Brooks Macdonald Regulatory News (BRK)

14 September 2023

BROOKS MACDONALD GROUP PLC

Final results for the year ended 30 June 2023

Solid financial performance, strategy continuing to deliver

Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group") today announces its audited results for the year ended 30 June 2023.

Andrew Shepherd, CEO of Brooks Macdonald, commented:

"I'm pleased to report a year of strategic progress and solid financial performance for Brooks Macdonald, highlighting once more the resilience of our strategy and our business model. Despite market headwinds we delivered 5.2% net flows and robust underlying profit margin. Although the economic climate continued to affect investor sentiment, we delivered consistent positive net flows, demonstrating the strength of both our proposition and our relationships with clients and advisers.

"As we look ahead, our focus remains on ensuring we are well positioned to support clients, advisers and our people. This underpins our ambition and the plans we have in place to take advantage of the long-term opportunity. Supported by a strong capital position, our proven strategy, and motivated people, we look to the future with confidence."

Solid financial performance

· Group Funds Under Management ("FUM") reaching £16.8 billion (FY22: £15.7 billion), up 7.5% on prior year

· Positive net flows every quarter, 5.2% at Group level for the full year (FY22: 4.8%), with the third quarter highest at an annualised level of 9.2%

· Robust investment performance given market conditions of 2.3% for the year, ahead of the 1.6% increase in the MSCI PIMFA Private Investor Balanced Index

· Revenue of £123.8 million (FY22: £122.2 million), up 1.3% driven by positive net flows and investment performance, a contribution from acquisitions1, and increased interest income, partly offset by product mix effects

· Underlying profit of £30.3 million2 (FY22: £34.5 million), maintaining a robust underlying profit margin of 24.5% (FY22: 28.2%), in line with the Group's commitment to deliver top quartile margins, despite difficult market conditions and the impact of cost pressures

· Strong capital position with a robust balance sheet, including an appropriate buffer over regulatory capital requirements

· Full year dividend up 5.6% to 75.0p (FY22: 71.0p) reflecting the Board's confidence in the Group's medium-term growth ambitions. Eighteenth successive annual dividend increase since the shares started trading on AIM.

Strategic progress

· Continued strong growth in the Group's Platform Managed Portfolio Service ("PMPS"), including BM Investment Solutions ("BMIS"), its B2B offering for advisers, with overall PMPS FUM up 70% over the year, now over 20% of Group FUM

· Continued progress in Bespoke Portfolio Service ("BPS") specialist products with FUM up almost 50% over the period in the Decumulation Service, partly offsetting net outflows in core BPS in line with the market

· Core investment management processes successfully transferred to the platform provided by SS&C, the Group's technology partner

· Acquisitions completed of Integrity Wealth Solutions and Adroit Financial Planning, extending and enhancing the Group's existing financial planning capabilities.

Outlook

· Net flows expected to remain positive for full year FY24, despite short-term macroeconomic headwinds which are likely to result in negative net flows for Q1 and may affect the timing of delivery of our medium-term 8-10% p.a. net flow ambition

· Changing product mix will continue to affect average revenue yield

· Benefits expected from the operational leverage from our SS&C relationship as FUM increases over the medium term

· Continuing to review potential acquisition targets to complement organic growth, in line with the Group's strategy

· Group's processes and client-centric culture proving well aligned to the requirements of the FCA's new Consumer Duty Principle, requiring firms to deliver good outcomes for retail customers

· Structural growth opportunity remains highly attractive, underpinned by demographics, government policy, increasing use of advice, fragmented nature of the market.

1 The underlying figures represent the results for the Group's continuing activities excluding certain adjusting items as listed in the Financial Review. These represent an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered. A reconciliation between the Group's statutory and underlying profit before tax is also included in the Financial Review.

2 The underlying figures represent the results for the Group's continuing activities excluding certain adjusting items as listed in the Financial Review. These represent an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered. A reconciliation between the Group's statutory and underlying profit before tax is also included in the Financial Review.

Key financial results

Underlying results3

Statutory results

Dividends

3 The underlying figures represent the results for the Group's continuing activities excluding certain adjusting items as listed in the Financial Review. These represent an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered. A reconciliation between the Group's statutory and underlying profit before tax is also included in the Financial Review.

Conference call and investor presentation details

There will be a Q&A session for analysts and investors at 9:30 a.m. today via webcast and conference call. For details please contact FTI Consulting on +44 (0) 07976 870961 or brooksmacdonald@fticonsulting.com

A video presentation and presentation slides will be available from 7:30 a.m. today by going to the Investor Relations section of Brooks Macdonald's website using the following link:

https://www.brooksmacdonald.com/investor-relations

Enquiries to:

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 £16.85 billion as at 30 June 2023.

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 international investment management, and acts as fund manager to a range of onshore and international funds.

The Group has fifteen offices across the UK and Crown Dependencies including London, Birmingham, Cheltenham, East Anglia, Exeter, Leeds, Manchester, Nuneaton, Southampton, Tunbridge Wells, Scotland, Wales, Jersey, Guernsey and Isle of Man.

LEI: 213800WRDF8LB8MIEX37

www.brooksmacdonald.com / @BrooksMacdonald

Chairman's statement

Introduction

Brooks Macdonald has had another good year, delivering solid financial performance and continued strategic progress. Funds under management ("FUM") finished the year at £16.8 billion (FY22: £15.7 billion), up 7.5% due to the combination of strong net flows and solid investment performance in turbulent markets. Despite volatile market conditions driving weaker investor sentiment, the Group achieved positive net flows every quarter. Net flows for the year were 5.2%, slightly ahead of last year's 4.8%, with the annualised rate of 9.2% in the third quarter (three months to 31 March) being particularly pleasing.

Our team works every day to protect and enhance our clients' wealth, and our Centralised Investment Process, embedded across the business, continues to deliver strong performance over the medium and longer term. Overall Group investment performance for this financial year was 2.3%, slightly ahead of the MSCI PIMFA Private Investor Balanced Index, which was up 1.6%.

Performance overview

The Group once again delivered growth at the FUM and revenue level, with revenue of £123.8 million (FY22: £122.2 million). Cost pressures meant that underlying profit before tax was £30.3 million, down 12.2% on last year (FY22: £34.5 million), and underlying diluted earnings per share ("EPS") was down 10.5% to 151.0p (FY22: 168.7p).

Statutory profit before tax fell 24.7% to £22.2 million (FY22: £29.5 million). Statutory basic EPS fell 23.0% to 114.7p (FY22: 149.0p).

