Brooks Macdonald Regulatory News (BRK)

BROOKS MACDONALD GROUP PLC

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022

"Solid six months demonstrating continued organic growth, and a robust underlying profit margin of 25%, supporting an 8% increase in the interim dividend"

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group") today announces its half-year results for the six months ended 31 December 2022.

Solid financial performance with continuing organic growth

· Total Funds under Management ("FUM") reached £16.2bn, up 3.6% over the half year (30 June 2022: £15.7 billion)

· The Group's core UK discretionary business had annualised net flows of 7.8% for the period, driven by:

Strategic progress

Selective high-quality acquisitions remaining a key pillar of the Group's strategy

Ongoing investment to deliver a comprehensive digital transformation

Andrew Shepherd, CEO, commented:

"I am encouraged by our underlying profit margin for the half year remaining robust at close to 25%, a reflection of continued cost discipline offsetting the impact of difficult markets on our funds under management and hence our revenue. Overall, our financial performance for the period was solid with positive net flows demonstrating continuing intermediary and client demand for our products and services. This performance enabled us to increase our interim dividend by 8%, delivering continued returns for our shareholders.

"Our purpose is realising ambitions and securing futures, and we have stayed close to our clients and intermediaries when they have needed us most. We are confident in our strategy, we are making good progress and I remain optimistic about our long-term prospects. Although the short-term macroeconomic outlook remains uncertain, we are well positioned to take advantage of the growth opportunities ahead."

1The underlying figures represent the results for the Group's activities excluding underlying adjustments as listed in the Interim management report. The Board considers the underlying profit to be an appropriate reflection of the Group's performance compared to statutory profit. A reconciliation between the Group's statutory and underlying profit before tax is also included in the Interim management report.

An analyst meeting will be held at 10.30am on Thursday 2 March. Please contact Iona Biggart at FTI Consulting on 07971 989065 or e-mail brooksmacdonald@fticonsulting.com for further details.

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 £16.2 billion as at 31 December 2022.

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

Interim management report

Solid performance in H1

The six months to end 2022 saw solid performance for Brooks Macdonald, with FUM growing to £16.2 billion, decent financial results, and continued organic growth.

The Group's revenues fell by 4.8% to £58.9 million (H1 FY22: £61.9 million). Underlying costs were broadly flat, up 0.2% to £44.4 million (H1 FY22: £44.3 million), reflecting continued strong cost discipline. This resulted in an underlying profit before tax of £14.5 million, a 17.6% decline on the prior period (H1 FY22: £17.6 million).

Our underlying profit margin remained robust at 24.6%, reflecting our commitment to top quartile underlying profit margin over the medium term, although it was down 3.8 percentage points from the prior period's 28.4%. Similarly, underlying basic EPS was down 16.0% to 74.4p (H1 FY22: 88.6p). Statutory profits declined from £13.2 million to £9.8 million.

The Group is declaring an interim dividend of 28.0 pence per share, a 7.7% uplift on the interim dividend paid last year, in line with the solid results for the period and the Board's continuing confidence in the firm's prospects.

Our investment performance remains good, with overall performance of 1.4% over the period, compared to a 0.3% decline in the MSCI PIMFA Private Investor Balanced Index. Over reasonable investment time horizons, our Centralised Investment Process ("CIP") continues to achieve strong risk adjusted returns for clients.

We completed the transition of our adviser- and client-facing processes to the SS&C platform, a critical milestone in our digital transformation, and are making good progress in embedding the SS&C systems and processes into the business.

Our people agenda remains focused on Our Promise, which is the consolidation of our commitment to our people across an inclusive culture, fulfilling careers and great recognition for outstanding performance.

Strategy delivering

The key strengths of our organisation are its client-centric culture, strong adviser relationships, robust Centralised Investment Process, comprehensive investment proposition, and commitment to service and operational excellence. We aim to build on these through our strategy, which is based on three key value drivers:

• Market-leading organic growth

• Service and operational excellence

• Selective high-quality acquisitions.

