interest received		90	64	166
Proceeds of sale of property, plant and equipment		-	-	6
Proceeds of sale of available for sale assets		14	-	-
Net cash used in investing activities		(21,607)	(2,793)	(3,219)
Cash flows from financing activities
Proceeds of issue of shares		21,652	107	298
Purchase of own share by employee benefit trust		(779)	(635)	(785)
Dividends paid to shareholders		(1,348)	(1,082)	(1,724)
Net cash generated from / (used in) financing activities		19,525	(1,610)	(2,211)
Net increase / (decrease) in cash and cash equivalents		1,000	(7,271)	(3,319)
Cash and cash equivalents at beginning of period		13,489	16,808	16,808
Cash and cash equivalents at end of period		14,489	9,537	13,489

The accompanying notes form an integral part of these interim consolidated financial statements.

Notes to the Financial Statements

for the six months ended 31 December 2012

1.     General information

Brooks Macdonald Group plc ('the Company') is the parent company of a group of companies ('the Group'), which offers a range of investment management services and related professional advice to private high net worth individuals, charities, and trusts. The Group also provides financial planning as well as offshore fund management and administration services and acts as fund manager to regulated OEICs, providing specialist funds in the property and structured return sectors and managing property assets on behalf of these funds and other clients. The Group's primary activities are set out in its Annual Report and Accounts for the year ended 30 June 2012.

The Group has offices in London, Edinburgh, Guernsey, Hale, Hampshire, Jersey, Manchester, Taunton, Tunbridge Wells and York.

The Company is a public limited company, incorporated in England and listed on AIM. The address of its registered office is 111 Park Street, London, W1K 7JL.

The consolidated interim financial information was approved for issue on 12 March 2013. It has been independently reviewed but is not audited.

2.     Accounting policies

a)   Basis of preparation

The Group's condensed consolidated half yearly financial statements are prepared and presented in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. They have been prepared on a going concern basis with reference to the accounting policies and methods of computation and presentation set out in the Group's consolidated financial statements for the year ended 30 June 2012, except as stated below. The half yearly financial statements should be read in conjunction with the Group's audited financial statements for the year ended 30 June 2012, which have been prepared in accordance with IFRS 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 2012 have been reported on by the Group's 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. They also did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

b)   New accounting policies

The Group's accounting policies are consistent with those disclosed within the annual financial statements for the year ended 30 June 2012, except as described below.

i)       Exceptional items

         Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the underlying financial performance of the Group. These include material items of income or expense that are shown separately due to the significance of their nature or amount.

b)   New accounting policies (continued)

New standards, amendments and interpretations adopted by the Group

In the current period no new standards, amendments or interpretations adopted by the Group have had a material effect on the amounts reported in these financial statements.

New standards, amendments and interpretations not affecting the reported results of the Group

The following standards, amendments and interpretations have been adopted in the current period. Their adoption has not had a significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements:

Amendment to IAS 1 'Financial statement presentation regarding other comprehensive income' (effective for annual periods beginning on or after 1 July 2012).

New standards, amendments and interpretations not yet effective

A number of new standards, amendments and interpretations, which have not been applied in preparing these financial statements, are effective for annual and interim periods on or after 1 January 2013:

Standard, Amendment or Interpretation	Effective date
Amendment to IFRS 1 'First-time Adoption of IFRS'	1 January 2013
Amendment to IFRS 7 'Financial Instruments: Disclosures'	1 January 2013
Amendment to IAS 19 'Employee Benefits'	1 January 2013
IFRS 10 'Consolidated Financial Statements'	1 January 2013
IFRS 11 'Joint Arrangements'	1 January 2013
IFRS 12 'Disclosures of Interests in Other Entities'	1 January 2013
IFRS 13 'Fair Value Measurement'	1 January 2013
IAS 27 (revised 2011) 'Separate Financial Statements'	1 January 2013
IAS 28 (revised 2011) 'Associates and Joint Ventures'	1 January 2013
Amendment to IAS 32 'Financial instruments: Presentation'	1 January 2014
IFRS 9 'Financial Instruments: Classification and Measurement'	1 January 2015

None of these are expected to have a significant impact on the Group's future financial statements.