Delivering our strategy

We have a clear strategy based on the three value drivers of market-leading organic growth, service and operational excellence, and selective high-quality M&A. We have continued to deliver against all three drivers:

• Our organic growth has been underpinned by our Platform Managed Portfolio Service ("PMPS"), including our business-to-business offering, BM Investment Solutions, with organic net new business of 65.6% for the financial year. PMPS now accounts for 20.7% of Group total FUM (FY22: 13.1%).

• We have continued to embed our processes on the platform provided by our technology partner, SS&C, and continued our digital transformation, migrating our financial planning activities to Intelliflo and (just after financial year end) implementing Salesforce for client relationship management.

• We completed two acquisitions, Integrity Wealth Solutions and Adroit Financial Planning.

The acquisitions have built on our existing financial planning capabilities and we will shortly be moving to an organisation more explicitly structured around our intermediary business on one hand, and our developing Private Clients business on the other.

Dividend

The Board has recommended a final dividend of 47.0p (FY22: 45.0p), which, subject to approval by shareholders, will result in total dividends for the year of 75.0p (FY22: 71.0p). This represents an increase of 5.6% in total dividend on the previous year and underlines the Board's confidence in the prospects for the Group. The final dividend will be paid on 3 November 2023 to shareholders on the register at the close of business on 22 September 2023.

Board changes

There were several changes to the Board during the financial year. In January, we announced that Chief Financial Officer, Ben Thorpe, and Chief Operating Officer, Lynsey Cross, would be leaving the business in due course and would be standing down from the Board with immediate effect.

In February, we announced that the Chairman, Alan Carruthers, was leaving the Board due to ill health. I would like to take this opportunity to reiterate the gratitude of the Group to Alan for the immense contribution he made to Brooks Macdonald during his tenure. The Group also announced that I would take over as Acting Chairman, pending a permanent replacement being appointed.

Later in February, we announced that James Rawlingson was being appointed Non-Executive Director with effect from 2 March 2023. He took over as Chair of the Audit Committee in May, following receipt of regulatory approval.

Finally in June, we announced that Andrea Montague would join the Board as an Executive Director with effect from 1 August 2023, and take over as Chief Financial Officer, subject to regulatory approval.

Looking ahead

The industry continues to be subject to regulatory change, with the FCA's new Consumer Duty rules going live on 31 July, shortly after the financial year end. We welcome the new Consumer Principle that requires firms to act to deliver good outcomes for retail customers and our processes and client-centric culture are proving well aligned to the new requirements.

Demographic and pension policy trends continue to underpin the strategic opportunity for the UK wealth sector in general, and Brooks Macdonald in particular, despite the continuing macroeconomic uncertainty, the improving interest rate environment for savers, and their impact on investor sentiment. The Group continues to deliver solid performance and robust cash generation, with a strong balance sheet. We have supportive shareholders and our employees continue to deliver outstanding service to our clients and intermediaries. We look to the future with confidence.

Richard Price

Acting Chairman

13 September 2023

CEO's review

Introduction

I am happy to report that this has been another successful year for Brooks Macdonald, with our strategy and business model continuing to deliver solid performance despite challenging macroeconomic conditions.

Our focus on our purpose of realising ambitions and securing futures ensures we keep our clients at the forefront of our minds, while also providing for our other stakeholders - our employees, intermediaries and shareholders.

Delivering our strategy

Three value drivers underpin our strategy: strong organic growth, service and operational excellence, and selective high-quality acquisitions. We are committed to delivering top quartile underlying profit margins, and we have also set medium-term ambitions of delivering 8-10% net flows and becoming a Top 5 wealth manager in the UK and Crown Dependencies. The sustainable and scalable business model we have put in place positions us well to achieve those ambitions and we continue to make progress, ready to capitalise on the growth opportunities we see ahead.

We completed two acquisitions in the first half of the financial year - first, Integrity Wealth Solutions ("Integrity") based in Nuneaton and then Adroit Financial Planning ("Adroit") in Manchester. We have worked with both firms over a number of years, delivering outsourced investment management. These acquisitions add critical financial planning capability and leadership as we build our Private Clients business. We continue to see a steady pipeline of potential acquisitions and M&A will remain an important contributor to achieving our goals.

We have spent considerable time putting in place sound foundations for our Private Clients business and, looking forward, we are now moving to make it increasingly visible. The business proposition for our Private Clients business - integrated wealth management - is quite distinct from the outsourced investment management we offer to our intermediaries and we will increasingly manage the two businesses separately. Of course, both will continue to be underpinned by the rigour and quality of our Centralised Investment Process, which is embedded across the Group.

Financial performance

We had a year of solid financial performance in FY23, continuing to deliver on our medium-term commitment to top quartile margins, although the underlying margin fell 3.7 points to 24.5%, reflecting market conditions and cost pressures. We delivered solid revenue and underlying profit levels of £123.8 million and £30.3 million respectively.

Statutory profit before tax also fell, to £22.2 million (FY22: £29.5 million).

Our year-end closing FUM was £16.8 billion. Net flows were positive in all quarters (and indeed months), 5.2% at Group level for the full year, peaking at an annualised level of 9.2% in the third quarter. Total FUM was up 7.5% over the year, with strong flows supported by solid investment performance. We have a healthy pipeline going into FY24, although market conditions are keeping client sentiment subdued.

Investment performance and market conditions

Investment performance for the year came in at 2.3%, slightly ahead of the MSCI PIMFA Private Investor Balanced Index, which rose 1.6%. Our investment performance was ahead of the ARC peer benchmark for the year, and remains ahead of ARC for the 10-year measure, and in line with peers over the medium term.

Financial markets remained volatile over the year with sticky inflation pressures keeping central bank monetary policy tight.

While inflation has been steadily falling in the United States, UK inflation has remained stubborn and it is less clear at what level it will settle in the post COVID-19 world. Against this backdrop central banks have been eager to show their commitment to battle inflation, causing bond markets to price in higher interest rates for longer. Our short-duration bond allocation was well positioned for this repricing of bond markets and allowed portfolios to weather the recent rises in gilt yields as well as those around the UK mini-budget of last year. We have maintained our overweight to equity markets, which has supported performance over the year, although some of these gains in international equities have been offset by a stronger sterling in the second half of the financial year. Brooks Macdonald outperformed the peer benchmark for all risk profiles over the year.

Looking ahead, we expect inflation to continue to fall in Europe and the UK, but for uncertainty around the new 'normal' level of inflation to lead to further volatility within bond and equity markets. We are retaining our overweight position to equity markets but maintaining our balance between value and growth investment styles to allow portfolios to perform in multiple economic scenarios.