In the period, the Group announced ambitious medium-term targets - delivering 8-10% net flows and top quartile underlying profit margin in support of becoming a Top 5 wealth manager in the UK and the Crown Dependencies. We expect the three key value drivers to combine to achieve these targets.

Market-leading organic growth

The first half of our financial year saw continuing positive net flows, running at an annualised rate of 4.4% for the period, compared to 4.0% for the same period last year, supported by our continued focus on clients and intermediaries.

Our UK Investment Management ("UKIM") business, under the leadership of Robin Eggar, had a solid half. We saw particularly good growth in our strategic focus areas of BM Investment Solutions ("BMIS"), our BRB offering for advisers, and Platform Management Portfolio Services ("PMPS"), which saw combined annualised net flows of 52.6%. We also continued to see progress in the specialised variants of our Bespoke Portfolio Service, including the Decumulation Service, which had FUM up c.25% over the period. Overall, our core UK Investment Management discretionary business had annualised net flows of 7.8% for the half year.

FUM in the UKIM Funds business declined by 2.4% in the period with net outflows more than offsetting positive investment performance, in line with experience across the industry.

International had pleasing investment performance, partly offset by disappointing outflows, leading to a loss at the underlying profit level. The Group continues to see a material market opportunity in the Crown Dependencies and will continue to invest in the islands, while reviewing options to improve the performance of the business.

Markets remained volatile in the last six months of 2022 with financial markets favouring different investment styles as the period progressed, creating a difficult investment backdrop to navigate. At a headline level, Brooks Macdonald investment performance gained 1.4% versus a loss of 0.3% for the PIMFA Balanced index. The longer-term returns of our Centralised Investment Process also continue to be robust, with each of Brooks Macdonald's Bespoke Portfolio Service ("BPS") risk profiles outperforming their relevant ARC benchmarks over 10 years.

Service and operational excellence

SS&C Technologies ("SS&C"), a global provider of software and technology services to the financial services industry, is our technology partner. In H1, we completed the transition of all client- and adviser-facing processes on to the SS&C platform, which is a critical milestone in our digital transformation. Progress is now being made to embed the SS&C systems and processes into the business, with a programme of work under way to deliver the full efficiency benefits and, ultimately, best-in-class client and intermediary experience.

The Group is continuing to drive forward its digital transformation, including upgrades to our financial planning and client relationship management systems.

Selective high-quality acquisitions

Acquisitions form an important part of our strategy, essential to achieve our ambitious medium-term target of becoming a Top 5 wealth manager in the UK and Crown Dependencies. As previously disclosed, we have four strict criteria for acquisitions: (i) the target must be a good business in its own right; (ii) there must be clear strategic logic to the combination; (iii) it must be a good cultural fit with Brooks Macdonald; and (iv) the economics of the transaction must be compelling.

In the period at hand, we were pleased to complete two acquisitions - Integrity Wealth Solutions in Nuneaton and Adroit Financial Planning in Manchester. Both firms are high quality financial advisers, with strong long-standing relationships with Brooks Macdonald, who now bring further scale and capability to our growing Private Clients business. Integrity have built a strong client base in the West Midlands and Adroit have a broader franchise across the country focused on Court of Protection and vulnerable clients.

Positive medium-term outlook

The short-term geopolitical and macroeconomic outlook remains uncertain, undermining investor sentiment, and at times, making clients reluctant to commit funds. Nonetheless, the outlook for the year remains as per prior guidance, with full year net flows expected to be 5-6%, primarily driven by Platform MPS and BMIS. The fundamental opportunity for the Group remains as strong as it has ever been and we are confident in our long-term prospects building on our ambitious organic and inorganic growth strategy, grounded in our purpose of realising ambitions and securing futures.