3.     Financial risk factors

The Group's activities expose it to a variety of financial risk, market risk, credit risk and liquidity risk. The principal risks that face the Group are described on pages 47 to 48 of the Annual Report and Accounts for the year ended 30 June 2012. There have been no significant changes affecting the fair value or classification of financial assets during the period.

4.     Segmental information

For management purposes the Group's activities are organised into three operating divisions: Investment management (including the results of Brooks Macdonald (International) Limited and Brooks Macdonald Retirement Services (International) Limited), Financial planning and Fund and Property management. The Group's other activity, offering nominee and custody services to clients, has been included within investment management below. These divisions are the basis on which the Group reports its primary segmental information.

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.

Period ended 31 Dec 2012 (unaudited)	Investment management	Financial planning	Fund and Property mangement	Total
	£'000	£'000	£'000	£'000
Total segment revenues	28,103	1,712	2,292	32,107
Inter segment revenues	-	(651)	-	(651)
External revenues	28,103	1,061	2,292	31,456
Segment result	7,032	29	(200)	6,861
Unallocated items				(2,603)
Profit before tax				4,258
Taxation				(1,376)
Profit for the period				2,882

Period ended 31 Dec 2011 (unaudited)	Investment management	Financial planning	Fund and Property management	Total
	£'000	£'000	£'000	£'000
Total segment revenues	23,178	1,292	1,509	25,979
Inter segment revenues	-	(368)	-	(368)
External revenues	23,178	924	1,509	25,611
Segment result	5,069	22	(402)	4,689
Unallocated items				(613)
Profit before tax				4,076
Taxation				(1,221)
Profit for the period				2,855

Year ended 30 Jun 2012 (audited)	Investment management	Financial planning	Fund and Property management	Total
	£'000	£'000	£'000	£'000
Total segment revenues	47,922	2,955	3,236	54,113
Inter segment revenues	-	(825)	-	(825)
External revenues	47,922	2,130	3,236	53,288
Segment result	10,255	67	(1,057)	9,265
Unallocated items				(745)
Profit before tax				8,520
Taxation				(2,264)
Profit for the period				6,256

a)   Operating income by geographical market

The Group's operations are located in the United Kingdom and Channel Islands.

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
United Kingdom	30,359	25,611	53,288
Channel Islands	1,097	-	-
Total operating income	31,456	25,611	53,288

b)   Major clients

The Group is not reliant on any one client or group of connected clients for the generation of revenues.

5.     Administrative costs

Administrative costs include £1,047,000 of directly attributable acquisition costs, comprising £30,000 in respect of the acquisition of JPAM Limited and £1,017,000 in respect of the acquisition of Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited (see note 12) during the six months ended 31 December 2012 (six months ended 31 December 2011: £nil; year ended 30 June 2012: £nil).

Administrative costs also include a provision of £240,000 in respect of an estimated levy by the Financial Services Compensation Scheme relating to the 2012/13 and 2013/14 scheme years.

For the six months ended 31 December 2011, administrative costs included a similar provision of £140,000 in respect of the interim levy relating to the 2011/12 scheme year. For the year ended 30 June 2012, administrative costs included a total charge of £396,000 in respect of the levies relating to both the 2011/12 and 2012/13 scheme years.

6.     Taxation

The current tax expense for the six months ended 31 December 2012 was calculated based on the estimated average annual effective tax rate. The overall effective tax rate for this period was 32.32% (six months ended 31 December 2011: 29.95%; year ended 30 June 2012: 26.57%).

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
United Kingdom taxation	1,294	842	1,866
Under provision in prior years	360	126	6
Total current taxation	1,654	968	1,872
Deferred taxation (credit) / charge	(278)	253	392
Income tax expense	1,376	1,221	2,264

The UK Government has proposed that the UK corporation tax rate be reduced to 22.0% over the four years from 2011 to 2014. The underlying UK corporation tax rate for the six months ended 31 December 2012 is 23.75% (six months ended 31 December 2011: 26.5%; year ended 30 June 2012: 25.5%).

Deferred tax assets and liabilities are calculated at the rate that is expected to be in force when the temporary differences unwind, but limited to the extent that such rates have been substantively enacted.

