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.
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