Brooks Macdonald Regulatory News (BRK)

7 March 2024

BROOKS MACDONALD GROUP PLC

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

"Six months of strategic progress resulting in an 18% increase in underlying profit before tax"

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group") today announces its half-year results for the six months ended 31 December 2023.

Andrew Shepherd, CEO, commented:

"I am pleased to report that demand for our products and services remains strong across our Group with £1.2 billion of gross inflows during the period. This rounds out a solid half year in which revenue growth and a focus on cost control delivered an improved underlying profit margin of 26.9%. 

"During the last six months our priority has been to help our clients and advisers navigate the challenging markets that the wealth management industry has continued to face. The need for trusted advice and robust long-term investment management remains as strong as ever. As a management team, we have been proactive in adapting our business to the current environment, resulting in a Group that is in a stronger operational position, well-placed to take advantage of the opportunity ahead.

"These results are a testament to the expertise and hard work of our people and our collective drive to deliver long-term sustainable results. Although the short-term macroeconomic outlook remains uncertain, we have confidence in our growth strategy and our ability to keep delivering for all our stakeholders."

Solid financial performance with continued organic growth

· Total Funds under Management ("FUM") grew to a record £17.6 billion, up 4.3% over the half year (30 June 2023: £16.8 billion);

· Funds under Management or Advice ("FUM/A") with Private Clients reached £5.2 billion, with £4.4 billion relating to portfolios within the Group's investment management and £0.8 billion to portfolios with third party investment managers;

· Investment performance was 5.3% for the half year, in line with the MSCI PIMFA balanced index, which was up 5.6%, offsetting net outflows in the period of £0.2 billion or 1% of opening FUM;

· Revenue increased by 8.0% to £63.6 million (H1 FY23: £58.9 million) driven by higher financial planning revenue, following the acquisitions in the prior period, and transactional and net interest income;

· Underlying costs increased by 4.7% in line with guidance and primarily due to the full period impact of the acquisitions made in the prior period and cost inflation. The benefits from the organisational changes implemented in December will be realised in the second half;

· Underlying profit before tax was £17.1 million, up from £14.5 million in the same period last year, with the underlying profit margin increasing to 26.9% (H1 FY23: 24.6%), consistent with the Group's commitment to achieving a top quartile underlying profit margin;

· The performance of our International operations is behind plan and in the interests of achieving the best return for shareholders, we have commenced a strategic review of the business. In addition, the Group has recognised an £11.6 million one-off, non-cash impairment charge on the goodwill associated with the International business acquired in 2012. This has led to a statutory loss before tax of £0.8 million at the Group level, compared with a profit of £9.8 million in H1 FY23. The impairment charge does not impact cash nor regulatory capital, and has not limited the Group's ability to distribute capital to shareholders in accordance with our progressive dividend policy;

· The Group has declared an interim dividend of 29.0p (H1 FY23: 28.0p), in line with its progressive dividend policy. This reflects our strong capital position and the Board's continuing confidence in the Group's prospects.

Strategic progress

Organisational development

· The Group implemented organisational changes, reducing headcount by c. 10%, which will result in an annual cost saving of c. £4 million, designed to strengthen the business operationally and best deliver on the strategy to drive growth;

· The Group is increasingly focusing its client-facing activities around its distribution channels, with distinct propositions and sales strategies that meet the different needs of advisers and private clients, to build stronger relationships and provide exceptional service.

Ongoing digital transformation

· In the period, the Group completed the first phase of the implementation of its new client relationship management system, focussed on advisers, with the second phase focused on intermediated and private clients to commence shortly;

· The Group has embedded outsourced adviser- and client-facing processes and systems, aiming to deliver best-in-class experience;

· In financial planning, the Group implemented advice software across the UK business to provide consistently strong client service.

Outlook

· The outlook for underlying profit for the year remains in line with market expectations;

· We expect continued momentum in gross inflows, primarily driven by Platform MPS and BMIS. However, the Group continues to see an elevated level of outflows given prevailing macroeconomic conditions, and we now expect net outflows for the full year at the Group level;

· Cost benefits of the organisational changes announced in October 2023 will be realised from the second half;

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.

2The statutory loss is after accounting for statutory profit adjustments, including a one-off goodwill impairment of £11.6 million in association with the International business.

Conference call and investor presentation details

There will be a video presentation followed by a Q&A session for analysts and investors at 9:30 a.m. today via webcast and conference call.