7.     Earnings per share

Adjusted earnings per share

The directors believe that adjusted earnings per share provide a truer reflection of the Group's performance for the period. Adjusted earnings per share are shown below and are calculated based on 'adjusted earnings', representing earnings before the costs of acquiring subsidiary companies during the period (see note 12).

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
Profit for the period	2,882	2,855	6,256
Costs of acquiring subsidiary companies	1,047	-	-
Adjusted earnings attributable to ordinary shareholders	3,929	2,855	6,256

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	No. of shares	No. of shares	No. of shares
Previously reported amounts:
Weighted average number of shares in issue during the period	-	10,699,126	10,797,333
Dilutive shares issuable on exercise of share options	-	240,816	162,633
Diluted weighted average number of shares in issue during the period	-	10,939,942	10,959,966
Restated amounts:
Weighted average number of shares in issue during the period (previously reported)	-	10,699,126	10,797,333
Prior year restatement	-	95,260	96,135
Weighted average number of shares in issue during the period	11,366,844	10,794,386	10,893,468
Dilutive shares issuable on exercise of share options	153,692	240,816	162,633
Diluted weighted average number of shares in issue during the period	11,520,536	11,035,202	11,056,101

Basic and diluted earnings per share of both previously reported periods have been restated for the effect of shares issued at a discount to their market value as part of the Spearpoint acquisition on the weighted average number of shares in issue.

Earnings per share	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	p	p	p
Based on reported earnings:
Basic earnings per share (previously reported)	-	26.68	57.94
Basic earnings per share (restated)	25.35	26.44	57.43
Diluted earnings per share (previously reported)	-	26.10	57.08
Diluted earnings per share (restated)	25.01	25.86	56.58
Based on adjusted earnings:
Basic earnings per share	34.56	26.44	57.43
Diluted earnings per share	34.09	25.86	56.58

8.     Dividends

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
Paid interim dividend on ordinary shares	-	-	642
Paid final dividend on ordinary shares	1,348	1,082	1,082
Total dividends	1,348	1,082	1,724

An interim dividend of 6.5p per share was declared by the board on 12 March 2013. In accordance with IAS 10, this has not been included as a liability at 31 December 2012. The interim dividend is due to be paid on 18 April 2013.

9.     Intangible assets

a)   Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units that are expected to benefit from that business combination. The carrying amount of goodwill at 31 December 2012 relates to Brooks Macdonald Asset Management (International) Limited, Brooks Macdonald Retirement Services (International) Limited and Braemar Group Limited (at 31 December 2011 and 30 June 2012: related solely to Braemar Group Limited).

b)   Computer software

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

c)   Acquired client relationship contracts

This asset represents the fair value of future benefits accruing to the Group from acquired client relationship contracts. The amortisation of client relationships is charged to the income statement on a straight line basis over their estimated useful lives (five to fifteen years).

During the six months ended 31 December 2012, the Group acquired client relationship contracts of £18,037,000 (six months ended 31 December 2011: £649,000; year ended 30 June 2012: £4,162,000). These comprised contracts with a fair value of £5,881,000 related to the acquisition of JPAM Limited and £12,156,000 related to the acquisition of Brooks Macdonald Asset Management (International) Limited, recognised as separately identifiable intangible assets acquired as part of these business combinations (note 12).

On 31 October 2011 the Group completed the acquisition of the client relationship contracts of Clarke Willmott LLP, a company based in Taunton. The addition during the six months to 31 December 2011 of £4,162,000 represents the total estimated cost of the acquisition as detailed in note 18 (page 42) of the Annual Report and Accounts for the year ended 30 June 2012.

d)   Contracts acquired with fund managers

This asset represents the fair value of future benefits accruing to the Group from contracts acquired with fund managers. Payments made to acquire such contracts are stated at cost and amortised on a straight line basis over an estimated useful life of five years.

