TIDMBRK
RNS Number : 8112S
Brooks Macdonald Group PLC
14 March 2019
14 March 2019
BROOKS MACDONALD GROUP PLC
FINANCIAL REPORT FOR THE SIX MONTHSED 31 DECEMBER 2018
Top-line and underlying profit growth, taking action to deliver
improved margins
Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group"),
the AIM listed integrated wealth management group, today announces
its half-year results for the six months ended 31 December
2018.
Financial Highlights
Half year Half year
ended ended
31.12.2018 31.12.2017
Total discretionary funds under GBP11.9bn GBP11.7bn
management ("FUM")
Revenue (from continuing operations) GBP52.0m GBP48.3m
Underlying(1) results (from continuing operations)
Underlying profit before tax GBP9.0m GBP8.3m
Underlying profit margin 17.3% 17.2%
Underlying diluted earnings per
share 51.9p 46.2p
Statutory results (from continuing operations)
Statutory profit before tax GBP0.5m GBP0.5m
Statutory diluted earnings per share -7.3p -4.9p
Cash GBP24.8m GBP26.9m
Dividends
Interim dividend 19.0p 17.0p
(1) Adjustments from statutory profit are in respect of the
amortisation of client relationships; finance income / costs and
changes in the fair value of deferred and contingent consideration;
impairment of the carrying value of goodwill (Levitas); impairment
of the carrying value of client relationships (Spearpoint);
restructuring charge; disposal costs and the profit from
discontinued operations (Property Management, Employee
Benefits).
Business Highlights:
-- FUM of GBP11.9 billion at 31 December, was down 4.5% over the
half year (compared to a fall of 7.0% in the MSCI WMA Balanced
Index), driven by investment performance (down GBP799 million),
partly offset by solid net new business (GBP241 million).
o Net new business was up 1.9%; within that, UK Investment
Management maintained a good rate of organic growth, at 3.6%, in
spite of a weak December driven by difficult market conditions and
weak client sentiment
o The International business was affected by the previously
disclosed loss of a client-facing team
o Investment performance continues to be robust.
-- Revenue up 7.7% versus H1 '18
o Fee income continued to grow, partly reflecting higher fee
revenue yield, despite lower market levels at the period end
o Transactional income materially affected by reduced new
business flows, a relatively stable asset allocation and the
ongoing trend towards all-in fees.
-- Underlying profit up 8.1% from GBP8.3 million to GBP9.0
million, supported by ongoing cost discipline.
-- Statutory profit before tax of GBP0.49 million reflected a
GBP4.8 million impairment of goodwill related to the Levitas
sponsorship fee, as the Group moves to a new 5-year partnership,
and a GBP2.3 million impairment of the value of Spearpoint acquired
client relationships, following the previously disclosed loss of a
client-facing team.
-- Prudent balance sheet and capital management, with capital
expenditure of GBP0.6m (FY18: GBP2.9m) and dilution management
undertaken to reflect the Board's intention to restrict aggregate
share dilution from employee share schemes to a maximum of 10%.
-- Interim dividend up by 11.8% to 19.0p (FY18: 17.0p).
-- Continued progress in dealing with the legacy issues
announced in July 2017 relating to the former Spearpoint
business:
o Reached agreement in principle with the new directors of the
Dublin-based fund, who informed shareholders on 12 March that they
had agreed Brooks Macdonald's goodwill offer of GBP3.4 million and
that they would call an Extraordinary General Meeting to seek
shareholder approval
o 82% of goodwill offers made to discretionary portfolio clients
accepted at 31 December, accounting for 74% of the value.
-- Measures announced in January to drive efficiency and
effectiveness, resulting in a material headcount reduction, while
making Brooks Macdonald easier to do business with for clients and
advisers
o Annualised cost savings of c.GBP4 million
o FY19 benefit of c.GBP1.5 million
o Associated restructuring cost of c.GBP3m, which will be
excluded from underlying profit.
-- Alan Carruthers announced as new Chairman in February, taking
over today from Christopher Knight who has been Chairman since the
Group's admission to trading on AIM in 2005.
Caroline Connellan, Chief Executive, commented:
"We delivered a good first half with growth in underlying profit
against a backdrop of difficult market conditions and weaker client
sentiment, caused by macroeconomic and political uncertainty.
December in particular was a challenging month but our UK
Investment Management business has maintained a good level of net
new business over the period, reflecting the strength of our client
and adviser relationships.
"In January, we announced measures to drive efficiency and
effectiveness in the business, streamlining processes, building a
scalable operating model and making Brooks Macdonald easier to do
business with. These changes will deliver material cost savings,
which we will start to benefit from in the second half, supporting
medium-term margin improvement.
"The fundamental opportunity for our business remains strong and
we continue to invest in our offering - for example, our recent new
product and service launches and our new client portal, due to go
live later this year. I am pleased by the progress we have made to
reinforce the foundations of our business and we are now
increasingly shifting our focus to driving sustainable and
value-enhancing growth."
An analyst meeting will be held at 9.15 for 9.30am on Thursday,
14 March at the offices of MHP Communications, 6 Agar Street,
London, WC2N 4HN. Please contact Robert Collett-Creedy on 020 3128
8147 or e-mail brooks@mhpc.com for further details.
LEI: 213800WRDF8LB8MIEX37
Enquiries to:
Brooks Macdonald Group plc www.brooksmacdonald.com
Caroline Connellan, Chief Executive 020 7499 6424
Ben Thorpe, Finance Director
Peel Hunt LLP (Nominated Adviser and Broker)
Guy Wiehahn / Adrian Haxby 020 7418 8900
MHP Communications
Reg Hoare / Simon Hockridge / Charlie Barker 020 3128 8540
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries,
provides leading investment management services in the UK and
internationally. The Group, which was founded in 1991 and began
trading on AIM in 2005, had Discretionary Funds under Management of
GBP11.9 billion as at 31 December 2018.
Brooks Macdonald offers a range of investment management
services to private high net worth individuals, pension funds,
institutions, charities and trusts. The Group also provides
financial planning as well as offshore investment management and
acts as fund manager to a regulated OEIC providing a range of
risk-managed multi-asset funds and a specialised absolute return
fund.
The Group has thirteen offices across the UK and the Channel
Islands including London, East Anglia, Hampshire, Leamington Spa,
Manchester, Taunton, Tunbridge Wells, York, Scotland, Wales,
Jersey, and Guernsey.
BROOKS MACDONALD GROUP PLC
HALF YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 31 DECEMBER 2018
Highlights of the period
Financial highlights Business highlights
as at 31 December 2018
+1.0%
Discretionary funds under
management
31 December 2018: GBP11.86
billion
31 December 2017: GBP11.74
billion
+8.1%
Underlying(1) profit before
tax from continuing operations
Six months to 31 December
2018: GBP8.99m
Six months to 31 December
2017(2) : GBP8.32m
-35.6%
Statutory profit before tax
Six months to 31 December
2018: GBP0.74m
Six months to 31 December
2017: GBP1.15m
19.0p
Interim dividend per share
2017: 17.0p
51.9p
Underlying(1) basic earnings
per share from continuing
operations
Six months to 31 December
2017: 46.4p
(5.9p) * FUM of GBP11.86 billion at 31 December 2018, was down
Statutory basic earnings 4.5% over the half year (compared to a fall of 7.0%
per share in the MSCI WMA Balanced Index), driven by investment
Six months to 31 December performance (down GBP799 million), partly offset by
2017: 0.1p solid net new business (GBP241 million).
* Revenue up 7.7% over the six months ended 31 December
2018. Fee income continued to grow, partly reflecting
higher fee revenue yield despite lower market levels
at the period end. Transactional income was
materially affected by reduced new business flows, a
relatively stable asset allocation and the ongoing
trend towards all-in fees.
* Underlying profit up 8.1% from GBP8.32m to GBP8.99m
supported by ongoing cost discipline.
* Statutory profit before tax of GBP0.49 million,
reflected a GBP4.8m impairment of goodwill related to
the Levitas sponsorship fee, as the Group moves to a
new 5-year partnership, and a GBP2.3m impairment of
the value of the Spearpoint acquired client
relationships, following the previously disclosed
loss of a client-facing team.
* Prudent balance sheet and capital management, with
capital expenditure of GBP0.6m (FY18: GBP2.9m) and
dilution management undertaken to reflect the Board's
intention to restrict aggregate share dilution from
employee share schemes to a maximum of 10%.
* Interim dividend up by 11.8% to 19.0p.
* Measures announced in January to drive efficiency and
effectiveness, resulting in a material headcount
reduction while making Brooks Macdonald easier to do
business with for clients and advisers.
* Alan Carruthers announced as new Chairman in February,
taking over today from Christopher Knight who has
been Chairman since the Group's admission to trading
on AIM in 2005.
(1) Excludes finance income and changes in fair value of contingent
consideration; finance costs and changes in fair value of deferred
consideration; amortisation of client relationship contracts
and contracts acquired with fund managers; impairment of goodwill;
impairment of client relationship contracts; restructuring charge;
the exceptional costs of resolving legacy matters; business
disposal costs; and profit from discontinued operations. A reconciliation
between underlying and statutory profit before tax from continuing
operations is shown in the Chairman's statement on page 2.
(2) Prior periods have been restated to separate the results
of discontinued operations, consistent with the presentation
in the current period.
Chairman's statement
Introduction
The first six months of our financial year to the end of
December 2018 have seen more difficult market conditions and weaker
client sentiment driven by the ongoing macroeconomic and political
uncertainty.
Despite this backdrop, the Group has once again achieved good
growth in revenue, underlying profit and underlying earnings per
share. Weaker markets were partly offset by solid net new business,
which resulted in discretionary funds under management at 31
December 2018 being up slightly on the previous calendar year.
Our centralised investment process continues to deliver strong
risk adjusted returns for our clients and over the period we have
continued to invest for the future. In parallel, we have maintained
our cost discipline and in January we announced plans to drive
increased efficiency and effectiveness in the business, delivering
increased margins in the medium term.
Results
Revenues from continuing operations have risen 7.7% to GBP52.0
million (FY18: GBP48.3 million) and underlying pre-tax profit has
increased by 8.1% to GBP9.0 million (FY18: GBP8.3 million), with
underlying earnings per share up 11.9% to 51.9p (FY18: 46.4p).