Review of business performance

UK Investment Management

Across UK Investment Management ("UKIM"), our people have once again worked incredibly hard to provide exceptional levels of support to their clients and intermediaries. We have seen positive net flows throughout the year, reaching an annualised rate of 12.0% at UKIM level in the third quarter. BM Investment Solutions ("BMIS"), our business-to-business offering, where we work with an adviser firm to provide a tailored service aligned to the objectives of the clients and the firm, was once again the strongest performer for net flows, followed by our Platform Managed Portfolio Service ("PMPS").

In our flagship Bespoke Portfolio Service ("BPS") product, UKIM has continued to see good growth in our specialist offerings, the AIM Portfolio Service, the Responsible Investment Service, our Decumulation Service, and our Court of Protection service. We have also successfully delivered portfolios based on short-dated UK Government bonds for investors looking to take advantage of higher interest rates while retaining access to funds. Beyond the specialist offerings and the gilt portfolios, however, BPS saw net outflows driven by a broad market trend, exacerbated by the impact of higher interest rates and macroeconomic uncertainty.

Although our Funds business had another challenging year, with persistent net outflows in line with much of the sector, we continue to see multi-asset funds as a major potential source of growth for Brooks Macdonald. We have confidence in the actions we have already taken to drive medium-term growth and we are reviewing what further steps we should be taking.

During the year, we added Integrity's office in Nuneaton to our portfolio of offices, bringing the total to 15 across the UK and the Crown Dependencies.

Private Clients

We have continued to develop our Private Clients business, adding Integrity and Adroit to our existing activities. We were delighted to welcome Martin Lindsey and Neil Jefferies, and their respective teams, to the Group and look forward to working with them to enhance and grow our capabilities in this area. We are increasingly offering clients an integrated wealth management proposition with robust financial planning linked to a Brooks Macdonald investment management solution, retaining our independent financial advice for more complex cases or where the client specifically requests it.

International

In International, Richard Hughes and team have had a difficult year commercially, with continued elevated outflows, but we see improving prospects in the coming months, with new products and focus bringing renewed confidence. The International business is now fully integrated with the Group and is leading the way on our private client focus.

People

I am personally committed to a strong people agenda and I see our client-centric culture as one of our greatest assets. We continue both to invest in our people and to bring in strong new hires to add to our talent pool. I was pleased to announce in December that our General Counsel, Simon Broomfield, was in addition taking on the role of Chief People Officer ("CPO"), and Simon is now driving forward our people strategy.

Simon taking on the CPO role was one of a number of changes in the Executive Committee this year, as several colleagues left the business - our Chief Financial Officer, Ben Thorpe, our Chief Operating Officer, Lynsey Cross, and our Chief Risk Officer, Priti Verma, as well as our previous CPO, Tom Emery, all moved on and they leave with our gratitude and best wishes. This allowed us to promote internal talent, Simon to CPO and Caroline Abbondanza from Chief Technology Officer to Chief Operating Officer, and to bring in two new hires from outside the organisation.

Andrea Montague became our new Chief Financial Officer on 1 August and Louis Petherick as Chief Risk Officer on 4 September, both subject to regulatory approval. Andrea was most recently Group Chief Risk Officer at Aviva, having been previously Group Chief Financial Controller, and Louis joins from FNZ UK, where he was Chief Risk Officer. I am delighted to welcome Andrea and Louis to the Group, and I am pleased with the strength of our new management team.

Outlook

The fundamental market opportunity for the Group is excellent, with an ageing population and a supportive policy environment alongside growing wealth. As we continue to deliver robust investment performance and supportive financial planning, plus exceptional client service, helping our stakeholders realise their ambitions and secure their futures, we can expect to see further strong business growth.

Our strategy remains based on the three value drivers of strong organic growth, service and operational excellence, and selective high-quality acquisitions. We are committed to delivering top quartile underlying profit margins, we are aiming to deliver 8-10% annual net flows in the medium term, now potentially delayed by short-term headwinds, and we aspire to be a Top 5 wealth manager in the UK and Crown Dependencies.

I have confidence in our team, who bring a wide range of expertise and experience as well as real passion and ambition to see Brooks Macdonald succeed. I would like to finish, as ever, by thanking our clients, the intermediaries we work with, and our people for their continuing support. I look forward to an exciting future together.

Andrew Shepherd

CEO

13 September 2023

Our strategy

Brooks Macdonald is delivering strong performance and has put in place foundations for our continued future success. Our strategy is clear and we are making substantial progress, ready to capitalise on the growth opportunities we see ahead.

Our Purpose - Realising ambitions and securing futures

Brooks Macdonald was founded to give clients wealth management driven by purpose and principles, and that remains as true as ever.

We have multiple stakeholders - clients always come first, and if we look after our clients, our employees, and our intermediaries, then our shareholders will get the returns they seek. For all of them, the reason Brooks Macdonald is here is to help them realise their ambitions and secure their futures.

We work every day to protect and enhance our clients' wealth through high-quality investment management and financial planning, underpinned by exceptional client service.

We are dedicated to the highest professional standards, inspired by our guiding principles: we do the right thing, we are connected, we care, and we make a difference. We are proud of the powerful blend of talented people we have in Brooks Macdonald, and together we are confident and ambitious in what we can achieve and the difference we can make for our clients.

Looking forward

We are moving to align our business around our two key distribution channels - intermediaries and private clients. Our proposition is different in the two channels - outsourced discretionary investment management for intermediaries and advice-led integrated wealth management for private clients. Aligning the organisation to the needs of the different propositions will make us more effective and efficient in delivering for clients and advisers.

Our medium-term targets

We have set three medium-term targets

1 Our ambition is to be a Top 5 wealth manager in the UK and Crown Dependencies

2 We aim at market-leading organic growth with 8-10% net flows, and

3 We are committed to top quartile underlying profit margin.

What

Intermediary

• Outsourced discretionary investment management for advisers

• FUM

Private Clients

• Advice-led integrated wealth management

• AUM/A

Why

• Propositions, target audience and therefore business models are different and need dedicated management.

• Clarity of business models will facilitate better alignment with functions.

• Exposing different business characteristics will increase investor insight.

Our strategy

Our strategy is based on the three value drivers of strong organic growth, service and operational excellence, and selective high-quality acquisitions, and we have been delivering against all three.

Financial review

Review of results for the year

The Group delivered a solid set of results for FY23, despite a backdrop of challenging macroeconomic environment and volatile markets impacting client sentiment. The Group achieved positive net flows of £0.8bn or 5.2% in FY23 ahead of the rate achieved in FY22 of 4.8%. The Group also continued to deliver on its ambitious growth strategy, completing the acquisitions of Integrity Wealth Solutions and Adroit Financial Planning in the year.