Review of the results for the period

The Group delivered a solid set of results for the first half of the financial year given the challenging macroeconomic environment. Net flows and overall financial performance remained resilient delivering an underlying profit for the period of £14.5 million and an underlying profit margin of 24.6%. The Group also continued to deliver on its ambitious growth strategy, completing the acquisition of Integrity Wealth Solutions and Adroit Financial Planning in the period.

The table below shows the Group's financial performance for the six months ended 31 December 2022 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 in the Condensed consolidated financial statements for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered.

Funds under management

The table below shows the opening and closing FUM position and the movements during the period broken down by segment and by our key services within UK Investment Management ("UKIM").

1. Capital-only index.

During the period, the Group recorded positive net flows of £0.3 billion or 2.2%. Positive investment performance of 1.4%, ahead of the benchmark index (which recorded a decline of 0.3%), added a further £0.2 billion. This resulted in a closing FUM of £16.2 billion, an increase of 3.6% from the start of the financial year (30 June 2022: £15.7 billion; 31 December 2021: £17.3 billion).

Within UKIM, the BPS offering experienced net outflows in the period of £0.1 billion, whilst Platform MPS (including BM Investment Solutions) recorded strong net flows of £0.5 billion. The Funds business saw outflows of £0.1 billion during the period, primarily due to wider market conditions with outflows across most funds in the sector.

International FUM remained broadly flat over the period with marginal net outflows offset by positive investment performance.

Revenue

Total revenue for the Group reduced by 4.8% to £58.9 million in the first half of the financial year. Fee income declined by 13% compared to the prior period driven by lower average FUM levels, and the implementation of a new competitive rate card for the Cornelian Risk Managed Funds range in order to drive higher levels of growth. Transactional income reduced by £0.9 million due to lower trading levels during the first quarter of the financial year and the continuing trend of clients moving to the fee-only rate card.

The decline in fee and transactional income was offset by higher interest turn of £5.1 million (H1 FY22: £0.4 million) driven by the rise in the Bank of England base rates.

Fees from Financial Planning in the period amounted to £2.4 million and recorded an increase of 9.1% on the previous period, driven by the first contribution from the recently acquired Integrity Wealth Solutions and Adroit Financial Planning businesses of £0.4 million.

Revenue, yields and average FUM

1. The yields on the Lloyds Channel Islands acquired businesses are included within the International fees line in the above table as these businesses are nowfully embedded.

2. Following a corporate restructure of the business in FY22, fees earned on Financial Planning advice in the International business are being wrapped up within the Annual Management Charge and 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 and the H1 FY22 International yield has been restated to ensure consistent reporting with the current period.

3. Capital-only index.

The Group's average FUM fell by 7.2% from H1 FY22, which was ahead of the movement in the MSCI PIMFA Private Investor Balanced Index, which fell by 10.2% from 31 December 2021 to 31 December 2022.

The yield on BPS fees for UKIM decreased by 1bp to 65.3bps during the period driven by a change in mix between fee-only and fee and dealing accounts and rates achieved on new business.

The BPS non-fee transactional income yield increased marginally by 0.3bps, whilst the yield on interest turn saw significant growth from 0.6bps to 9.1bps driven by increase in the Bank of England base rates during the period. This will now begin to stabilise as we restart paying clients interest on cash balances.

The yields on MPS custody dropped by 1.3bps to 58.5bps as a result of the change in mix within the portfolios, whilst the MPS platform remained relatively stable when compared to the prior period. These include the Brooks Macdonald Investment Solutions offering that attracts relatively larger mandates, which benefit from discounted tiered rates.

The Funds fee yields reduced by 6.9bps to 48.8bps during the first half of the year. This was principally 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 3.5bps to 72.6bps during the first half of the year as a result of the change in mix and the impact of the timing of inflows and outflows during the period. Non-fees income yield increased significantly by 11.3bps as a result of the rise in rates earned on both GBP and foreign currency account balances.

Underlying costs

Total underlying costs for the Group of £44.4 million were broadly in line with last year (H1 FY22: £44.3 million) and included £0.3 million in respect of the recent acquisitions of Integrity Wealth Solutions and Adroit Financial Planning.