Statutory profit before tax from continuing operations was
GBP0.49 million (FY18: GBP0.46 million), reflecting:
-- An impairment of GBP4.8 million of goodwill relating to the
Levitas transaction, as the Group moves to a new 5-year partnership
which:
o Has a lower sponsorship fee, on which the goodwill calculation
is based; and
o Is expected to drive higher FUM and therefore higher
investment management revenues.
-- An impairment of GBP2.3 million in the value of client
relationships from the Spearpoint acquisition, following the
previously disclosed loss of a client-facing team.
Reconciliation of underlying profit before tax to profit before
tax from continuing operations
Six months Six months
to 31 December to 31 December
2018 2017*
GBPm GBPm
Underlying profit before tax from continuing
operations 8.99 8.32
Amortisation of client relationships (1.13) (1.20)
Finance income / (cost) of deferred and
contingent consideration (0.05) (0.08)
Changes in fair value of deferred and
contingent consideration 0.40 (0.99)
Goodwill impairment (4.75) -
Client relationship contracts impairment (2.33) -
Disposal-related costs (0.02) (0.08)
Exceptional costs of resolving legacy
matters - (5.51)
Restructuring charge (0.62) -
Profit before tax from continuing operations 0.49 0.46
---------------- ----------------
* The comparative results for the six months ended 31 December
2017 have been restated to exclude the results of the discontinued
operation, Employee Benefits, which was sold on 31 December 2018 as
per note 9 to the condensed consolidated financial statements.
The restructuring charge relates to costs incurred in relation
to the Group's previously announced efficiency improvements, to
drive margins in the medium term. The changes will result in a
material headcount reduction and the Group will incur costs in
relation to redundancy, payment in lieu of notice, settlement and
other restructuring-related costs. The charges are not
representative of the underlying business so have therefore been
excluded in reporting underlying profit.
Dividend
The Board has declared an interim dividend of 19.0p (FY18:
17.0p). This represents an increase of 11.8% compared to the
previous year. The interim dividend will be paid on 23 April 2019
to shareholders on the register as at 22 March 2019.
Funds under management
As previously announced, funds under management ('FUM') fell by
GBP0.6 billion to GBP11.9 billion in the six months to 31 December
2018 (30 June 2018: GBP12.4 billion), representing a decline of
4.5%, notwithstanding net new business of 1.9%. This compares to
the MSCI WMA Private Investor Balanced Index, which fell 7.0% over
the same six month period. Over the calendar year to 31 December
2018, our FUM have grown GBP0.1 billion, representing 1.0%
growth.
The decline in FUM over the half year was driven by investment
performance (down GBP799 million), partly offset by solid new
business (GBP241 million). Net new business was 1.9% over the half
year; within these total figures UK Investment Management
maintained a good rate of organic growth at 3.6%, in spite of a
weak December driven by difficult market conditions. The
International business was affected by the previously disclosed
loss of a client-facing team.
Analysis of discretionary fund flows over the period
Six months Six months Year to
to 31 December to 31 December 30 June
2018 2017 2018
GBPm GBPm GBPm
Opening discretionary FUM 12,414 10,456 10,456
Net new discretionary business 241 808 1,365
Investment growth (799) 474 594
---------------- ---------------- ---------
Total FUM growth (558) 1,282 1,958
Closing FUM 11,857 11,738 12,414
Organic growth (net of
markets) 1.9% 7.7% 13.1%
Total growth (4.5%) 12.3% 18.7%
Business review
The Group's purpose is to protect and enhance our clients'
wealth through the provision of investment management and advice
alongside exceptional service. We continue to pursue an organic
growth strategy based on the three pillars of foundation, focus and
growth:
-- Building on a foundation of success, with our client-centric
culture and our strong relationships with clients and advisers
driving market-leading rates of growth in funds under
management.
-- Focusing to deliver value to our shareholders, our clients
and advisers, and our staff, working from a sustainable platform to
ensure that we deliver improved margins in the medium term.
-- Driving for growth, deepening our relationships with our
existing clients and advisers and bringing our investment
management and financial planning expertise to new clients.
In the six months to 31 December 2018, we reinforced the
foundation by continuing to strengthen the leadership team, adding
Ben Thorpe as Finance Director, Priti Verma as Chief Risk Officer
and Adrian Keane-Munday as Managing Director, Financial Planning.
We are fortunate in the depth of talent in our investment teams,
underlined when we promoted Robin Eggar, Head of London, and John
Wallace, Head of Regions, to co-lead our UK Investment Management
business. We continue to focus on driving greater value from the
business, reinforcing our cost discipline and adopting a prudent
approach to capital expenditure, as well as pushing for growth,
adding over 100 new adviser relationships in the financial year,
agreeing a new 5-year Levitas partnership, developing new product
offerings and further expanding our geographic footprint with the
opening of our East Anglia office in Bury St. Edmunds.
During the period, we completed the sale of our sub-scale
Employee Benefits business to Brunsdon Employee Benefits Limited,
continuing our strategy of focusing on our core capabilities.
As we deliver our strategy, the emphasis across the three
strategic pillars of foundation, focus and growth is changing,
moving increasingly from reinforcing the foundations and taking
immediate actions on margin improvement to driving value-enhancing
growth, looking to capture economies of scale through streamlining
processes, eliminating duplication and leveraging digital, while
maintaining focus on our clients and advisers, identifying growth
opportunities and building a pipeline of services and products.
We completed our work on GDPR (the EU General Data Protection
Regulation) and continued further development of MiFID II (the
second Markets in Financial Instruments Directive), particularly
related to the requirement for "ex post" reporting of costs and
charges. More recently, we initiated development of a new client
portal which we will launch later this year and we are continuing
our preparations for the implementation of the Senior Managers
Regime.
During the period, we made good progress across all of our
businesses - UK Investment Management (including Funds),
International, and Financial Planning.
Within UK Investment Management we have seen continued traction
across all our client service lines. Further, we have been active
in product development, relaunching and expanding our Court of
Protection service and launching our new Responsible Investment
Service. The development work is now largely complete on our new
Decumulation product, which we look forward to launching in the
spring, and we are currently in active discussions with a number of
adviser firms, relating to opportunities for tailored versions of
our Managed Portfolio Service. Our Funds activities have continued
to see strong FUM growth, with our Defensive Capital Fund
performing well to reach just short of GBP600 million by the
calendar year end.
As expected, we have seen pressure on revenue yields,
principally stemming from reduced transactional income driven by
lower new business levels, the move towards all-in fees, and a
stable asset allocation from our Centralised Investment Process.
Overall, we believe this gives us higher quality revenue as our fee
income continues to grow while transactional income has been
declining. In UK Investment Management, our fee income in the six
months ended 31 December 2018 increased 10.3% against the same
period in the previous year.
International has seen reasonable levels of new business as we
continue to resolve outstanding legacy issues related to the
Spearpoint acquisition. Client attrition following the previously
disclosed departure of a client-facing team has led to a GBP2.3
million write-down in the value of acquired client relationships.
Revenue and underlying profit showed good growth.
Our Centralised Investment Proposition has continued to perform
well, giving returns ahead of the relevant ARC Private Client Index
across most risk profiles for 1, 3 and 5 years; continued good
performance is critical to medium-term client retention.
The need for advice for high net worth individuals continues to
grow, so the opportunity for our Financial Planning business
remains strong. We continue to focus on delivering a comprehensive
independent financial planning service to private clients and on
seeking new opportunities to support future growth, robustly
managing any perceived channel conflict.
Provision for legacy matters
We announced in July 2017 our decision to deal proactively with
certain legacy matters arising from the former Spearpoint business
which we acquired in 2012. These matters relate both to a number of
discretionary portfolios formerly managed by Spearpoint, now
managed by our Jersey office, and a Dublin-based fund, for which
Spearpoint acted as investment manager. While we accept no legal
liability in these matters, we have a deep commitment to treating
customers fairly and seeking to protect our clients' best
interests. We developed a plan to resolve these matters and made a
GBP12.0 million provision relating to potential goodwill
payments.
We have been in discussions with the new directors of the Board
of the Dublin-based fund. We have reached agreement in principle
with the directors, who informed shareholders on 12 March that they
had agreed Brooks Macdonald's goodwill offer of GBP3.4 million and
that they would call an Extraordinary General Meeting to seek
shareholder approval.
At 31 December 2018, 82% of the goodwill offers made to
discretionary portfolio clients had been accepted, accounting for
74% of the offers by value (compared to 75% and 66% respectively at
30 June 2018). A small number of clients have rejected those
goodwill offers, some of whom may take other routes to pursue their
claims.
GBP1.4 million of the provision was utilised during the period,
bringing the total utilised to GBP7.3 million. The total provision
is unchanged at GBP12.0 million.
We continue to be in discussions with all stakeholders,
including relevant regulators, as we seek to bring these matters to
a conclusion.
Share dilution and cash
At the Group's Annual General Meeting in October 2018
shareholders approved the introduction of a new Long Term Incentive
Plan. That Plan has provisions restricting the level of dilution,
particularly relating to discretionary awards:
-- There is an overall dilution limit of 15%, a limit approved by shareholders in 2010;
-- A large part of the existing dilution, approximately 5%,
relates to our Save As You Earn Scheme, which has a high level of
participation;
-- Dilution relating to discretionary awards is explicitly capped at 10% over 10 years.
At the AGM a number of shareholders cast votes against the Plan,
informing us that in their view the 15% limit was excessive. In the
light of these shareholder concerns the Board intends to limit
aggregate dilution to a maximum of 10%.
In order to adhere to this 10% limit the company has engaged in
buying shares in the market to fulfil awards in certain of its
employee share schemes. As a result cash resources at the period
end amounted to GBP24.8 million (31 December 2017: GBP26.9
million). The Group had no borrowings at 31 December 2018 (31
December 2017: GBPnil).