As experienced across the industry, the weaker markets seen during the financial year have impacted the Group's revenue growth, whilst the inflationary pressures prevailing during the year, along with increased costs in connection to the Group's digital transformation and costs incurred for terminated M&A processes, amongst other non-staff cost movements, have resulted in an uplift in total costs. This resulted in an underlying profit for the year of £30.3 million, representing a decrease of 12.2% on the prior year. The underlying profit margin was of 24.5% (FY22: 28.2%).

Group financial results summary

The table below shows the Group's financial performance for the year ended 30 June 2023 with the comparative period and provides a reconciliation between the underlying results, which the Board considers to be an appropriate reflection of the Group's underlying performance, and the statutory results. Underlying profit represents an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered.

Table 1 - Group financial results summary

FUM movement in the year

The table below shows the opening and closing FUM position and the flows for the year broken down by segment and by the key services within UK Investment Management ("UKIM").

Table 2 - Movements in funds under management

1 Capital-only index.

The Group achieved positive net flows of £0.8 billion or 5.2% during the year, up on the rate achieved in FY22 of 4.8%. Investment performance contributed £0.4 billion, leading to an overall growth in the Group's closing FUM of 7.5% from the start of the financial year to £16.8 billion (FY22: £15.7 billion).

Investment performance for the year was 2.3%, surpassing the MSCI PIMFA Private Investor Balanced Index benchmark, which increased by 1.6% over the same period. Investment performance was ahead of the ARC peer benchmark for the year, and remains ahead of ARC for the 10-year measure, and in line with peers over the medium term.

Within UKIM, the BPS offering recorded net outflows of £0.2 billion during the year (FY22: £0.1 billion net inflows) with the prevailing market volatility impacting investor sentiment and higher interest rates driving increased trends towards higher cash holdings, debt repayment and investment in money market funds in the short term. Within BPS, we continue to see good traction in our specialist products - the AIM Portfolio Service, the Responsible Investment Service, the Decumulation Service, and the Court of Protection Service - all focused on meeting different client needs.

Platform MPS and, within that, the Group's B2B offering BM Investment Solutions ("BMIS") continued to grow and had a strong year, recording net inflows of £1.3 billion (FY22: £0.8 billion), which has continued to be an area of strategic focus for the Group in FY23.

The Funds business recorded total net outflows of £0.2 billion during the year (FY22: £0.1 billion), driven by market conditions and in line with observed sector-wide behaviour.

The International business reported net outflows for the year of £0.1 billion (FY22: break-even), also driven by market and economic headwinds.

Revenue

Table 3 - Breakdown of the Group's total revenue

Total revenue for the Group increased by 1.3% to £123.8 million in FY23 (FY22: £122.2 million).

Fee income of £91.5 million declined by 10.1% compared to the prior year (FY22: £101.8 million) driven by lower average FUM levels as a result of prevailing market conditions during the financial year, and the relative change in product mix, with the growth in net flows primarily driven by the MPS service. The implementation of a new competitive rate card for the Cornelian Risk Managed Funds range introduced in FY23 to drive asset growth has also contributed to the reduction of fee income in FY23.

Transactional and FX income reduced by 9.5% on last year due to lower trading volume in the year and the continuing trend of clients moving to the fee-only rate card.

Financial planning fee totalled £6.6 million in FY23, representing an increase of £2.5 million on FY22, primarily attributable to the income generated by the Integrity Wealth Solutions and Adroit Financial Planning businesses acquired during the year.

Interest income increased significantly from £1.6 million to £12.4 million, driven by the rise in the Bank of England base rates during FY23, net of amounts paid out to clients on cash holdings.

Table 4 - Revenue, average FUM and yields

1 The revenue and yields in respect of the Lloyds Channel Islands previously acquired businesses are included within the International fees line in the above table as these businesses are now fully embedded.

2 Following a corporate restructure of the business in FY22, fees earned on financial planning advice in the International business is included in the Annual Management Charge and are no longer billed separately. Comparatives have been updated to reflect a like-for-like comparison with advice fees shown in the International fees line for both years. As a result, the financial planning revenue in the table above relates to solely UK financial planning income.

3 Capital-only index (average based on quarterly closing balances).

The Group's average FUM fell by 2.3% from FY22 to FY23, ahead of the average monthly movement in the MSCI PIMFA Private Investor Balanced Index, which fell by 6.1% over the same period.

The yield on BPS fees for UKIM decreased by 0.7bps to 65.1bps during the year (FY22: 65.8bps), driven by fee pressure and rates achieved on new business. The BPS non-fee transactional and FX income yield reduced by 1.4bps in the year, as a result of lower trading volumes and a relatively lower proportion of dealing accounts. On the other hand, the yield on interest income saw significant growth from 1.1bps to 11.7bps driven by the increases in the Bank of England base rates during the year, partly offset by interest paid out by the Group on clients' cash balances.

The yield on MPS Custody of 59.1bps remained relatively stable on FY22, whereas the yield on MPS Platform fell slightly by 0.4bps to 18.8bps due to the impact of product mix as Platform MPS includes our BM Investment Solutions offering that attracts relatively larger mandates and benefit from discounted tiered rates. The MPS non-fee yield on interest income increased substantially, from 3.3bps last year to 11.7bps in FY23.

The Funds fee yields reduced by 9.5bps to 48.3bps during FY23, in line with expectations, driven by the Cornelian Risk Managed Fund range moving onto a more competitive rate card in July 2022. As part of our growth strategy, we are targeting a significant increase in market share with advisers and networks that predominately use multi-asset funds to deliver their investment offering.

International fee income yield reduced by 2.2bps to 73.3bps during FY23, driven by a change in mix and the impact of the timing of inflows and outflows recorded during the year. Similarly to UKIM, non-fees income yield increased significantly by 10.3bps as a result of the rise in rates earned on both GBP and foreign currency account balances, along with increased foreign exchange trading activity.

Underlying costs

Total underlying costs increased by 6.6% from £87.7 million in FY22 to £93.5 million in FY23, including £2.0 million incurred in respect of the two acquired businesses during the year. The key movements are set out in the bridge chart and explained below.

Table 6 - Breakdown of net movement in total underlying costs into staff and non-staff costs

Staff costs

Total staff costs increased by £0.8 million to £56.1 million. Of this, £1.6 million was driven by the incremental costs arising from the two acquisitions. Excluding acquired costs, staff costs decreased by £0.8 million, from £55.3 million to £54.5 million.