9.     Intangible assets (continued)

	Goodwill	Software	Acquired client relationship contracts	Contracts acquired with fund managers	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 July 2011	3,550	87	2,056	1,850	7,543
Additions	-	32	4,162	123	4,317
Disposals	-	-	-	-	-
At 31 December 2011	3,550	119	6,218	1,973	11,860
Additions	-	-	649	-	649
Disposals	-	(29)	-	-	(29)
At 30 June 2012	3,550	90	6,867	1,973	12,480
Additions	17,208	227	18,037	601	36,073
Disposals	-	-	-	-	-
At 31 December 2012	20,758	317	24,904	2,574	48,553
Accumulated amortisation
At 1 July 2011	-	23	229	1,268	1,520
Amortisation charge	-	42	104	99	245
At 31 December 2011	-	65	333	1,367	1,765
Amortisation charge	-	(19)	203	99	283
At 30 June 2012	-	46	536	1,466	2,048
Amortisation charge	-	26	508	133	667
At 31 December 2012	-	72	1,044	1,599	2,715
Net book value
At 1 July 2011	3,550	64	1,827	582	6,023
At 31 December 2011	3,550	54	5,885	606	10,095
At 30 June 2012	3,550	44	6,331	507	10,432
At 31 December 2012	20,758	245	23,860	975	45,838

10.  Property, plant and equipment

During the six months ended 31 December 2012, the Group acquired assets at a cost of £353,000 (six months ended 31 December 2011: £717,000; year ended 30 June 2012: £1,215,000). No assets were disposed of in the six months ended 31 December 2012 (six months ended 31 December 2011: £nil; year ended 30 June 2012: £6,000), resulting in a gain on disposal of £nil (six months ended 31 December 2011: £nil, year ended 30 June 2012: £nil).

11.  Available for sale financial assets

Available for sale financial assets include an investment in Braemar Group PCC Limited Student Accommodation Cell - B shares of £1,594,000. The fund is managed by Brooks Macdonald Funds Limited, a subsidiary of the Group. Trading is currently suspended on this fund, however the fund manager continues to publish a price based on the fair value of the underlying assets of the fund. A £14,000 investment in Ground Rents Income Fund plc was disposed of during the period (six months ended 31 December 2011: £nil; year ended 30 June 2012: £nil).

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
At beginning of period	1,657	1,561	1,561
Disposals	(14)	-	-
Additions	-	-	63
Gain from changes in fair value	-	10	33
At end of period	1,643	1,571	1,657

12.  Business combinations

On 1 July 2012, the Group acquired the entire share capital of JPAM Limited. JGHP Limited, a subsidiary company of JPAM Limited, has a portfolio of client relationships and offers financial advice to high net worth individuals. The company is a long standing professional introducer of private clients and their portfolios to the Group. The acquisition bought out the Group's continuing obligations to JPAM Limited in advance of the retirement of the principal.

The total consideration of £5,240,000 was satisfied by cash on acquisition of £3,005,000 and contingent deferred consideration for the balance of £2,235,000, due in three annual instalments and based on the value of the discretionary funds under management retained at each instalment date. The fair value of the liability has been re-measured at the period end assuming that the value of the discretionary funds retained follows a similar growth pattern to that experienced by the rest of the Group. A range of final outcomes cannot be estimated as the future value of the funds under management is dependent on several unpredictable variables including client retention and market movements.

Directly attributable acquisition costs of £30,000 were incurred in the acquisition, which have been charged to the income statement for the six month period ended 31 December 2012.

The fair value of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable. The fair value of the identifiable assets and liabilities acquired, at the date of acquisition, are detailed in (a) below.

On 19 November 2012, the Group acquired the entire share capital of Brooks Macdonald Asset Management (International) Limited (BMI) (formerly Spearpoint Limited) and Brooks Macdonald Retirement Services (International) Limited (BMRS) (formerly Spearpoint Retirement Services Limited), incorporated in Guernsey and Jersey respectively. BMI is an integrated wealth management business based in the Channel Islands with discretionary and advisory funds and assets under management of £1.1 billion. BMRS offers retirement planning services to clients. The acquisition also added scale to the Group, as well as offshore capability and access to the expanding international pensions market.

12.  Business combinations (continued)

The total consideration of £33,669,000 was satisfied by cash of £21,478,000, the issue of 418,627 new shares in Brooks Macdonald Group plc with a value of £5,450,000 and a contingent deferred balance of £6,741,000, payable in two instalments in March 2013 and November 2014 and based on the future value of the discretionary funds under management acquired. The fair value of the liability has been re-measured at the period end assuming that the value of the discretionary funds retained follows a similar growth pattern to that experienced by the rest of the Group. A range of final outcomes cannot be estimated as the future value of the funds under management is dependent on several unpredictable variables including client retention and market movements.