Staff costs

Total staff costs decreased by 8.8% from £28.3 million to £25.8 million. Fixed staff costs increased by 7.5% to £21.5 million as a result of inflationary pay rises, the introduction of higher National Insurance rates in April 2022 and the cost of new hires from the recent two acquisitions.

Variable staff costs reduced by 48.2% to £4.3 million driven by the reduction in pre-variable pay profit and a small number of senior management exits. Within this, the share-based payments charge was down £0.9 million on the prior period due to lapses recognised in H1 FY23 and a reduction in the Group's share price impacting the associated employer national insurance contributions.

Non-staff costs

Non-staff costs amounted to £18.6 million, of which £0.1 million related to the recent acquisitions. Within this, the Group incurred £1.3 million in relation to terminated M&A processes and other one-off costs which are not expected to recur. Excluding the impact of these and the acquired costs, non-staff costs for the core business increased by £1.2 million or 7.5% on H1 FY22. During the period, the Group successfully migrated the Group's custody book 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 £0.6 million in the go-live year, comprising £1.3 million additional spend on the enhanced capabilities, offset by a reduction in computer software amortisation of £0.7 million following the full amortisation in the prior year of the legacy operating platform technology.

Profit before tax

Combined, the above gave rise to an underlying profit before tax for the half year of £14.5 million, a decrease of 17.6% on the prior period (H1 FY22: £17.6 million) resulting in a profit margin of 24.6%, down by 3.8 points on last year (H1 FY22: 28.4%).

The Group's statutory profit before tax fell by £3.4 million to £9.8 million (H1 FY22: £13.2 million). A breakdown of the underlying adjustments together with an explanation of each is included within the Reconciliation between underlying and statutory profits section below.

Segmental analysis

The Group reports its results across two key operating segments: UK Investment Management and International. The tables below provide a breakdown of the half year performance broken down by these segments, with comparatives.

Restatement of segmental view

Over the past 12 months, the Group has undertaken a wide-ranging review of its internal management information and management cost allocations. The new branch and team level performance reporting is driving a step change in performance management and business insight and transforms the Group's management information capabilities. As part of this change, the business has moved to team and branch level compensation models based on contribution. In order to ensure this change was delivering appropriate and equitable results, a detailed review of the cost structure and allocation methodology was carried out, which resulted in a more appropriate reflection of internal resource usage. As a result, the segmental results for the comparative period have been restated to ensure consistent reporting with the current period. The impact of this restatement has been an increase in Group allocations and recharges to the International business.

UKIM saw revenue fall by 4.1% to £48.8 million, driven by lower average FUM, whilst its total costs remained relatively flat on the prior period. This resulted in an underlying profit before tax of £16.9 million, down £2.0 million on the prior period and an underlying profit margin of 34.6%, a reduction of 2.5 points.

International revenue reduced by £0.9 million to £10.1 million as a result of lower average markets and the impact of outflows. Total costs increased marginally by 2.0% from £10.1 million to £10.3 million, driven primarily by higher legal costs. This resulted in the International segment recording an underlying loss of £0.2 million, down £1.1 million from the underlying profit of £0.9 million in H1 FY22. The continued investment in the Isle of Man branch in the current year resulted in an underlying loss of £0.3 million, which is included within the overall International loss of £0.2 million.

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 when compared to the statutory results as this excludes income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage and peer group benchmarking, allowing a like-for-like comparison. Underlying profit is deemed to be an alternative performance measure ("APM"); refer to the Non-IFRS financial information section in the Condensed consolidated financial statements 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 six months ended 31 December 2022, with comparatives is shown in the following table:

Amortisation of client relationships (£2.8 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 is due to 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 of the Condensed 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. The migration was executed at the end of July 2022, however, as part of the transition process, the Group has incurred net incremental costs in running two operating platforms concurrently. The dual running costs have been excluded from underlying profit in view of their non-recurring nature.