Excluding the impact of acquisitions, fixed staff costs increased by £3.2 million as a result of inflationary pay rises and the impact of net joiners. The increase in fixed staff costs was offset by a decrease in the variable staff costs from £14.8 million to £10.9 million driven by the reduction in pre-variable pay profit. Within this, the share-based payments charge was down £0.8 million on the prior year due to lapses recognised in FY23 as a result of leavers, and a reduction in the Group's share price impacting the associated employer national insurance contributions.

Non-staff costs

Non-staff costs amounted to £37.4 million, representing an increase of 15.4% on the prior year. Excluding the cost impact of the two recently acquired businesses of £0.4 million, non-staff costs increased by £4.6 million or 14.2%. In addition to generic inflationary increases seen across the industry during the year, the following items contributed to the net increase.

During the year, the Group migrated investment management processes onto the SS&C technology suite, delivering brand-new capabilities and supporting the Group's digital transformation, whilst providing a scalable platform for future growth. The platform migration resulted in a net increase of £2.1 million in FY23, comprising £3.2 million additional spend on the enhanced capabilities, offset by a transitional service credit of £1.1 million recognised during the embedding period.

Furthermore, during the year, the Group incurred £1.0 million in connection with terminated M&A processes and £0.7 million in legal fees in respect of legacy matters cases, now fully settled. In the prior year, the Group recognised a release of historic tax provisions amounting to £1.4 million, which was not repeated in FY23.

The above noted uplift in non-staff costs were offset by a reduction in Financial Services Compensation Scheme ("FSCS") levy of £0.6 million from £1.1 million in FY22 to £0.5 million in FY23 as a result of lower compensation forecasts expected by the FSCS for FY23.

Profit before tax

Combined, the above gave rise to an underlying profit before tax for the year of £30.3 million, a decrease of 12.2% on the prior year (FY22: £34.5 million) and resulting in a profit margin of 24.5%, down by 3.7 points on last year (FY22: 28.2%).

The Group's statutory profit before tax was of £22.2 million (FY22: £29.5 million).

Segmental analysis

For FY23, the Group reported its results across two key operating segments, UK Investment Management and International. The tables below provide a breakdown of the full-year performance broken down by these segments, with comparatives. The operations in relation to Integrity Wealth Solutions and Adroit Financial Planning have been included in the UK Investment Management segment from the respective acquisition dates.

UKIM, which includes the Group's Private Clients business, reported a 2.5% increase in revenue, driven by higher financial planning and interest income, offset by a decline in fee income and transactional income. Total underlying costs increased by 6.2% as a result of the factors outlined previously. This gave rise to an underlying profit for FY23 of £34.5 million (FY22: £36.0 million) and an underlying profit margin of 33.3%.

The volatile markets and economic uncertainties experienced in FY23 also impacted the International segment, which reported a decrease in underlying profit to £0.1 million (FY22: £0.2 million). The decline in profitability was driven by a reduction in fee income within revenues as discussed previously and an uplift in total costs, partly driven by legal and professional fees.

Table 7 - Segmental analysis

Restatement of segmental view

We have undertaken a review of cost allocations across the Group to support branch and team level performance reporting, ensuring the costs are allocated consistently across the Group. As a result, the prior year segmental reporting has been restated to ensure consistent reporting with the current year reporting.

Reconciliation between underlying and statutory profits

Underlying profit before tax is considered by the Board to be an appropriate reflection of the Group's performance compared to the statutory results as it excludes income and expense categories, which are deemed to be of a non-recurring nature or a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage. Underlying profit is deemed to be an alternative performance measure ("APM"); refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definitions, and the criteria for how underlying adjustments are considered. A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2023 with comparatives is shown in the table below:

Table 8 - Reconciliation between underlying profit and statutory profit before tax

Amortisation of client relationship contracts (£5.7 million charge)

These intangible assets are created in the course of acquiring funds under management and are amortised over their useful life, which have been assessed to range between 6 and 20 years. The increase in the charge from last year is due to the additional assets recognised as part of the acquisitions of Integrity Wealth Solutions and Adroit Financial Planning. This amortisation charge has been excluded from the underlying profit since it is a significant non-cash item. (Refer to Note 10 to the Consolidated financial statements for more details).

Dual running operating platform costs (£1.6 million charge)

The Group is in a partnership agreement with SS&C to transform our adviser and client service including the onboarding process and digital experience, as well as enhancing our operating platform. As part of the transition process, the Group has incurred net incremental costs in running two operating platforms concurrently, with the dual running costs finishing at the end of H1 FY23. The dual running costs have been excluded from underlying profit in view of their non-recurring nature.

Acquisition and integration-related costs (£0.6 million charge)

These represent costs incurred in relation to the acquisitions of Integrity Wealth Solutions on 31 October 2022 and Adroit Financial Planning on 15 December 2022. The acquisition-related costs incurred include stamp duty and legal fees and the integration-related costs include the cost of retention-based share option awards.

Changes in fair value and finance cost of deferred contingent consideration (£0.2 million charge)

This comprises the associated net finance costs arising on deferred contingent consideration payments from acquisitions carried out by the Group, together with their fair value measurements, where applicable. The deferred contingent consideration for Integrity Wealth Solutions was revalued at 30 June 2023. (Refer to Note 12 of the Consolidated financial statements for more details).

FY22 - Other non-operating income (£3.0 million credit)

During the prior year ended 30 June 2022, the Group received confirmation from HMRC that the supply of certain Group services was exempt from VAT. As a result, the Group received a refund from HMRC in respect of VAT arising on those services during the period from 1 July 2017 to 30 June 2020 of £3.0 million. This was treated as an adjusting item to the underlying profit in view of its non-recurring nature.

Reconciliation between profits and earnings before interest, tax, depreciation and amortisation ("EBITDA")

The tables below provide reconciliations between the Group's underlying and statutory profit before tax and the underlying and statutory earnings before interest, tax, depreciation and amortisation ("EBITDA"), which constitutes an APM, and which the Board considers to be an appropriate alternative measure to the Group's BAU performance.

Table 9 - Underlying EBITDA reconciliation

Table 10 - EBITDA reconciliation

Taxation

The Group's total tax charge for the year was £4.1 million, representing a decrease of 32.8% from last year (FY22: £6.1 million). The Group's underlying effective tax rate has decreased from 20.8% to 19.7% and the statutory effective tax rate has decreased from 20.8% to 18.4%. The reduction is primarily due to an R&D credit on FY22 qualifying expenditure recognised as a prior period tax adjustment in FY23, and additional deferred tax credits recognised in the current year. (Details on taxation are provided in Note 6 of the Consolidated financial statements).

Earnings per share

Basic statutory earnings per share for the Group in FY23 was 114.7p (FY22: 149.0p). On an underlying basis, basic earnings per share was 153.8p, a decrease of 11.7% on the prior year (FY22: 174.1p) driven by the decrease in underlying earnings. (Details on the basic and diluted earnings per share are provided in Note 8 of the Consolidated financial statements).