Principal risks and uncertainties
The Group's activities expose it to a variety of financial and
non-financial risks. Our principal risks, which are described in
the 2018 Annual Report and Accounts, include:
-- loss of clients or reputational damage as a result of poor performance or service;
-- regulatory breaches;
-- loss of key staff;
-- cyber and data security breaches;
-- potential service issues with outsourced IT infrastructure;
-- operational risk due to failure of internal processes and controls;
-- the risk of breaching investment portfolio mandates; and
-- financial risks such as liquidity risk, market risk and credit risk.
Brexit
The UK is scheduled to leave the European Union on 29 March. We
have reviewed the potential consequences and we see no material
threat to the continuing operations of the Group, given our
activities are almost entirely within the UK or outside the EU
(principally the Channel Islands). However, while not a direct
impact, there may be continuing effects on markets and client
sentiment.
The Board
John Linwood, a former Chief Technology Officer of the BBC,
joined the board as a non-executive director in September 2018.
As previously announced, Alan Carruthers today succeeds me as
Chairman. I joined the board as a non-executive director in 2002
and became Chairman when our shares were listed on AIM in 2005. Our
FUM were then GBP371 million compared to the GBP12 billion we
manage today; our market capitalisation on listing was GBP14
million compared to over GBP200 million today. Our success reflects
the professionalism and commitment of those we employ, attributes
which are as evident in the business today as they were when I
joined the board. I am confident that alongside Caroline
Connellan's executive leadership Alan will preside over a Group
which will enjoy continuing growth and success.
Outlook and summary
We remain focused on delivering strong performance at all levels
of the business. We continue to build on our success to date and
invest in our offering to deliver future growth, while
progressively improving our margins. The benefits of the measures
we announced in January to drive efficiency and effectiveness
through the business will start to be felt in the second half.
We have an excellent team and a well established organic growth
strategy. Although the early part of the second half has seen
continued macroeconomic and political uncertainty, it has also seen
continued momentum in the underlying business. The Group is well
positioned for the future.
Christopher Knight
Chairman
13 March 2019
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 31 December 2018
Year ended
Six months
ended 31 Dec
2018 30 Jun 2018
Six months
ended 31 Dec
Note (unaudited) 2017 (unaudited)(1) (audited)(1)
GBP'000 GBP'000 GBP'000
Revenue 4 52,013 48,308 100,820
Administrative costs 5 (44,705) (46,860) (91,105)
Other gains and losses 6 (6,863) (932) (3,643)
Operating profit 445 516 6,072
Finance income 7 109 36 128
Finance costs 7 (62) (88) (152)
Profit before tax 492 464 6,048
Taxation on continuing
operations 8 (1,503) (1,129) (1,328)
(Loss) / profit for the
period from continuing
operations (1,011) (665) 4,720
Profit from discontinued
operations 9 245 681 674
Taxation on discontinued
operations 8 (49) - -
(Loss) / profit for the
period attributable to
equity holders of the Company (815) 16 5,394
-------------- --------------------- --------------
Other comprehensive income:
Items that may be reclassified
subsequently to profit
or loss
Revaluation of available
for sale financial assets - (3) (2)
Total comprehensive (expense)
/ income for the period (815) 13 5,392
-------------- --------------------- --------------
(Loss) / earnings per share
from continuing operations
Basic 10 (7.3p) (4.9p) 35.5p
Diluted 10 (7.3p) (4.9p) 35.4p
(Loss) / earnings per share
attributable to equity
holders of the Company
Basic 10 (5.9p) 0.1p 39.4p
Diluted 10 (5.9p) 0.1p 39.3p
(1) Prior periods have been restated to separate the results of
the additional discontinued operations, consistent with the
presentation in the current period. Refer to note 9 for details of
the results of discontinued operations.
Condensed Consolidated Statement of Financial Position
as at 31 December 2018
31 Dec 31 Dec 30 Jun
2018 2017 2018
Note (unaudited) (unaudited) (audited)
Assets GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 12 51,473 61,464 60,556
Property, plant and equipment 13 3,642 3,969 3,996
Available for sale financial
assets 14 - 1,572 1,578
Financial assets at fair value
through other comprehensive
income 15 500 - -
Financial assets at fair value
through profit or loss 16 5 - -
Deferred tax assets 826 1,385 1,176
------------- ------------- -----------
Total non-current assets 56,446 68,390 67,306
Current assets
Trade and other receivables 25,526 25,135 26,019
Financial assets at fair value
through profit or loss 16 662 1,238 1,267
Cash and cash equivalents 24,754 26,909 30,939
------------- ------------- -----------
Total current assets 50,942 53,282 58,225
Total assets 107,388 121,672 125,531
------------- ------------- -----------
Liabilities
Non-current liabilities
Deferred consideration 17 (349) (1,282) (1,479)
Deferred tax liabilities (1,882) (3,149) (2,565)
Other non-current liabilities (137) (88) (157)
------------- ------------- -----------
Total non-current liabilities (2,368) (4,519) (4,201)
Current liabilities
Trade and other payables (13,999) (19,159) (23,291)
Current tax liabilities (2,778) (2,503) (1,325)
Deferred tax liabilities (554) - (425)
Provisions 18 (5,788) (12,368) (8,332)
------------- ------------- -----------
Total current liabilities (23,119) (34,030) (33,373)
Net assets 81,901 83,123 87,957
------------- ------------- -----------
Equity
Share capital 138 138 138
Share premium account 38,476 37,510 38,404
Other reserves 3,520 6,133 3,114
Retained earnings 39,767 39,342 46,301
------------- ------------- -----------
Total equity 81,901 83,123 87,957
------------- ------------- -----------
The condensed consolidated financial statements were approved by
the Board of Directors and authorised for issue on 13 March 2019,
signed on their behalf by:
C M Connellan B L Thorpe
Chief Executive Finance Director
Company registration number: 4402058
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 December 2018
Share
Share premium Other Retained
Note capital account reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2017 138 37,101 6,480 41,987 85,706
--------- --------- ---------- ---------- --------
Comprehensive income
Loss for the period
from continuing operations - - - (665) (665)
Profit from discontinued
operations 9 - - - 681 681
Other comprehensive
income:
Revaluation of available
for sale financial assets - - (3) - (3)
--------- --------- ---------- ---------- --------
Total comprehensive
income - - (3) 16 13
Transactions with owners
Issue of ordinary shares - 409 - - 409
Share-based payments - - 820 - 820
Share-based payments
transfer - - (863) 863 -
Tax on share options - - (301) - (301)
Dividends paid 11 - - - (3,524) (3,524)
--------- --------- ---------- ---------- --------
Total transactions with
owners - 409 (344) (2,661) (2,596)
Balance at 31 December
2017 138 37,510 6,133 39,342 83,123
--------- --------- ---------- ---------- --------
Comprehensive income
Profit for the period
from continuing operations - - - 5,385 5,385
Loss from discontinued
operations 9 - - - (7) (7)
Other comprehensive
income:
Revaluation of available
for sale financial assets - - 1 - 1
Total comprehensive
income - - 1 5,378 5,379
Transactions with owners
Issue of ordinary shares - 894 - - 894
Share-based payments - - 849 - 849
Share-based payments
transfer - - (3,900) 3,900 -
Tax on share options - - 31 - 31
Dividends paid 11 - - - (2,319) (2,319)
--------- --------- ---------- ---------- --------
Total transactions with
owners - 894 (3,020) 1,581 (545)
Balance at 30 June 2018 138 38,404 3,114 46,301 87,957
--------- --------- ---------- ---------- --------
Share
Share premium Other Retained
Note capital account reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 June 2018 138 38,404 3,114 46,301 87,957
--------- --------- ---------- ---------- ---------
Comprehensive income
Loss for the period
from continuing operations - - - (1,011) (1,011)
Profit from discontinued
operations 9 - - - 196 196
Other comprehensive
income - - - - -
Total comprehensive
income - - - (815) (815)
Transactions with owners
Issue of ordinary shares - 72 - - 72
Share-based payments - - 1,145 - 1,145
Share-based payments
exercised - - (692) 692 -
Purchase of own shares
by employee benefit
trust - - - (2,288) (2,288)
Tax on share options - - (47) - (47)
Dividends paid 11 - - - (4,123) (4,123)
--------- --------- ---------- ---------- ---------
Total transactions with
owners - 72 406 (5,719) (5,241)
Balance at 31 December
2018 138 38,476 3,520 39,767 81,901
--------- --------- ---------- ---------- ---------
Condensed Consolidated Statement of Cash Flows
for the six months ended 31 December 2018
Six months Six months
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 Jun 2018
Note (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Cash generated from operations 19 455 2,954 13,610
Taxation paid (348) (1,388) (2,673)
Net cash generated from
operating activities 107 1,566 10,937
Cash flows from investing
activities
Purchase of intangible
assets 12 (200) (1,699) (5,069)
Purchase of property, plant
and equipment 13 (420) (1,174) (1,829)
Deferred consideration
paid 17 (1,251) (1,852) (1,852)
Proceeds from sale of discontinued
operations 9 593 966 1,005
Finance income received 7 96 32 102
Proceeds of sale of financial
assets at fair value through
profit or loss 16 1,229 - -
Cash flows from investing
activities of discontinued
operations 9 - 2 2
------------- ------------- -------------
Net cash used in investing
activities 47 (3,725) (7,641)
Cash flows from financing
activities
Proceeds of issue of shares 72 409 1,303
Purchase of own shares
by employee benefit trust (2,288) - -
Dividends paid to shareholders 11 (4,123) (3,524) (5,843)
------------- ------------- -------------
Net cash used in financing
activities (6,339) (3,115) (4,540)
Net decrease in cash and
cash equivalents (6,185) (5,274) (1,244)
Cash and cash equivalents
at beginning of period 30,939 32,183 32,183
------------- ------------- -------------
Cash and cash equivalents
at end of period 24,754 26,909 30,939
------------- ------------- -------------
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2018
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, acts as fund manager to
regulated OEICs and provides specialist funds in the property and
structured return sectors. The Group's primary activities are set
out in its Annual Report and Accounts for the year ended 30 June
2018.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom under the Companies Act 2006 and is
listed on AIM. The address of its registered office is 72 Welbeck
Street, London, W1G 0AY.
The half yearly financial report was approved for issue on 13
March 2019. The condensed consolidated financial statements have
been independently reviewed but are not audited.