Acquisition and integration-related costs (£0.3 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 costs incurred include stamp duty and legal fees.

FY22 Changes in fair value and finance cost of deferred contingent consideration (£0.1 million charge)

This comprises the fair value measurement arising on deferred consideration payments from acquisitions carried out by the Group, together with their associated net finance costs where applicable. Refer to Note 15 of the Condensed consolidated financial statements for more details.

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

During the 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 over the period from 1 July 2017 to 30 June 2020 of £3.0 million.

Taxation

The Group's Corporation Tax charge on underlying profits for the period was £2.8 million (H1 FY22: £3.7 million) representing an effective tax rate of 19.0% (H1 FY22: 21.1%). The reduction is principally driven by an R&D credit arising on FY22 qualifying expenditure and recognised as a prior period tax adjustment in H1 FY23. The statutory Corporation Tax charge was £1.6 million, down 46.7% from the prior period (H1 FY22: £3.0 million).

Earnings per share

The Group's basic statutory earnings per share for the six months ended 31 December 2022 was 51.8p, which reduced by 13.7p from H1 FY22. On an underlying basis, basic earnings per share decreased by 16.0% to 74.4p (H1 FY22: 88.6p). Details on the basic and diluted earnings per share are provided in Note 8 of the Condensed consolidated financial statements.

Financial position and regulatory capital

The Group's financial position remains strong with net assets of £151.1 million at 31 December 2022 (H1 FY22: £140.3 million; FY22: £148.4 million). As at 31 December 2022, the Group had an own funds adequacy ratio of 267.8% (H1 FY22: 285.7%). 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 interim profits (net of the declared interim dividends) as these are deemed to be verified at the date of publication of the half year results.

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 period 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 Pillar III 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.

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 declared an interim dividend of 28.0p (H1 FY22: 26.0p). This represents an increase of 7.7% compared to the previous period. The interim dividend will be paid on 6 April 2023 to shareholders on the register as at 10 March 2023. Refer to Note 9 of the Condensed consolidated financial statements for more details.

Cash flow and capital expenditure

The Group continues to have strong levels of cash generation from operations. Total cash resources at the end of December 2022 fell by £23.7 million from the 30 June 2022 to £37.6 million (H1 FY22: £45.7 million; FY22: £61.3 million). 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 out flow of £14.9 million. Excluding this outflow, cash decreased by £8.8 million from 30 June 2022, with £7.0 million spent on the FY22 final dividend during the current period. The Group continued to have no borrowings at 31 December 2022.

During the six months ended 31 December 2022, the Group incurred capital expenditure of £2.3 million. This comprised technology-related development of £1.9 million and property-related costs of £0.4 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 successful migration, with the capital expenditure amortised over the remaining eight years of the ten-year agreement entered into with SS&C.

Condensed consolidated statement of comprehensive income

for the six months ended 31 December 2022

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

Condensed consolidated statement of financial position

as at 31 December 2022

The Condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 1 March 2023, signed on their behalf by:

Andrew Shepherd

CEO

Company registration number: 4402058

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

Condensed consolidated statement of changes in equity

for the six months ended 31 December 2022

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

Condensed consolidated statement of cash flows

for the six months ended 31 December 2022

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

Notes to the condensed consolidated financial statements

for the six months ended 31 December 2022

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, 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.

The Interim Report and Accounts were approved for issue on 1 March 2023. The Condensed consolidated financial statements have been independently reviewed but not audited.

2. Accounting policies

a) Basis of preparation

The Group's Condensed consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'. The Financial statements have been prepared on the historical cost basis, except for the revaluation of financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss and deferred contingent consideration such that they are measured at their fair value.

The information in this Interim Report and Accounts does not comprise statutory financial statements within the meaning of section 434 of the Companies Act 2006. The Group's financial statements for the year ended 30 June 2022 have been reported on by its auditors and delivered to the Registrar of Companies. The Condensed consolidated financial statements should be read in conjunction with the Group's audited financial statements for the year ended 30 June 2022, which are prepared in accordance with UK-adopted International Accounting Standards.