Dividend

The Board recognises the importance of dividends to shareholders and the benefit of providing sustainable shareholder returns. In determining the level of dividend in any year, the Board considers a number of factors, such as the level of retained earnings, future cash commitments, statutory profit cover, capital and liquidity requirements and the level of profit retention required to sustain the growth of the Group. The Board has proposed a final dividend of 47.0p per share (FY22: 45.0p). Including the interim dividend of 28.0p per share (FY22: 26.0p), this results in a total dividend for the year of 75.0p per share (FY22: 71.0p), which is an overall increase of 4.0p or 5.6%. (Refer to Note 9 to the Consolidated financial statements for more details). The recommended dividend is subject to shareholders' approval, which will be sought at the Company's Annual General Meeting on 26 October 2023.

Financial position and regulatory capital

Net assets increased by 6.0% to £157.3 million at 30 June 2023 (FY22: £148.4 million), demonstrating the Group's continued strong financial position. The Group's tangible net assets (net assets excluding intangibles) was £56.7 million at 30 June 2023 (FY22: £62.5 million). As at 30 June 2023, the Group had regulatory capital resources of £64.6 million (FY22: £70.0 million). As at 30 June 2023, the Group had an own funds adequacy ratio of 328.1% (FY22: 356.9%). The own funds adequacy ratio is defined as the Group's own funds as a proportion of the fixed overhead requirement. The total net assets and the own funds adequacy ratio calculation take into account the respective period's profits (net of the declared interim dividends) as these are deemed to be verified at the date of publication of the annual results.

Table 11 - Own funds reconciliation

Brooks Macdonald Asset Management Limited, the Group's main operating subsidiary, is an IFPRU 125k Limited Licence Firm regulated by the Financial Conduct Authority ("FCA"). In view of this, the Group is classified as a regulated group and subject to the same regime. As required under FCA rules, and those of both the Jersey and Guernsey Financial Services Commission, the Group assesses its regulatory capital and liquidity on an ongoing basis through the Internal Capital Adequacy and Risk Assessment ("ICARA") and Adjusted Net Liquid Asset ("ANLA") assessments, which include performing a range of stress tests and scenario analysis to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. Surplus levels of capital and liquidity are forecast, taking into account known outflows and proposed dividends to ensure that the Group maintains sufficient capital and liquidity at all times.

The FY22 ICARA review was conducted for the year ended 30 June 2022 and signed off by the Board in December 2022. Regulatory capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions and disposals where applicable, as well as budgeted and forecast trading results. The Group's IFPR Public Disclosures are published annually on the Group's website (www.brooksmacdonald.com) and provide further details about the Group's regulatory capital resources and requirements. The Group monitors a range of capital and liquidity statistics on a daily and monthly basis.

Cash flow and capital expenditure

The Group continues to have strong levels of cash generation from operations. Total cash resources at the end of the year were £53.4 million (FY22: £61.3 million) and the Group had no borrowings at 30 June 2023. This reduction was contributed by the Group financing the recent acquisitions of Integrity Wealth Solutions and Adroit Financial Planning from its own resources, resulting in a net cash outflow of £15.1 million.

The Group incurred capital expenditure of £3.7 million (FY22: £3.2 million). This comprised technology-related development of £3.0 million (FY22: £2.9 million), property-related costs of £0.5 million (FY22: £0.2 million) and IT and office equipment of £0.2 million (FY22: £0.1 million). The technology-related spend was primarily incurred in connection with our partnership with SS&C and amortisation started at the end of July 2022 following the migration, with the capital expenditure amortised over the remaining eight years of the ten-year agreement entered into with SS&C.

FY24 guidance and outlook

Looking ahead, financial markets remain volatile presenting short-term headwinds, expected to impact flows, particularly in H1 FY24. Moreover, the continued change in product mix is expected to impact fee yields. Whilst the Group continues to focus on cost discipline, inflationary cost pressures are expected to lead to mid-single digit cost growth.

Despite the short-term headwinds on financial performance, the Group continues to be well placed to deliver on its ambitious strategic objectives in the medium term and continue to grow the business.

Andrea Montague

Chief Financial Officer

13 September 2023

Risks

A dynamic approach to risk management in order to support positive client outcomes

We continue to develop and enhance our risk management processes across the Group as the risk landscape under which the firm operates changes, and the impact of the current geopolitical and macroeconomic uncertainties are monitored.

The Group continues to respond to regulatory developments and has implemented changes to our risk management framework to reflect the requirements of these new regulations, such as the Task Force on Climate-related Financial Disclosures ("TCFD") and the Consumer Duty. The Group remains focused on embedding and enhancing the risk management framework, through its work on resilience, third parties, and client outcomes.

The Group has also maintained its drive towards efficient, data-driven and evidenced-based risk management, which facilitates the transition to a more agile and dynamic approach to identifying, assessing, managing and monitoring risks.

Overall, the Group remains well capitalised and liquid, with significant buffers above all regulatory requirements.

How we manage risk

The Group risk management framework

Risk management starts with oversight through appropriate governance; an efficient board and committee structure, with individual and collective roles and delegated authorities and a set of core policies to provide guidance to staff.

Effective risk management relies on insight through robust and timely management information. We manage our risks by learning lessons from past events, such as errors, breaches, near misses and complaints, by conducting point-in-time risk assessments and attempting to predict what the future risk landscape might look like through our suite of key indicators.

The risk management methodology within the Group's risk management framework ("RMF") consists of the following six interlinked steps:

Risk identification. This takes place through regular business monitoring and periodic reviews, including risk mapping exercises and the risks arising from change or new products and services.

Risk appetite. Once we have identified risks, we set an appetite for each material risk. This defines the amount of risk that the Board is prepared to accept in order to deliver its business objectives. Risk appetite reflects culture, strategic goals and the existing operating and control environment.

Risk analysis. Having set the risk appetite, we can assess the impact and probability of each material risk against the agreed risk appetite. This can include the quantification of capital risk as part of the Internal Capital Adequacy and Risk Assessment ("ICARA").

Controls assessment. We also assess the effectiveness of controls in reducing the probability of a risk occurring, or should it materialise, in mitigating its impact.

Additional actions. Where differences exist between our risk appetite and the current residual risk profile, we take action to either accept, avoid or transfer part or all of those risks that are outside our risk appetite, or to reconsider the risk appetite.

Reporting. Ongoing reporting of risks to senior management provides insight to inform risk-based decision-making and allocation of resources to achieve business objectives.