2. Accounting policies
a) Basis of preparation
The Group's condensed consolidated 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 2018, except as stated below. The condensed consolidated
financial statements should be read in conjunction with the Group's
audited financial statements for the year ended 30 June 2018, which
have been prepared in accordance with International Financial
Reporting Standards ('IFRS') and IFRS Interpretations Committee
('IFRS IC') interpretations, as adopted by the European Union and
the Companies Act 2006 applicable to companies reporting under
IFRS.
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 2018 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. It
contained no statement under section 498(2) or (3) of the Companies
Act 2006.
At the time of approving the half yearly financial statements,
the directors have a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the half yearly
financial statements.
b) Changes in accounting policies
The Group's accounting policies that have been applied in
preparing these condensed consolidated financial statements are
consistent with those disclosed in the Annual Report and Accounts
for the year ended 30 June 2018, except as described below.
New accounting standards, amendments and interpretations adopted
in the period
In the six months ended 31 December 2018, the Group adopted two
new standards being IFRS 9 'Financial instruments' and IFRS 15
'Revenue from contracts with customers'. The Group did not adopt
any other new standards and amendments issued by the International
Accounting Standards Board ('IASB') or interpretations issued by
the IFRS IC in the six months ended 31 December 2018.
IFRS 9 'Financial instruments'
IFRS 9 governs the accounting treatment for the classification
and measurement of financial instruments and the timing and extent
of credit provisioning, replacing the previously adopted IAS 39
'financial instruments: recognition and measurement.' The standard
concerns guidance for the classification and measurement of
financial assets by introducing a fair value through other
comprehensive income category for certain financial assets. It also
contains a new impairment model which intends to result in earlier
recognition of losses.
Transition
The Group has taken advantage of the exemption per paragraph
5.6.1 of IFRS 9, regarding restated comparative information for
prior periods with respect to classification, measurement and
impairment requirements. Where differences arise in the carrying
amounts of financial assets and financial liabilities resulting
from the adoption of IFRS 9, they are to be recognised in retained
earnings as at 1 July 2018. Accordingly, the information presented
for December 2017 and June 2018 will not reflect the requirements
of IFRS 9 but will be presented in line with IAS 39.
Classification and measurement of financial assets and financial
liabilities
IFRS 9 requires the Group to hold its financial assets and
liabilities at amortised cost, fair value through profit or loss
("FVPL") or fair value through other comprehensive income
("FVOCI"). The categorisation of assets as 'held to maturity'
("HTM") and 'available for sale' ("AFS") are no longer recognised
under IFRS. The classification criteria for designating financial
assets between the categories under IFRS 9 require the Group to
assess and document the business models under which the assets are
actually managed. Consideration needs to be given to management of
the asset in terms of if the asset is held for contractual cash
flow, if the contractual cash flow represents solely payment of
principal and interest and if the asset is held for selling
purposes.
The effect of adopting IFRS 9 on the carrying amounts of
financial assets at 1 July 2018 has resulted in a change of
classification on the Condensed Consolidated Statement of Financial
Position, however has not changed the Condensed Consolidated
Statement of Comprehensive Income and Condensed Consolidated
Statement of Cash Flows.
The following table summarises the original measurement
categories under the previously adopted IAS 39 and the new
measurement categories and carrying amount under IFRS 9 for each of
the Group's financial assets at 1 July 2018.
Financial asset Previous Previous New IFRS New IFRS
IAS 39 classification IAS 39 carrying 9 classification 9 carrying
amount amount
Unlisted redeemable preference AFS FVOCI
shares GBP650,000 GBP650,000
Contingent consideration AFS FVPL
receivable GBP923,000 GBP923,000
Offshore bond AFS GBP5,000 FVPL GBP5,000
Trade & other receivables Loans and Amortised
receivables GBP26,019,000 cost GBP26,019,000
Financial assets at FVPL FVPL GBP1,267,000 FVPL GBP1,267,000
Cash and cash equivalents Amortised Amortised
cost GBP30,939,000 cost GBP30,939,000
Total financial assets GBP59,803,000 GBP59,803,000
----------------- --------------
The basis of classification for financial liabilities under IFRS
9 remains unchanged from IAS 39. There remains two categories being
amortised cost or FVPL. The Group has assessed its financial
liabilities at 1 July 2018 and concluded that no change in
classification is required. Therefore there has been no impact on
the Condensed Consolidated Statement of Financial Position,
Condensed Consolidated Statement of Comprehensive Income or
Condensed Consolidated Statement of Cash Flows as a result of IFRS
9 in relation to financial liabilities.
Impairment of financial assets
Under IFRS 9, an expected credit loss ("ECL") model is used to
measure the impairment of financial assets. Under an ECL model a
credit loss provision is recognised once a loss is expected to
arise, instead of when it occurs as previously required under IAS
39. The objective of the impairment requirements is to recognise
lifetime expected credit losses for all financial instruments,
considering all reasonable information, including that which is
forward looking. The Group applies the simplified lifetime expected
credit loss model. This requires an assessment of the total amount
of credit losses expected over the lifetime of the asset and is
performed on an asset by asset basis. As a result, the Group has
determined that the initial application of IFRS 9's impairment
requirements at 1 July 2018 results in no additional impairment
provision.
IFRS 15 'Revenue from contracts with customers'
IFRS 15 governs the accounting treatment of revenue recognition
from contracts with customers which replaces the existing IFRS
revenue guidance adopted previously, in particular IAS 18
'Revenue'. IFRS 15 creates a single model for revenue recognition
from contracts, with customers and aims to provide greater
consistency and comparability across industries by linking revenue
to the fulfilment of identified performance obligations that are
detailed in the customer contract. The core principle underlying
the new recognition is that an entity should recognise revenue in a
manner that depicts the pattern of transfer of goods and services
to customers. It also requires that the incremental cost of
obtaining a customer contract should be capitalised if that cost is
expected to be recovered.
Transition
The Group has taken advantage of the exemption per Appendix C of
IFRS 15 regarding restated comparative information for prior
periods with respect to revenue recognition. Where differences
arise resulting from the adoption of IFRS 15, they are to be
recognised in retained earnings as at 1 July 2018. Accordingly, the
comparative numbers presented for December 2017 and June 2018 will
not reflect the requirements of IFRS 15 but will be presented in
line with previous revenue recognition from contracts with
customers.
Impact of IFRS 15 on financial statements for six months ended
31 December 2018
The Group has reviewed IFRS 15 and its impact on its existing
revenue streams, as well as on its policy of capitalising the cost
of obtaining customer contracts. As described below, the adoption
of IFRS 15 has not had a significant impact on the Group's revenue
recognition accounting policy.
Portfolio management fee income and fund management fees
The core portfolio management fee income is contracted with
customers and is in relation to the continued management of their
portfolio during a defined period. As a result, the performance
obligation is ongoing over the contract resulting in no impact on
revenue recognition as a result of IFRS 15.
Portfolio management fee income includes income earned on
supporting activities and revenue that are part of the overall
service provided, and as a result do not present a separate and
stated performance obligation. These supporting activities are for
one off services and revenue is recognised once the service has
occurred, therefore IFRS 15 has no impact on the supporting
activities for portfolio management fee income.
Financial services commission
The revenue is earned as a result of the core services provided
in the Financial Planning segment through advisory fees (see
below). The revenue is earned as a result of a past service being
satisfied resulting in no impact to revenue recognition due to IFRS
15.
Advisory fees
Advisory fees are earned by the Financial Planning segment and
are subject to client agreements to provide financial advice and
assistance and clients are charged based on an agreed rate of funds
under advice, invoiced over the period the service is provided.
Under IFRS 15 the Group is required to identify distinct
performance conditions in order to recognise 'work in progress'
relating to unbilled revenue earned by an advisor. The client
contracts do not include any distinct performance conditions
meaning this work in progress revenue cannot be recognised under
IFRS 15. The work in progress balance and movement from year to
year is consistently immaterial, and therefore the adoption of IFRS
15 has not had a material impact on advisory fee revenue.
Costs of obtaining or fulfilling a contract
Under IFRS 15 the scope requirements for recognising an asset in
relation to costs of obtaining or fulfilling a contract are broader
such that costs to obtain any contract with a customer should be
capitalised if those costs are incremental and the Group expects to
recover them. Amortisation should then be charged on a basis that
is consistent with the transfer to the customer of the services to
which the capitalised costs relate.
The Group's policy for capitalising contract costs currently
recognises the fair value of the future benefits accruing to the
Group from the acquired client relationship contracts. The
amortisation of client relationships is charged to the Condensed
Consolidated Statement of Comprehensive Income on a straight line
basis over their estimated useful lives of 15 to 20 years. The
Group has assessed the impact IFRS 15 on these and concluded that
the current policies in place are sufficient and therefore will
remain unchanged.
Other new standards, amendments and interpretations listed in
the following table were newly adopted by the Group but have not
had a material impact on the amounts reported in these condensed
consolidated financial statements. They may, however, impact the
accounting for future transactions and arrangements.
Standard, Amendment or Interpretation Effective
date
-------------------------------------------------------- ----------
Annual improvements to IFRS standards 2014-2017 1 January
cycle (IFRS 1 and IAS 28) 2018
-------------------------------------------------------- ----------
Foreign Currency Transactions and Advance Consideration 1 January
(IFRIC 22) 2018
-------------------------------------------------------- ----------
Classification and measurement of share-based 1 January
payment transactions (amendments to IFRS 2) 2018
-------------------------------------------------------- ----------
New accounting standards, amendments and interpretations not yet
adopted
A number of new standards, amendments and interpretations, which
have not been applied in preparing these condensed consolidated
financial statements, have been issued and are effective for annual
and interim periods beginning after 1 July 2018:
Standard, Amendment or Interpretation Effective
date
------------------------------------------------------- ----------
Leases (IFRS 16) 1 January
2019
------------------------------------------------------- ----------
Uncertainty over Income Tax Treatments (IFRIC 1 January
23) 2019
------------------------------------------------------- ----------
Annual improvements to IFRS standards 2015-2018 1 January
cycle (IFRS 3, IFRS 11, IAS 12, IAS 23) 2019
------------------------------------------------------- ----------
Amendments to IAS 28: Long-term Interest in Associates 1 January
and Joint Ventures 2019
------------------------------------------------------- ----------
Amendments to References to the Conceptual Framework 1 January
in IFRS Standards 2020
------------------------------------------------------- ----------
Amendment to IFRS 3 Business Combinations 1 January
2020
------------------------------------------------------- ----------
Amendments to IAS 1 and IAS 8: Definition of Material 1 January
2020
------------------------------------------------------- ----------
Insurance Contracts (IFRS 17) 1 January
2021
------------------------------------------------------- ----------
Not yet endorsed for use in the EU
The impact of these changes is currently being reviewed and
there is no intention to early adopt.