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 these Financial statements.

Developments in reporting standards and interpretations

Standards and interpretations adopted during the current reporting period

In the six months ended 31 December 2022, the Group did not adopt any new standards or amendments issued by the International Accounting Standards Board ("IASB") or interpretations by the IFRS Interpretations Committee ("IFRS IC") that have had a material impact on the Condensed consolidated financial statements.

Future new standards and interpretations

A number of new standards are effective for annual periods beginning after 1 July 2022 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these Condensed consolidated financial statements. None of the standards not yet effective are expected to have a material impact on the Group's Financial statements.

b) Changes in accounting policies

The accounting policies applied in these Condensed consolidated financial statements are the same as those applied in the Group's Consolidated financial statements as at and for the year ended 30 June 2022.

In the six months ended 31 December 2022, the Group did not adopt any new standards or amendments issued by the IASB or interpretations issued by the IFRS IC that have had a material impact on the Condensed consolidated financial statements.

New standards, amendments and interpretations listed below were newly adopted by the Group but have not had a material impact on the amounts reported in these Financial statements. They may, however, impact the accounting for future transactions and arrangements.

• COVID-19-related Rent Concessions (Amendment to IFRS 16)

• Reference to the Conceptual Framework (Amendments to IFRS 3)

• Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

• Annual Improvements to IFRS Standards 2018-2020.

c) Critical accounting judgements and key sources of estimation and uncertainty

The Group has reviewed the judgements and estimates that affect its accounting policies and amounts reported in its Condensed consolidated financial statements. These are unchanged from those reported in the Group's Financial statements for the year ended 30 June 2022.

During the period, the Group acquired the entire share capital of Integrity Wealth Bidco Limited and Integrity Wealth (Holdings) Limited. The Group accounted for the transaction as a business combination, as set out in Note 7. The payment of certain elements of consideration was deferred, contingent on future revenue targets being met by the acquired business. The Group continues to monitor the forecast of consideration payable. A provision for the expected consideration has been made.

Under the terms of the agreement, the deferred contingent consideration can be a maximum possible payment of up to £2,500,000. Management's best estimate of this award at 31 December 2022 was £1,275,000, based on forecast future revenues. The maximum award of £2,500,000, would result in an increase in fair value and charge to the Condensed statement of comprehensive income for the period to 31 December 2022 of £998,000.

3. Segmental information

For management purposes, the Group's activities are organised into two operating divisions: UK Investment Management and International. These divisions are the basis on which the Group reports its primary segmental information to the Executive Committee, which is the Group's chief operating decision-maker. In accordance with IFRS 8 'Operating Segments', disclosures are required to reflect the information that 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, and also provides 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 Isle of Man, offering a similar range of investment management and financial planning services as the UK Investment Management segment.

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

The Group segment principally comprises the Group Board's management and associated costs, along with the consolidation adjustments. Revenues and expenses are allocated to the business segment that originated the transaction. Transactions 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 Interim management report, the segmental results for the six months ended 31 December 2021 have been restated to be consistent with the current period. For the six months ended 31 December 2021, the reported UKIM segment allocated costs have changed from £13,862,000 to £11,763,000, a movement of £2,099,000, and underlying profit before tax changed from £16,871,000 to £18,970,000, a movement of £2,099,000. The reported International segment underlying administrative costs changed from £6,852,000 to £6,235,000, a movement of £617,000, allocated costs changed from £1,790,000 to £3,889,000, a movement of £2,099,000, and underlying profit before tax changed from £2,397,000 to £915,000, a movement of £1,482,000. The reported Group segment underlying administrative costs changed from £17,301,000 to £17,918,000, a movement of £617,000, and underlying loss before tax changed from £1,635,000 to £2,252,000, a movement of £617,000.