Overarching risk appetite statement

• The Group's overarching risk appetite statement ("ORAS"), as defined by the Board, sets out the acceptable level of current and emerging risk we are willing to take to achieve our strategic business objectives. It provides a framework to allow the Group to effectively balance the risk and reward relationship in decision-making.

• Clients, both existing and prospective, are at the heart of everything we do. As such, we aim to operate a sustainable business that conducts itself in a reputable and prudent manner, taking into account the interests of our clients through providing products and services suited to their needs and risk profile, which demonstrate value for money.

• As the business continues to grow through sustainable organic growth and strategic value-adding acquisitions, the ORAS helps ensure our key stakeholder obligations are met, supported by internal policies and regulatory requirements. We commit to using this framework to ensure we make strategic and business decisions that do not exceed our overarching risk appetite.

• In all of the Group's decisions and operations, we balance risk versus reward and we consider the below three dimensions.

Client outcome

• We put client interests at the heart of everything we do to ensure appropriate client outcomes.

Financial performance and resources

• We optimise profitability and use resources efficiently to drive financial performance.

• We, at all times, maintain adequate capital and liquid assets to meet financial and funding obligations as they fall due.

• We invest in the development and wellbeing of our employees.

Control environment

• We, at all times, operate within our risk appetite, operational risk parameters and regulatory framework, ensuring a robust control and oversight environment.

Key risks

We have identified our risks at Group and business line levels to help manage our key risks in a consistent and uniform way with oversight from relevant Committees and Boards.

Group level risks

Emerging risks

Viability statement

In accordance with the UK Corporate Governance Code, the Board has assessed the Group's viability over a five-year period. The decision to do so is to be aligned with the Group's strategy, its budgeting and forecasting process and the scenarios set out in the 2022 Internal Capital Adequacy and Risk Assessment ("ICARA").

The Board has carried out a robust assessment of the principal risks facing the Group along with the stress tests and scenarios that would threaten the sustainability of its business model, future performance, solvency or liquidity. This assessment is based on the Group's Medium-Term Plan ("MTP"), the ICARA and an evaluation of the Group's emerging and principal risks, as set out in the Risks section.

In assessing the future viability of the overall business, the Board has considered the current and future strategy. The Board has also considered the business environment of the Group and the potential threats to its business model arising from regulatory, demographic, political and technological changes. Moreover, the Board's assessment considered the current macroeconomic environment, the impact of volatile markets and the prevailing high inflation and interest rates, on the Group's profitability, regulatory capital and liquidity forecasts. The Board's assessment of the Group's capital and liquidity position also considers the implications of meeting the Group's proposed interim and final dividend pay-outs.

The five-year MTP forms part of the Group's annual business planning process. The model translates the Group's current and future strategy into a detailed year-one budget, followed by higher-level forecasts for years two through to five. The combination of this detailed budgeting, longer-term forecasting and various stress tests provides a transparent and holistic view of the forward-looking financial prospects of the Group. The Board reviews and challenges the Group's MTP annually. The MTP covering the five-year period from FY23 to FY27, which underpins the 2022 ICARA was challenged and approved by the Board in June 2022. The MTP for the five-year period covering FY24 to FY28 was reviewed and challenged by the Board in June 2023.

In addition to the annual MTP preparation process, a re-forecast is carried out by management and reviewed by the Board on a quarterly basis. These reflect updates for prevailing trading conditions and other changes required to the budget assumptions set at the start of the year.

As part of the ICARA, the Group models a range of downside scenarios and a severe but plausible stress scenario designed to assess the Group's ability to withstand a market-wide shock, such as a sharp market decline triggered by a global recession; Group-specific stresses, such as the loss of an investment management team or key introducer, and a combination of both.

The Group modelled a multi-layered scenario involving a significant decline in financial markets over a five-year period (a drop of 23% and 5% in years one and two respectively, followed by a gradual recovery), combined with the loss of a key investment management team. This scenario would have a material impact on the Group's profitability compared to the MTP base case, giving rise to a small regulatory capital deficit by the end of FY27, before putting in place any mitigating management actions.

Management identified a number of mitigating actions that could be implemented in the event of such severe stresses. In this scenario, the mitigation actions implemented were to reduce discretionary compensation and reduce the dividend payments to ensure a capital surplus was maintained against the minimum capital requirement. No additional actions were taken with regards to profitability as although the Group experiences a sharp decline in profitability, the reduction was temporary, and profits were forecast to increase from FY25 onwards. In the Group's modelling on the above-mentioned multi-layered scenario, post the implementation of the management mitigating actions the Group would revert to a healthy capital surplus position. If deemed appropriate, mitigating actions could include a broader and more significant reduction in the Group's cost base (IT, property, change initiatives and others). The implementation of the above actions depends on the nature of the specific stress events and the time frames over which they occur.

These scenarios are refreshed on a regular basis to ensure they remain relevant and continue to be a suitable tool for developing our controls and mitigating actions. The latest ICARA refresh exercise took place in spring 2023, where it was confirmed that the stress tests modelled previously in the 2022 ICARA were still deemed appropriate and materially relevant. Management also considers a reverse stress case and carries out an assessment of the cost to the Group of a wind-down in the event of a non-recoverable shock to the operating model. Moreover, management has identified a number of actions that could be implemented in the event of severe stresses.

Taking into consideration the assessment of the above factors, including the results of the latest ICARA, the Group's risk management framework and the mitigating actions that can be put in place, the Board has reasonable expectations the Group will be able to continue in operation and meet its liabilities as they fall due over the period under assessment. This assessment also supports the Group's Consolidated financial statements to be prepared on a going concern basis, as discussed in Note 2 of the Consolidated financial statements.

Consolidated statement of comprehensive income

For the year ended 30 June 2023

Consolidated statement of financial position

As at 30 June 2023

1 The Group has reclassified the deferred tax balances to offset deferred tax assets and liabilities and present net deferred tax balances by jurisdiction to ensure consistent reporting with the current period. In the prior year, the reported deferred tax asset was £3,002,000, which has been netted off in the deferred tax liabilities balance.

The Consolidated financial statements were approved by the Board of Directors and authorised for issue on 13 September 2023, and signed on their behalf by:

Andrew Shepherd

CEO

Andrea Montague

Chief Financial Officer

Company registration number: 4402058

Consolidated statement of changes in equity

For the year ended 30 June 2023

Consolidated statement of cash flows

For the year ended 30 June 2023

Notes to the consolidated financial statements

For the year ended 30 June 2023

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 to private high net worth individuals, pension funds, institutions, charities and trusts. The Group also provides financial planning as well as international investment management, and acts as fund manager to a range of onshore and international funds.