IFRS 16 'Leases'
IFRS 16 is effective for periods commencing on or after 1
January 2019. The standard was endorsed by the EU during 2017. The
Group has decided not to early adopt this standard and as a leasee,
the Group can apply the standard using either a retrospective
approach, or a modified retrospective approach with optional
practical expedients. The Group has considered the impact of both
applications in relation to its existing contracts and expects to
apply the modified retrospective approach.
IFRS 16 will require the recognition of a right-of-use asset and
associated lease liability for the office premises that are leased
by the Group. The asset would be depreciated over the lease term
and the liability would accrue interest, resulting in a
front-loaded expense profile. As a result, the Group's total assets
and liabilities will be increased by the recognition of lease
assets and liabilities.
This accounting treatment contrasts with the current treatment
for operating leases, where no asset or liability is recognised and
the lease payments are charged to the Condensed Consolidated
Statement of Comprehensive Income on a straight line basis over the
term of the lease. The total cost of the lease over the lease term
is expected to be unchanged under the new standard.
3. Segmental information
For management purposes the Group's activities are organised
into three operating divisions: UK Investment Management, Financial
Planning and International. The Group's other activity, offering
nominee and custody services to clients, is included within UK
Investment Management. These divisions are the basis on which the
Group reports its primary segmental information to the Group board
of directors, which is the Group's chief operating decision maker.
In accordance with IFRS 8 'Operating Segments', disclosures are
required to reflect the information which the Board of directors
uses internally for evaluating the performance of its operating
segments and allocating resources to those segments. The
information presented in this note is consistent with the
presentation for internal reporting.
Revenues and expenses are allocated to the business segment that
originated the transaction. Revenues and expenses that are not
directly originated by a particular operating business segment are
reported as 'all other segments & consolidation adjustments.'
Sales between segments are carried out at arm's length. Centrally
incurred expenses are allocated to business segments on an
appropriate pro-rata basis. Segmental assets and liabilities
comprise operating assets and liabilities, those being the majority
of the Condensed Consolidated Statement of Financial Position.
All other
segments
Six months ended UK Investment Financial & consolidation
31 Dec 2018 (unaudited) Management Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 42,450 1,801 7,423 461 52,135
Inter segment revenue (122) - - - (122)
-------------- ---------- -------------- ----------------- ---------
External revenues 42,328 1,801 7,423 461 52,013
Underlying administrative
expenses (21,357) (1,374) (4,937) (15,273) (42,941)
-------------- ---------- -------------- ----------------- ---------
Operating contribution 20,971 427 2,486 (14,812) 9,072
Allocated costs (9,731) (1,214) (1,533) 12,478 -
Underlying other gains and
losses, finance income and
finance costs 7 - (85) (9) (87)
Underlying profit before tax 11,247 (787) 868 (2,343) 8,985
Goodwill impairment - - - (4,756) (4,756)
Client relationship contracts
impairment - - - (2,328) (2,328)
Amortisation of client relationships
and contracts acquired with
fund managers (398) - (210) (519) (1,127)
Restructuring charge (431) - (3) (181) (615)
Changes in fair value of deferred
consideration - - - 419 419
Finance cost of deferred consideration - - - (63) (63)
Disposal costs - (21) - - (21)
Changes in fair value of contingent
consideration - - - (15) (15)
Finance income from contingent
consideration - - - 13 13
Profit / (loss) before tax 10,418 (808) 655 (9,773) 492
Taxation (1,503)
Profit from discontinued operations 196
---------
Profit for the period attributable to equity holders of the
Company (815)
---------
The below segmental analysis has been restated to reflect the
previously reported Funds segment which was integrated into UK
Investment Management on 1 July 2018. Property Funds have been
included in the 'All other segments & consolidation
adjustments' along with the non-reportable Group segment. The
analysis has also been restated to reflect the additional
discontinued operation recognised in the six months ended 31
December 2018 (note 9) and a change in presentation to disclose
administrative expenses, allocated costs and underlying other gains
and losses, finance income and finance costs by segment.
All other
segments
Six months ended UK Investment Financial & consolidation
31 Dec 2017 (unaudited) Management Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 39,794 2,152 6,720 457 49,123
Inter segment revenue (642) (173) - - (815)
-------------- ---------- -------------- ----------------- ---------
External revenues 39,152 1,979 6,720 457 48,308
Underlying administrative
expenses (22,471) (1,006) (5,169) (11,749) (40,395)
-------------- ---------- -------------- ----------------- ---------
Operating contribution 16,681 973 1,551 (11,292) 7,913
Allocated costs (6,876) (866) (1,024) 8,766 -
Underlying other gains and
losses, finance income and
finance costs 1 - 12 389 402
Underlying profit before tax 9,806 107 539 (2,137) 8,315
Amortisation of client relationships
and contracts acquired with
fund managers (454) - (210) (532) (1,196)
Finance cost of deferred consideration - - - (88) (88)
Finance income from contingent
consideration - - - 4 4
Changes in fair value of deferred
consideration - - - (985) (985)
Exceptional costs of resolving
legacy matters - - (5,505) - (5,505)
Disposal costs - - - (81) (81)
Profit / (loss) before tax 9,352 107 (5,176) (3,819) 464
Taxation (1,129)
Profit from discontinued operations 681
---------
Profit for the period attributable to equity holders of the
Company 16
---------
All other
segments
UK Investment Financial & consolidation
Year ended 30 June 2018 (audited) Management Planning International adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 82,593 4,226 14,170 977 101,966
Inter segment revenue (832) (314) - - (1,146)
-------------- ---------- -------------- ----------------- ---------
External revenues 81,761 3,912 14,170 977 100,820
Underlying administrative
expenses (46,302) (2,080) (10,375) (24,368) (83,125)
-------------- ---------- -------------- ----------------- ---------
Operating contribution 35,459 1,832 3,795 (23,391) 17,695
Allocated costs (16,460) (1,974) (2,400) 20,834 -
Underlying other gains and
losses, finance income and
finance costs 6 - 54 124 184
Underlying profit before tax 19,005 (142) 1,449 (2,433) 17,879
Amortisation of client relationships
and contracts acquired with
fund managers (890) - (420) (1,051) (2,361)
Finance cost of deferred consideration - - - (152) (152)
Finance income from contingent
consideration - - - 26 26
Changes in fair value of deferred
consideration - - - (1,191) (1,191)
Changes in fair value of contingent
consideration - - - (16) (16)
Software impairment (2,518) - - - (2,518)
Exceptional costs of resolving
legacy matters - - (5,530) - (5,530)
Disposal costs - - - (89) (89)
Profit / (loss) before tax 15,597 (142) (4,501) (4,906) 6,048
Taxation (1,328)
Profit from discontinued operations 674
---------
Profit for the period attributable to equity holders of the
Company 5,394
---------
4. Revenue
Six months Six months Year ended
ended ended
31 Dec 2018 31 Dec 2017 30 Jun 2018
(unaudited)(1)
(unaudited) (audited)(1)
GBP'000 GBP'000 GBP'000
Portfolio management
fee
and transactional
income 45,173 42,075 87,908
Financial services
commission 72 85 151
Advisory fees 2,307 2,473 4,937
Fund management fees 4,461 3,675 7,824
Total revenue from
continuing
operations 52,013 48,308 100,820
------------------------ ---------------------------- -------------------------
(1) Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period. Refer to note 9 for details of the results of
discontinued operations.
a) Geographic analysis of revenue
The Group's operations are located in the United Kingdom and the
Channel Islands. The following table presents external revenue
analysed by the geographical location of the Group entity providing
the service.
Six months
ended Year ended
Six months
31 Dec 2018 ended 30 Jun 2018
31 Dec 2017
(unaudited) (unaudited)(1) (audited)(1)
GBP'000 GBP'000 GBP'000
United Kingdom 44,590 41,588 86,650
Channel Islands 7,423 6,720 14,170
Total revenue from continuing
operations 52,013 48,308 100,820
------------- ----------------- --------------
(1) Prior periods have been restated to separate the results of
the additional discontinued operations, consistent with the
presentation in the current period. Refer to note 9 for details of
the results of discontinued operations.
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
The following items are included within administrative costs in
the Condensed Consolidated Statement of Comprehensive Income.
Financial Services Compensation Scheme levies
A credit of GBP131,000 was recognised in respect of Financial
Services Compensation Scheme ('FSCS') levies in the six months
ended 31 December 2018 following final confirmation by the FSCS of
the supplementary levy for 2018/19 scheme year (six months ended 31
December 2017: charge of GBP3,000; year ended 30 June 2018: charge
of GBP664,000).
6. Other gains and losses
Other gains and losses represent the net changes in the fair
value of the Group's financial instruments recognised in the
Condensed Consolidated Statement of Comprehensive Income.
Six months Six months
ended ended
31 Dec 2018 31 Dec 2017 Year ended
30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Impairment of goodwill
(note 12) (4,756) - -
Impairment of client relationship
contracts (note 12) (2,328) - -
Impairment of software - - (2,518)
(Loss) / gain from changes
in fair value of financial
assets at fair value through
profit or loss (note 16) (33) 53 82
Loss from changes in fair
value of contingent consideration
receivable (note 16) (15) - (16)
Gain / (loss) from changes
in fair value of deferred
consideration payable (note
17) 419 (985) (1,191)
Impairment of financial
assets at fair value through
profit or loss (note 15) (150) - -
------------- ------------- -------------
Other gains and losses (6,863) (932) (3,643)
------------- ------------- -------------
7. Finance income and finance costs
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Finance income
Dividends on preference
shares 26 20 50
Bank interest on deposits 70 12 52
Finance income from contingent
consideration 13 4 26
Total finance income 109 36 128
------------- -------------- -------------
Finance costs
Finance cost of deferred
consideration 62 88 152
------------- -------------- -------------
Total finance costs 62 88 152
------------- -------------- -------------
8. Taxation
The current tax expense for the six months ended 31 December
2018 was calculated based on the Corporation Tax rate of 19.00%,
applied to the taxable profit for the period ended 31 December 2018
(six months ended 31 December 2017: 19.00%; year ended 30 June
2018: 19.00%).