Directly attributable acquisition costs of £1,017,000 were incurred in the acquisition, which have been charged to the income statement for the six month period ended 31 December 2012.

Goodwill of £17,208,000 was recognised on acquisition in respect of expected synergies from combining the operations of BMI and BMRS with those of the Group, as well as intangible assets that do not qualify for separate recognition and the experience of the investment management and pensions staff employed by the companies.

The fair value of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable. The fair value of the identifiable assets and liabilities acquired, at the date of acquisition, are detailed in (a) below.

a)   Net assets acquired through business combinations

	JPAM Limited	BMI & BMRS
	£'000	£'000
Property, plant and equipment	-	54
Trade and other receivables	192	4,190
Cash and cash equivalents	694	3,032
Other current assets	-	735
Trade and other payables	-	(1,088)
Other current liabilities	(176)	-
Total net assets recognised by acquired companies	710	6,923
Fair value adjustments:
Client relationship contracts	5,881	12,156
Software	-	227
Deferred tax liability on client relationship contracts and software	(1,351)	(2,845)
Net identifiable assets	5,240	16,461
Goodwill	-	17,208
Total purchase consideration	5,240	33,669

12.  Business combinations (continued)

b)   Impact on reported results from date of acquisition

	Revenues from external customers	Profit for the period
	£'000	£'000
JPAM Limited	399	219
Spearpoint entities:
Brooks Macdonald Asset Management (International) Limited	1,009	217
Brooks Macdonald Retirement Services (International) Limited	88	11
Total Spearpoint entities	1,097	228
Total impact of business combinations	1,496	447

Had JPAM Limited, Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited been consolidated from 1 July 2012, the Consolidated Statement of Comprehensive Income would show pro-forma revenue of £35,981,000 and profit for the period of £4,215,000.

c)   Net cash outflow resulting from business combinations

	JPAM Limited	BMI & BMRS
	£'000	£'000
Total purchase consideration (note 12a)	5,240	33,669
Less:
Shares issued as consideration	-	(5,450)
Deferred cash consideration	(2,235)	(6,741)
Cash paid to acquire subsidiary	3,005	21,478
Less: cash held by subsidiary acquired	(694)	(3,032)
Cash paid to acquire subsidiary net of cash acquired	2,311	18,446
		Combined
		£'000
Total cash paid to acquire subsidiaries net of cash acquired		20,757

13.  Deferred consideration

Deferred consideration, which has been included within provisions in current liabilities to the extent that it is due to be paid within one year of the reporting date (note 14), relates to the directors' best estimate of amounts payable in the future in respect of certain client relationships and subsidiary undertakings that were acquired by the Group. Deferred consideration is measured at its fair value based on discounted expected future cash flows. Amounts falling due after more than one year from the reporting date are presented in non-current liabilities as shown below.

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
At beginning of the period	959	-	-
Amount payable in respect of acquisitions during the period	5,691	910	910
Movement during the period	114	16	49
Transfer to current liabilities	(995)	-	-
At end of the period	5,769	926	959

The amount payable in respect of acquisitions during the period of £5,691,000 comprises deferred consideration of £4,319,000 relating to the acquisition of Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited and £1,372,000 relating to the acquisition of JPAM Limited (note 12).

14.  Provisions

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011  (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
Client compensation
At beginning of the period	339	243	243
Movement during the period	33	48	96
At end of the period	372	291	339
Deferred consideration
At beginning of the period	1,350	794	794
Transfer from non-current liabilities	995	-	-
Amount paid	(1,240)	(711)	(711)
Deferred consideration on acquisitions during the period	3,285	1,267	1,267
At end of the period	4,390	1,350	1,350
Other provisions
At beginning of the period	-	-	-
FSCS levy (note 5)	240	140	-
At end of the period	240	140	-
Total provisions at beginning of the period	1,689	1,037	1,037
Total provisions at end of the period	5,002	1,781	1,689

a)   Client compensation

Client compensation provisions relate to the potential liability arising 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 (six months ended 31 December 2011: eight months; year ended 30 June 2012: eight months) from the date of notification of the complaint.

b)   Deferred consideration

Deferred consideration has been included within provisions to the extent that it is due to be paid within one year of the reporting date.