The Company is a public limited company by shares, incorporated and domiciled in the United Kingdom under the Companies Act 2006 and listed on AIM. The address of its registered office is 21 Lombard Street, London, EC3V 9AH, England.

2. Principal accounting policies

The general accounting policies applied in the preparation of these Financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated.

a. Basis of preparation

The Group's Consolidated financial statements for the year ended 30 June 2023 have been prepared in accordance with UK-adopted International Accounting Standards ("IAS") and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. These Consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of financial assets at fair value through other comprehensive income, financial assets and financial liabilities at fair value through profit or loss, and deferred contingent consideration such that they are measured at their fair value.

At the time of approving the 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 Financial statements. For further details on the Group's going concern assessment, see the Viability statement. There have been no post balance sheet events that have materially impacted the Group's liquidity headroom and going concern assessment.

c. Changes in accounting policies

The Group's accounting policies that have been applied in preparing these Financial statements are consistent with those disclosed in the Annual Report and Accounts for the year ended 30 June 2022, except as explained below.

New accounting standards, amendments and interpretations adopted in the year

In the year ended 30 June 2023, the Group did not adopt any new standards or amendments issued by the International Accounting Standards Board ("IASB") or interpretations by the International Financial Reporting Standards Interpretations Committee ("IFRS IC") that have had a material impact on the Consolidated financial statements.

Certain new accounting standards, amendments to accounting standards, and interpretations have been published that are not mandatory for 30 June 2023 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions.

d. Critical accounting estimates and significant judgements

The preparation of financial information requires the use of assumptions, estimates and judgements about future conditions. Use of currently available information and application of judgement are inherent in the formation of estimates. Actual results in the future may differ from those reported. In this regard, the Directors believe that the accounting policies, where important estimations are used, relate to the measurement of intangible assets and the estimation of the fair value of share-based payments.

The preparation of the Group's Consolidated financial statements includes the use of estimates and assumptions. The significant accounting estimates, being those with a significant risk of a material change to the carrying value of assets and liabilities within the next year in terms of IAS 1, 'Presentation of Financial Statements', are the useful economic life estimates for property, plant and equipment, computer software and acquired client-relationship contracts, additionally the pre-tax discount rate and perpetuity growth rate used to calculate the International cash-generating unit ("CGU") goodwill impairment review (Note 10).

The Consolidated financial statements include other areas of judgement and accounting estimates. While these areas do not meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and measurement of certain material assets and liabilities are based on assumptions and/or are subject to longer-term uncertainties. The other areas of judgement and accounting estimates are the pre-tax discount rate and perpetuity growth rate used within the Braemar and Cornelian CGU goodwill impairment reviews (Note 10), additionally the inputs into the Black-Scholes model used to value the Group's equity-settled share-based payments (Note 15).

The underlying assumptions and estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised only if the revision affects both current and future periods.

Further information about key assumptions and sources of estimation uncertainty are set out below.

Intangible assets

The Group has acquired client relationships and the associated investment management and financial advice contracts as part of business combinations, through separate purchase or with newly employed teams of fund managers, as described in Note 10. In assessing the fair value of these assets, the Group has estimated their finite life based on information about the typical length of existing client relationships. Acquired client relationship contracts are amortised on a straight-line basis over their estimated useful lives, ranging from 6 to 20 years.

Of the client relationship intangible assets held by the Group at 30 June 2023, the expected amortisation charge for the year ending 30 June 2024 is £5,808,000. If the useful economic lives were to reduce by one year, the estimated charge would increase by £2,033,000.

Goodwill recognised as part of a business combination is reviewed annually for impairment, or when a change in circumstances indicates that it might be impaired. The recoverable amounts of CGUs are determined by value-in-use calculations, which require the use of estimates to derive the projected future cash flows attributable to each unit. Details of the more significant assumptions and sensitivity analysis are given in Note 10.

In assessing the value of client relationships and the associated investment management and financial advice contracts and goodwill ,or gain on bargain purchase arising as part of a business combination, the Group prepares forecasts for the cash flows acquired and discounts to a net present value. The Group uses a pre-tax discount rate, adjusting from a post-tax discount rate calculated by the Group's weighted average cost of capital ("WACC"), adjusted for any specific risks for the relevant CGU. The Group uses the capital asset pricing model ("CAPM") to estimate the WACC, which is calculated at the point of acquisition for a business combination, or the relevant reporting period date. The key inputs are the risk-free rate, market risk premium, the Group's adjusted beta with reference to beta data from peer-listed companies, small company premium and any risk-adjusted premium for the relevant CGU. See Note 10 for further details on the discount rate for the various CGUs.

Share-based payments

The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the inputs to that model (Note 15). The charge to the Consolidated statement of comprehensive income in respect of share-based payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly. A decrease of 10% in the total options would decrease the estimated share-based payment charge and the associated national insurance charge in the Consolidated statement of comprehensive income for the year by £591,000 and £121,000, respectively. The key inputs into the fair value calculations for the options granted during the year are disclosed in Note 15.

3. Segmental information

For management purposes, the Group's activities are organised into two operating divisions: UK Investment Management 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.

The UK Investment Management segment offers a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts, as well as wealth management services to high net worth individuals and families, giving independent 'whole of market' financial advice, enabling clients to build, manage and protect their wealth. The International segment is based in the Channel Islands and the Isle of Man, offering a similar range of investment management and wealth management services as the UK Investment Management segment. The Group segment principally comprises the Group Board's management and associated costs, along with the consolidation adjustments.

Following the acquisitions of Integrity and Adroit (Note 7), the activities since the two acquisitions were completed have been included in the UK Investment Management segment.

Revenues and expenses are allocated to the business segment that originated the transaction. Sales between segments are carried out at arm's length. Centrally incurred expenses are allocated to business segments on an appropriate pro rata basis.

1 As discussed in the Financial review, the segmental results for the year ended 30 June 2022 have been restated to be consistent with the current year. For the year ended 30 June 2022, the reported UKIM segment allocated costs have changed from £25,129,000 to £21,327,000, a movement of £3,802,000, and underlying profit before tax changed from £32,202,000 to £36,004,000, a movement of £3,802,000. The reported International segment underlying administrative costs changed from £14,016,000 to £12,783,000, a movement of £1,233,000, allocated costs changed from £3,152,000 to £8,187,000, a movement of £5,035,000, and underlying profit before tax changed from £3,973,000 to £171,000, a movement of £3,802,000. The reported Group segment underlying administrative costs changed from £29,932,000 to £31,165,000, a movement of £1,233,000, and allocated costs changed from £28,281,000 to £29,514,000, a movement of £1,233,000.

4. Revenue