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
UK Corporation Tax 1,754 1,808 3,396
(Over) / under provision
in prior years - - (613)
------------- -------------- -------------
Total current taxation 1,754 1,808 2,783
Deferred tax credits (251) (679) (600)
Research and development
tax credit - - (855)
Total income tax expense
on continuing operations 1,503 1,129 1,328
Capital gains tax on discontinued 49 -
operations -
Total income tax expense 1,552 1,129 1,328
------------- -------------- -------------
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
During the six months ended 31 December 2018, the Group disposed
of its Employee Benefits business (note 9), resulting in a capital
gains tax of GBP49,000.
The Finance (No.2) Act 2015, which was substantively enacted in
October 2015, will reduce the main rate of Corporation Tax to 17%
in 2020. 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. The tax rate used to determine the deferred
tax assets and liabilities is therefore 17.00% (six months ended 31
December 2017: 17.00%; year ended 30 June 2018: 17.00%) and will be
reviewed in future years subject to new legislation.
During the year ended 30 June 2018, the Group made a claim for
research and development tax relief in relation to qualifying
expenditure on software development incurred in the years ended 30
June 2016 and 30 June 2017. This resulted in a reduction in the
Corporation Tax liabilities of the respective years, and a
repayment of GBP855,000 from HMRC. The Group will consider whether
further claims can be made for qualifying expenditure in the year
ended 30 June 2018 and thereafter in due course.
9. Discontinued operations
On 31 December 2018, the Group disposed of its Employee Benefits
operations within the Financial Planning segment. Profit from
discontinued operations is disclosed separately in the Condensed
Consolidated Statement of Comprehensive Income, being the results
of the disposal to 31 December 2018 and the gain on disposal.
Initial cash consideration of GBP50,000 was received on completion.
Additional cash consideration will also be receivable in the first
calendar quarter of 2020, being a multiple of revenue earned by the
disposed business for the year ended 31 December 2019. On disposal
the estimated consideration receivable was estimated at GBP282,000,
which was recognised at its fair value of GBP219,000 based on the
discounted forecast cash flows. This gain is presented within
profit from discontinued operations in the Condensed Consolidated
Statement of Comprehensive Income for the six months ended 31
December 2018. Disposal costs of GBP21,000 were incurred by the
Group in relation to the sale.
On 1 December 2017, the Group disposed of its Property
Management division, comprising the wholly owned subsidiaries
Braemar Estates (Residential) Limited and Braemar Facilities
Management Limited. Profit from discontinued operations is
disclosed separately in the Condensed Consolidated Statement of
Comprehensive Income, being the results of the disposal group to 1
December 2017 and the gain on disposal. For further details on this
disposal please see the Brooks Macdonald Group Plc Annual Report
& Accounts for the year ended 30 June 2018. During the six
months ended 31 December 2018 the Group received GBP483,000 of
contingent consideration (note 16), and a further GBP60,000 as
additional post-completion consideration.
The presentation of prior periods below have been restated to
separate the results of the additional discontinued operations,
consistent with the presentation in the current period. The
previously reported discontinued operations recognised the
operations of Braemar Estates (Residential) Limited and Braemar
Facilities Management Limited however the Employee Benefits
operation has now been included.
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited)(1) (audited)
GBP'000 GBP'000 GBP'000
Loss of discontinued operations (84) (142) (188)
Gain on disposal of discontinued
operations 329 823 862
------------- ----------------- -------------
Profit before tax from
discontinued operations 245 681 674
Taxation (49) - -
------------- ----------------- -------------
Profit from discontinued
operations 196 681 674
------------- ----------------- -------------
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited)(1) (audited)
GBP'000 GBP'000 GBP'000
Revenue 224 1,682 1,931
Administrative costs (308) (1,826) (2,121)
-------------
Operating loss (84) (144) (190)
Finance income - 2 2
------------- ----------------- -------------
Loss before tax (84) (142) (188)
------------- ----------------- -------------
a) Gain on disposal of discontinued operations
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited)(1) (audited)(1)
GBP'000 GBP'000 GBP'000
Initial consideration
received 50 966 966
Additional consideration
received 60 - 39
Fair value of contingent
consideration (note 16) 219 913 913
-------------
Total disposal consideration 329 1,879 1,918
Net assets on disposal - (1,056) (1,056)
Gain on disposal of discontinued
operations 329 823 862
------------- ----------------- ---------------
(1) Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period.
10. Earnings per share
The directors believe that underlying earnings per share provide
a truer reflection of the Group's performance in the period.
Underlying earnings per share are calculated based on 'underlying
earnings', which is defined as earnings before finance costs of
deferred consideration, finance income of contingent consideration,
changes in the fair value of deferred consideration, changes in
fair value of contingent consideration, goodwill impairment,
amortisation of client relationships and contracts acquired with
fund managers, finance income from contingent consideration,
exceptional costs of resolving legacy matters, business disposal
costs and profit or loss from discontinued operations. The tax
effect of these adjustments has also been considered.
Earnings for the period used to calculate earnings per share as
reported in these condensed consolidated financial statements were
as follows:
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (audited)
(unaudited) (1) (1)
GBP'000 GBP'000 GBP'000
(Loss) / earnings from continuing
operations (1,011) (665) 4,720
Profit from discontinued operations 196 681 674
Earnings attributable to ordinary
shareholders (815) 16 5,394
Goodwill impairment (note 12) 4,756 - -
Client relationship contracts
impairment (note 12) 2,328 - -
Amortisation of acquired client
relationship contracts (note
12) 1,072 1,084 2,156
Restructuring charge 615 - -
Changes in fair value of deferred
consideration (note 17) (419) 985 1,191
Underlying profit from discontinued
operations (245) (681) (536)
Finance cost of deferred consideration
(note 17) 63 88 152
Amortisation of contracts acquired
with fund managers (note 12) 55 111 206
Disposal costs (note 9) 21 82 89
Changes in fair value of contingent
consideration (note 16) 15 - 16
Finance income from deferred
consideration (note 7) (13) (4) (26)
Exceptional costs of resolving
legacy matters - 5,506 5,531
Software impairment (note 12) - - 2,518
Tax impact of adjustments (283) (864) (588)
Underlying earnings for the
period 7,150 6,323 16,103
Basic earnings per share is calculated by dividing earnings
attributable to ordinary shareholders by the weighted average
number of shares in issue throughout the period. Diluted earnings
per share represents the basic earnings per share adjusted for the
effect of dilutive potential shares issuable on exercise of
employee share options under the Group's share-based payment
schemes, weighted for the relevant period. The weighted average
number of shares in issue during the period was as follows:
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
Number of Number of
shares Number of shares shares
Weighted average number of shares
in issue 13,765,991 13,641,290 13,677,910
Effect of dilutive potential
shares issuable on exercise
of employee share options 18,880 58,046 28,318
------------- ----------------- -------------
Diluted weighted average number
of shares in issue 13,784,871 13,699,336 13,706,228
------------- ----------------- -------------
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (audited)
(unaudited) (1) (1)
p p p
Based on reported earnings:
Basic (loss) / earnings per
share from:
- Continuing operations (7.3) (4.9) 35.5
- Discontinued operations 1.4 5.0 3.9
------------- -------------- -------------
Total basic earnings per share (5.9) 0.1 39.4
Diluted (loss) / earnings per
share from:
- Continuing operations (7.3) (4.9) 35.4
- Discontinued operations 1.4 5.0 3.9
------------- -------------- -------------
Total diluted earnings per share (5.9) 0.1 39.3
Based on underlying earnings:
Basic earnings per share 51.9 46.4 117.7
Diluted earnings per share 51.9 46.2 117.5
(1) Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period. Refer to note 9 for details of the results of
discontinued operations.
11. Dividends
Six months Six months
ended ended
31 Dec 2018 31 Dec 2017 Year ended
30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Final dividend paid on ordinary
shares 4,123 3,524 3,524
Interim dividend paid on ordinary
shares - - 2,319
Total dividends 4,123 3,524 5,843
------------- ------------- -------------
An interim dividend of 19.0p (six months ended 31 December 2017:
17.0p) per share was declared by the Board of Directors on 13 March
2019. It will be paid on 23 April 2019 to shareholders who are on
the register at the close of business on 22 March 2019. In
accordance with IAS 10, this dividend has not been included as a
liability in the condensed consolidated financial statements at 31
December 2018.
A final dividend for the year ended 30 June 2018 of 30.0p (year
ended 30 June 2017: 26.0p) per share was paid on 2 November
2018.