An amount of £1,240,000 was paid during the period to Clarke Willmott LLP in respect of client relationships acquired by Brooks Macdonald Asset Management Limited in October 2011. A balance of £995,000 was transferred from non-current liabilities and relates to the final tranche that is payable in November 2013.

Deferred consideration of £3,285,000 was recognised during the period, comprising £863,000 in relation to the acquisition of JPAM Limited in July 2012 and £2,422,000 in relation to the acquisition of BMI and BMRS in November 2012 (note 12).

14.  Provisions (continued)

b)   Deferred consideration (continued)

In the six months ended 31 December 2011 and the year ended 30 June 2012, an amount of £711,000 was paid to Lawrence House Fund Managers in respect of the acquisition of Brooks Macdonald Asset Management (Tunbridge Wells) Limited. A deferred consideration balance of £1,267,000 was also recognised in relation to the acquisition of client relationships from Clarke Willmott LLP.

c)   Other provisions

Other provisions include an amount of £240,000 in respect of an estimated levy by the Financial Services Compensation Scheme. This comprises an interim levy relating to the 2012/13 scheme year and the initial annual levy relating to the 2013/14 scheme year. At 31 December 2011 a similar provision of £140,000 was included in respect of the interim levy relating to the 2011/12 scheme year, which was subsequently paid in April 2012. An initial annual levy of £183,000 relating to the 2012/13 scheme year was billed in June 2012 and was included within trade payables in the financial statements for the year ended 30 June 2012, hence no provisions were made at that date.

15.  Reconciliation of operating profit to net cash inflow / (outflow) from operating activities

	Six months ended 31 Dec 2012 (unaudited)	Six months ended 31 Dec 2011 (unaudited)	Year ended 30 Jun 2012 (audited)
	£'000	£'000	£'000
Operating profit	4,282	4,040	8,402
Depreciation	425	388	734
Amortisation of intangible assets	667	245	530
Increase in receivables	(364)	(1,449)	(2,920)
Decrease in payables	(659)	(6,028)	(4,319)
Increase in provisions	917	338	652
Decrease in non-current liabilities	(2,181)	-	(210)
Share-based payments	556	286	702
Net cash inflow / (outflow) from operating activities	3,643	(2,180)	3,571

16.  Related party transactions

At 31 December 2012, two of the Company's directors (at 31 December 2011: three; at 30 June 2012: three) had taken advantage of the season ticket loan facility that is available to all employees. The total amount outstanding at the balance sheet date was £11,000 (at 31 December 2011: £11,000; at 30 June 2012: £9,000).

17.  Share-based payment schemes

a)   Long Term Incentive Scheme (LTIS)

The Company has made annual awards under the LTIS to executive directors and other senior executives. The conditional awards, which vest three years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period. All such conditional awards are made at the discretion of the Remuneration Committee.

b)   Employee Benefit Trust

Brooks Macdonald Group plc established an Employee Benefit Trust ('the Trust') on 3 December 2010. The Trust was established in order to acquire ordinary shares in the Company to satisfy rights to purchase shares on the exercise of LTIS options. Up to 31 December 2012, the Company has paid £2,564,000 to the Trust, which has acquired 212,172 shares in the open market for a consideration of £2,544,000. 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.

c)   Other share schemes

Details of equity settled and phantom share schemes are provided on pages 44 to 45 of the Annual Report and Accounts for the year ended 30 June 2012.

Introduction

We have been engaged by the Company to review the condensed consolidated set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2012, which comprise the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the 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 consolidated 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 AIM Rules for Companies, which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements.

As disclosed in note 2, 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 consolidated 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 AIM Rules for Companies 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 consolidated set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

PricewaterhouseCoopers LLP

Chartered Accountants

12 March 2013

7 More London Riverside, London, SE1 2RT

Notes:

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

The maintenance and integrity of the Brooks Macdonald 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 financial statements since they were initially presented on the website.

 

END

 

 

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