12. Intangible assets
Contracts
Acquired acquired
client with
Computer relationship fund
Goodwill software contracts managers Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July 2017 36,006 7,732 32,745 3,521 80,004
Additions - 1,699 - - 1,699
Disposals (230) (77) (584) - (891)
Reclassification to
Property, Plant and
Equipment - (943) - - (943)
At 31 December 2017 35,776 8,411 32,161 3,521 79,869
Additions - 3,370 - - 3,370
Impairment - (4,013) - - (4,013)
At 30 June 2018 35,776 7,768 32,161 3,521 79,226
Additions - 200 - - 200
At 31 December 2018 35,776 7,968 32,161 3,521 79,426
--------- ---------- -------------- ---------- --------
Accumulated amortisation
& impairment
At 1 July 2017 1,986 1,858 10,315 3,197 17,356
Amortisation charge - 923 1,084 111 2,118
Disposals - (61) (217) - (278)
Reclassification to
Property, Plant and
Equipment - (791) - - (791)
--------- ---------- -------------- ---------- --------
At 31 December 2017 1,986 1,929 11,182 3,308 18,405
Amortisation charge - 595 1,072 95 1,762
Disposals - (2) - - (2)
Impairment - (1,495) - - (1,495)
At 30 June 2018 1,986 1,027 12,254 3,403 18,670
Amortisation charge - 1,072 1,072 55 2,199
Impairment 4,756 - 2,328 - 7,084
--------- ---------- -------------- ---------- --------
At 31 December 2018 6,742 2,099 15,654 3,458 27,953
--------- ---------- -------------- ---------- --------
Net book value
At 1 July 2017 34,020 5,874 22,430 324 62,648
At 31 December 2017 33,790 6,482 20,979 213 61,464
At 30 June 2018 33,790 6,741 19,907 118 60,556
--------- ---------- -------------- ---------- --------
At 31 December 2018 29,034 5,869 16,507 63 51,473
--------- ---------- -------------- ---------- --------
a) Goodwill
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units ('CGUs') that are expected
to benefit from that business combination. The carrying amount of
goodwill in respect of these CGUs within the operating segments of
the Group comprises:
31 Dec 2018
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Funds
Braemar Group Limited ('Braemar') 3,320 3,320 3,320
Levitas Investment Management
Services Limited ('Levitas') 4,471 9,227 9,227
------------- ------------- ------------
7,791 12,547 12,547
International
Brooks Macdonald Asset Management
(International) Limited and Brooks
Macdonald Retirement Services
(International) Limited (collectively
'Brooks Macdonald International') 21,243 21,243 21,243
Total goodwill 29,034 33,790 33,790
------------- ------------- ------------
At the reporting date, there were some impairment indicators
present for the Levitas CGU and based on a value-in-use
calculation, the recoverable amount at 31 December 2018 was
GBP5,152,000. This was lower than the carrying amount of the CGU,
reflecting both a reduction in forecast revenue growth and an
increase in the discount rate applied, indicating that it should be
impaired. An impairment loss of GBP4,756,000 has been recognised
against the goodwill attributable to the CGU and is shown in the
Consolidated Statement of Comprehensive Income within other gains
and losses.
The key underlying assumptions of the calculation are the
discount rate, the growth in funds under management of the Levitas
funds and the long-term growth rate of the business. A pre-tax
discount rate of 12% (30 June 2018: 11%) has been used, based on
the Group's assessment of the risk-free rate of interest and
specific risks pertaining to Levitas. Annual funds under management
growth rates of between 8% and 36% are forecast in the next five
financial years, the period covered by the most recent forecasts,
which reflect historic actual growth and planned management
activities, which are considered to be achievable given current
market and industry trends. A 2% long-term growth rate is applied
to cash flows beyond the forecast period and is considered prudent
in the context of the long-term average growth rate for the funds
industry in which the CGU operates.
Reasonable possible changes in the key assumptions and the
impact of these changes on the calculated recoverable amount
are:
-- A 1% change in the pre-tax discount rate which would result
in an increase of GBP628,000 or a decrease of GBP512,000 in the
recoverable amount.
-- A 10% change in the forecast funds under management which
would result in a GBP329,000 change in the recoverable amount.
-- A 0.5% change in the long-term average growth rate which
would result in an increase of GBP210,000 or a decrease of
GBP190,000 in the recoverable amount.
At the reporting date there were some impairment indicators
present for the Brooks Macdonald International CGU, however based
on a value-in-use calculation the recoverable amount at 31 December
2018 was GBP32,813,000, indicating that there is no impairment.
There were no impairment indicators present for the Braemar CGU
at 31 December 2018.
b) Computer software
Computer software costs are amortised on a straight line basis
over an estimated useful life of 4 years. Costs incurred on
internally developed computer software are initially recognised at
cost and when the software is available for use the costs are
amortised on a straight line basis over an estimated useful life of
4 years.
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 Condensed
Consolidated Statement of Comprehensive Income on a straight line
basis over their estimated useful lives (15 to 20 years).
During the six months ended 31 December 2018, an impairment
charge of GBP2,328,000 was recognised in relation to one of the
Group's acquired relationship contracts due to a reduction in the
expected useful economic life from 15 to 12 years.
d) Contracts acquired with fund managers
This asset represents the fair value of the future benefits
accruing to the Group from contracts acquired with fund managers.
Payments made to acquire such contracts are initially recognised at
cost and amortised on a straight line basis over an estimated
useful life of 5 years.
13. Property, plant and equipment
Motor vehicles Fixtures,
fittings
Leasehold & office
improvements equipment IT equipment Total*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July 2017 2,053 8 8,125 1,323 11,509
Additions 428 - 89 658 1,175
Disposals - (8) (53) (3) (64)
Reclassification to
intangible assets - - - 943 943
At 31 December 2017 2,481 - 8,161 2,921 13,563
Additions 400 - 55 199 654
At 30 June 2018 2,881 - 8,216 3,120 14,217
Additions 153 - 80 187 420
At 31 December 2018 3,034 - 8,296 3,307 14,637
-------------- ---------------- ----------- ------------- ---------
Accumulated amortisation
At 1 July 2017 (737) (8) (7,175) (386) (8,306)
Depreciation charge (99) - (276) (184) (559)
Depreciation on disposals - 8 53 1 62
Reclassification to
intangible assets - - - (791) (791)
At 31 December 2017 (836) - (7,398) (1,360) (9,594)
Depreciation charge (162) - (241) (224) (627)
At 30 June 2018 (998) - (7,639) (1,584) (10,221)
Depreciation charge (193) - (230) (351) (774)
At 31 December 2018 (1,191) - (7,869) (1,935) (10,995)
-------------- ---------------- ----------- ------------- ---------
Net book value
At 1 July 2017 1,316 - 950 937 3,203
At 31 December 2017 1,645 - 763 1,561 3,969
At 30 June 2018 1,883 - 577 1,536 3,996
-------------- ---------------- ----------- ------------- ---------
At 31 December 2018 1,843 - 427 1,372 3,642
-------------- ---------------- ----------- ------------- ---------
*During the six months ended 31 December 2018, property, plant
and equipment non-current assets were reviewed in terms of useful
economic life and classification of assets. The outcome was that
the useful economic lives have been updated in line with Group's
revised expectations from 1 July 2018. The Group has also amended
the property, plant and equipment non-current asset classifications
to present the property, plant and equipment non-current assets in
clearly defined classifications.
The following table summarises and shows the changes to the
Group's new property, plant and equipment non-current asset
classifications and useful economic lives.
As at 30 June 2018 As at 1 July 2018
Classification Useful economic Classification Useful economic
life life
----------------------- ---------------- ----------------------- ----------------
Fixtures and 3 to 6.67 years Fixtures, fittings 5 years
fittings & office equipment
Equipment 5 years IT equipment 4 or 5 years*
Leasehold improvements Over the term Leasehold improvements Over the term
of the lease of the lease
Motor vehicles 4 years Motor vehicles 4 years
*IT equipment includes hardware, which has a useful economic
life of 4 years and servers and networks, which have a useful
economic life of 5 years.
14. Available for sale financial assets
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At 30 June 2018 1,578 - -
IFRS 9 reclassification
to FVOCI (650) - -
IFRS 9 reclassification
to FVPL (928) - -
-------------- -------------- -------------
At beginning of period - 658 658
Additions - 913 913
Finance income of contingent
consideration - 4 26
Net loss from changes
in fair value - (3) (19)
At end of period - 1,572 1,578
-------------- -------------- -------------
The Group adopted IFRS 9 'Financial instruments' at 1 July 2018
resulting in the available for sale financial assets category being
no longer available. As a result, the available for sale assets
were reclassified to fair value through other comprehensive income
(note 15) and fair value through profit or loss (note 16). For
further details on the adoption and impact to the financial
statements, please see note 2(b).
15. Financial assets at fair value through other comprehensive
income
Six months
ended
31 Dec 2018
(unaudited)
GBP'000
IFRS 9 reclassification from AFS (note 14) 650
Impairment (150)
-------------
At end of period 500
-------------
At 31 December 2018, the Group held an investment of 500,000
redeemable GBP1 preference shares in an unlisted company
incorporated in the UK. The preference shares carry an entitlement
to a fixed preferential dividend at a rate of eight per cent per
annum. During the six months ended the company impaired its
GBP150,000 investment in preference share capital in an unlisted
company incorporated in the Channel Islands to a net book value of
GBPnil as the Group does not expect to recover its investment.
16. Financial assets at fair value through profit or loss
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At 30 June 2018 1,267 - -
IFRS 9 reclassification from
AFS (note 14) 928 - -
------------- -------------- -------------
At beginning of period 2,195 1,185 1,185
Additions 219 - -
Finance income of contingent 13 - -
consideration
Net (loss) / gain from changes
in fair value (48) 53 82
Payments received (483) - -
Disposals (1,229) - -
At end of period 667 1,238 1,267
------------- -------------- -------------
Analysed as:
Amounts falling due within
one year 662 1,238 1,267
Amounts falling due after more
than one year 5 - -
------------- -------------- -------------
At end of period 667 1,238 1,267
------------- -------------- -------------
The Group disposed of their 563,689 class A units in the IFSL
Brooks Macdonald Balanced Fund in November 2018 at their fair value
of GBP1,229,000. In the period from 1 July 2018 to disposal, the
Group recognised a reduction in fair value of GBP33,000.
At 31 December 2018, the offshore bond had a market value of
GBP5,000 (31 December 2017: GBP8,000; 30 June 2018: GBP5,000
recognised as available for sale financial assets; note 14).
During the six months ended 31 December 2018, the Group disposed
of its Employee Benefits business (note 9). On disposal, the Group
recognised a contingent consideration receivable in respect of
contingent consideration receivable from the purchaser at its fair
value of GBP219,000.
During the six months ended 31 December 2018, the Group received
GBP483,000 of the contingent consideration receivable recognised on
disposal of Braemar Estates (Residential) Limited in December 2017.
At 31 December 2018, the contingent consideration receivable was
GBP437,000 including finance income of GBP13,000 and a reduction in
fair value of GBP15,000 was recognised during the period.
17. Deferred consideration
Deferred consideration is split between non-current liabilities
(see below) and provisions in current liabilities (note 18) to the
extent that it is due to be paid within one year of the reporting
date. It reflects 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. The movements in the total deferred
consideration balance during the year were as follows:
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of the period 2,875 3,384 3,384
Finance cost of deferred consideration 63 88 152
Fair value adjustments (419) 985 1,191
Payments made during the period (1,251) (1,852) (1,852)
At end of period 1,268 2,605 2,875
------------- -------------- -------------
Analysed as:
Amounts falling due within
one year 919 1,323 1,396
Amounts falling due after more
than one year 349 1,282 1,479
At end of period 1,268 2,605 2,875
------------- -------------- -------------
No additions to deferred consideration payable were recognised
in the period. Payments totalling GBP1,251,000 (six months ended 31
December 2017: GBP1,852,000; year ended 30 June 2018: GBP1,852,000)
were made during the period to the vendors of Levitas. Full details
of the Levitas acquisition are disclosed in note 13 of the 2015
Annual Report and Accounts.
A decrease in the fair value of deferred consideration of
GBP419,000 (six months ended 31 December 2017: increase of
GBP985,000; year ended 30 June 2018: increase of GBP1,191,000) was
recognised during the period, all in respect of Levitas, with a
corresponding gain recognised within other gains and losses in the
Condensed Consolidated Statement of Comprehensive Income. The
amount payable is based on the incremental growth in FUM of the TM
Levitas funds, measured at annual intervals. As forecast growth was
not achieved during the period, the FUM forecast was subsequently
revised and the estimated future deferred consideration payments
decreased accordingly. The outstanding deferred consideration
liability at 31 December 2018 relates entirely to the present value
of fixed amounts owed to the vendors of Levitas.
Amounts falling due after more than one year from the reporting
date are presented within non-current liabilities as shown
below:
Six months
ended
Six months
31 Dec 2018 ended Year ended
31 Dec 2017 30 Jun 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At beginning of the period 1,479 1,720 1,720
Finance cost of deferred consideration 62 88 152
Fair value adjustments (419) 985 1,191
Transfer to current liabilities (773) (1,511) (1,584)
At end of period 349 1,282 1,479
------------- -------------- -------------
18. Provisions
Exceptional
costs of
resolving Deferred FSCS
Client compensation legacy matters consideration levy Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2017 807 6,500 1,664 621 9,592
Charge / (Release) to
the Statement of Comprehensive
Income (499) 5,506 - 3 5,010
Transfer from non-current
liabilities - - 1,511 - 1,511
Utilised during the period (107) (1,265) (1,852) (521) (3,745)
-------------------- ---------------- --------------- -------- --------
At 31 December 2017 201 10,741 1,323 103 12,368
Charge to the Statement
of Comprehensive Income 92 25 - 624 741
Transfer from non-current
liabilities - - 73 - 73
Utilised during the period (271) (4,541) - (38) (4,850)
-------------------- ---------------- --------------- -------- --------
At 30 June 2018 22 6,225 1,396 689 8,332
Adjustment in respect
of prior periods - - 1 - 1
Charge to the Statement
of Comprehensive Income 88 - - (131) (43)
Transfer from non-current
liabilities - - 773 - 773
Utilised during the period (21) (1,446) (1,251) (557) (3,275)
-------------------- ---------------- --------------- -------- --------
At 31 December 2018 89 4,779 919 1 5,788
-------------------- ---------------- --------------- -------- --------
a) Client compensation
Client compensation provisions relate to the potential liability
arising from client complaints against the Group. Complaints are
assessed on a case by case basis and provisions for compensation
are made where judged necessary. The amount recognised within
provisions for client compensation represents management's best
estimate of the potential liability. The timing of the
corresponding outflows is uncertain as these are made as and when
claims arise.
b) Exceptional costs of resolving legacy matters
Following a review into legacy matters arising from the former
Spearpoint business, which was acquired by the Group in 2012, a
provision was recognised for costs of resolving these including
associated expenses in the years ended 30 June 2017 and 30 June
2018. These matters relate to a number of discretionary portfolios
formerly managed by Spearpoint, now managed by Brooks Macdonald
Asset Management (International) Limited, and a Dublin-based fund,
for which Spearpoint acted as investment manager. During the six
months ended 31 December 2018 no further provisions were made (six
months ended 31 December 2017: GBP5,506,000; year ended 30 June
2018: GBP5,531,000). The amount utilised during the period of
GBP1,446,000 represented goodwill payments made to clients of
GBP871,000, legal fees of GBP330,000 and related expenses of
GBP245,000. During the period, a contingent liability was
recognised in relation to potential claims related to the legacy
matters (note 22).
c) Deferred consideration
Deferred consideration has been included within provisions as a
current liability to the extent that it is due for payment within
one year of the reporting date. Details of the total deferred
consideration payable are provided in note 17.
d) FSCS levy
At 31 December 2018 provisions include an amount of GBP1,000 (at
31 December 2017: GBP103,000; at 30 June 2018: GBP689,000) in
respect of expected levies by the Financial Services Compensation
Scheme. The expected levy for the 2019/20 scheme year has been
announced by the FSCS but does not yet meet the recognition
criteria for a provision.
19. Reconciliation of operating profit to net cash inflow from
operating activities
Six months Six months
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 Jun 2018
(unaudited) (unaudited)(1) (audited)(1)
GBP'000 GBP'000 GBP'000
Operating profit / (loss)
from:
- Continuing operations 445 516 6,072
- Discontinued operations
(note 9) (84) (144) (190)
------------- ---------------- --------------
Operating profit 361 372 5,882
Depreciation of property,
plant and equipment 774 573 1,186
Amortisation of intangible
assets 2,199 2,118 3,880
Other gains & losses 6,863 932 3,643
Decrease / (increase) in
trade and other receivables 493 (2,442) (3,323)
(Decrease) / increase in
trade and other payables (9,292) (2,010) 2,122
(Decrease) / increase in
provisions (2,067) 3,117 (992)
Decrease in other non-current
liabilities (20) (69) -
Reduction in net assets due
to disposal of discontinued
operations - (457) (457)
Share-based payments charge 1,144 820 1,669
------------- ---------------- --------------
Net cash inflow from operating
activities 455 2,954 13,610
------------- ---------------- --------------
(1) Prior periods have been restated to separate the results of
discontinued operations, consistent with the presentation in the
current period. Refer to note 9 for details of the results of
discontinued operations.
20. Related party transactions
There were no related party transactions during the period and
no balances outstanding at 31 December 2018 owed to or from related
parties.
21. Equity-settled share-based payments
Share options granted during the period under the Group's equity
settled share-based payment schemes were as follows:
Exercise Number of
price Fair value options
p p
Long Term Incentive Scheme nil 1,149 - 1,708 163,501
---------- -------------- ----------
No options were granted in respect of the Company's other equity
settled share-based payment schemes during the six months ended 31
December 2018. The charge to the Condensed Consolidated Statement
of Comprehensive Income for the six months ended 31 December 2018
in respect of all equity settled share-based payment schemes was
GBP646,000 (six months ended 31 December 2017: GBP820,000; year
ended 30 June 2018: GBP1,653,000).
22. Contingent liabilities
In the normal course of business the Group is exposed to certain
legal and tax issues which, in the event of a dispute, could
develop into litigious proceedings and in some cases may result in
contingent liabilities.
During the six months ended 31 December 2018, the Group has
discovered a possible liability to HM Revenue & Customs in
relation to a PAYE settlement agreement. The Group has made contact
with HM Revenue & Customs, but at this stage it is unknown if
and how much the possible liability is, and therefore no provision
has been made at 31 December 2018.
During the six months ended 31 December 2018, a small number of
clients rejected goodwill offers made by Brooks Macdonald Asset
Management (International) Limited in connection with the
exceptional costs of resolving legacy matters (note 18), which have
been released from the provision. It is possible that one or more
of these clients might issue claims against Brooks Macdonald Asset
Management (International) Limited but no such claims have been
issued as at 31 December 2018. As a result, it is not possible to
estimate the potential outcome of claims or to assess the quantum
of any liability with any certainty at this stage.
23. Events since the end of the period
Since the end of the period, the Group announced efficiency
improvements, to increase margins in the medium term. The Group has
identified a range of opportunities to streamline and remove
duplication from core processes. The changes will result in a
material headcount reduction and the Group expects the cost of the
changes to be up to GBP3,000,000, incurred in relation to
redundancy, payment in lieu of notice, settlement and other
restructuring-related costs. During the six months ended 31
December 2018, the Group had expensed GBP615,000 in relation to
this, with the remaining balance expected to be expensed during the
six months ending 30 June 2019.
Since the end of the period, the Group have reached an agreement
in principle with the Board of directors of the Dublin-based fund
in relation to the exceptional costs of resolving legacy matters
(note 18), who informed shareholders on 12 March that they had
agreed Brooks Macdonald Asset Management (International) Limited's
goodwill offer of GBP3,400,000 and that they would call an
Extraordinary General Meeting to seek shareholder approval.
Statement of directors' responsibilities
The directors confirm that the half yearly financial report has
been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union
and that the interim management report includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The directors of Brooks Macdonald Group plc are listed on page
42.
By order of the Board of Directors
B L Thorpe
Finance Director
13 March 2019
Report on the condensed consolidated half yearly financial
statements
Our conclusion
We have reviewed Brooks Macdonald Group Plc's condensed
consolidated financial statements (the "interim financial
statements") in the half-yearly financial report of Brooks
Macdonald Group Plc for the 6 month period ended 31 December 2018.
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 31 December 2018;
-- the condensed consolidated statement of comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, 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.
Our responsibility is to express a conclusion on the interim
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 complying
with the AIM Rules for Companies and for no other purpose. We do
not, in giving this conclusion, 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.
What a review of interim financial statements involves
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,
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.
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 interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
13 March 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DBGDXSGBBGCX
(END) Dow Jones Newswires
March 14, 2019 03:01 ET (07:01 GMT)
Brooks Macdonald (LSE:BRK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Brooks Macdonald (LSE:BRK)
Historical Stock Chart
From Jul 2023 to Jul 2024