For conference call details please contact FTI Consulting on +44 (0) 07976 870961 or brooksmacdonald@fticonsulting.com. The video presentation can be accessed on the Investor Relations section of Brooks Macdonald's website using the following link:

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

Presentation slides will be available from 7.30 a.m. today on the Investor Relations site.

Enquiries to:

Notes to editors

Brooks Macdonald Group plc, through its various subsidiaries, provides leading wealth 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 £17.6 billion as at 31 December 2023.

Brooks Macdonald offers outsourced discretionary investment management for intermediaries and advice-led integrated wealth management for private clients. The Group also acts as fund manager to a range of onshore and international funds.

The Group has fourteen offices across the UK and Crown Dependencies including London, Birmingham, 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 financial performance in H1

The six months ended 31 December 2023 saw solid performance amid challenging markets, with positive investment returns contributing to growth in Funds under Management ("FUM") of 4.3%, which reached a record £17.6 billion (30 June 2023: £16.8 billion). Despite weak industry flows, we delivered good growth in BM Investment Solutions ("BMIS"), our Platform Managed Portfolio Service ("PMPS") and the specialist offerings in our Bespoke Portfolio Service ("BPS"), especially in our Decumulation Service.

Total Group revenue increased by 8.0% to £63.6 million (H1 FY23: £58.9 million), driven by an increase in transactional and interest income, and a greater contribution from financial planning revenue following the acquisitions in the prior period. Total underlying costs were up 4.7% to £46.5 million (H1 FY23: £44.4 million), reflecting strong cost discipline in an inflationary environment. Together, this resulted in a significant increase to underlying profit before tax, of 17.9% to £17.1 million (H1 FY23: £14.5 million), and to underlying profit margin of 2.3 percentage points to 26.9% (H1 FY23: 24.6%), reflecting our commitment and progress to achieving a top quartile underlying profit margin. Similarly, underlying basic EPS was up 9.7% to 81.6p (H1 FY23: 74.4p).

The performance of our International operations is behind plan and in the interests of achieving the best return for shareholders, we have commenced a strategic review of the business. In addition, the Group has recognised an £11.6 million one-off, non-cash impairment charge on the goodwill associated with this business. This has contributed to a Group statutory loss before tax of £0.8 million - excluding this impairment, the Group would have recognised a statutory profit before tax of £10.8 million (H1 FY23: £9.8 million). The impairment charge does not impact cash, nor regulatory capital, and has not limited the Group's ability to distribute capital to shareholders in accordance with our progressive dividend policy.

The Group is declaring an interim dividend of 29.0p per share, up from the 28.0p interim dividend paid last year, in line with the solid underlying results for the period and the Board's continuing confidence in the Group's prospects.

Strategy to enable growth

Recent markets have been more difficult to navigate but our key strengths, which include a client-centric culture, strong adviser relationships, robust Centralised Investment Process and a commitment to service and operational excellence, mean that the value we provide our key stakeholders remains strong.

We have a clear strategy which will increase the value we create for all stakeholders. We are focused on three key value drivers to achieve this strategy:

? Market-leading organic growth;

? Service and operational excellence; and

? Selective high-quality acquisitions.

Our medium-term ambition is to achieve the following targets: to deliver 8-10% net flows, to achieve top quartile underlying profit margin and to become a Top 5 wealth manager in the UK.

Market-leading organic growth

In the first half of our financial year, we continued to see elevated industry outflows. However, client demand was strong and we continued to attract funds, with Group gross inflows of £1.2 billion, up 1% on the same period last year. Approximately half of these inflows were in our MPS Platform service. Increased outflows of £1.3 billion, reflecting trends seen in the broader market, led to overall modest net outflows of less than £0.2 billion in the period. This was more than offset by positive investment performance of £0.9 billion, leading to a 4.3% increase in FUM to a record level of £17.6 billion.

Our UK Investment Management ("UKIM") discretionary business achieved slightly positive net inflows, as growth in Managed Portfolio Service ("MPS") more than offset outflows in BPS. Positive investment returns led to an increase in UKIM discretionary FUM of 5.6% to £13.7 billion.

We continued to see a positive growth trajectory in our BMIS and PMPS, which saw annualised net flows of 13.5% and 16.3%, respectively. We also delivered good progress in the specialised variants of our BPS, including the Decumulation Service, where annualised net flows were 10.9%, and our recently launched gilts offering ended the 2023 calendar year with FUM of £0.2 billion.

FUM in the UKIM Funds business remained broadly flat in the period at £1.7 billion, with investment returns offsetting net outflows, which were in line with experience across the industry.

Similarly, in International, the FUM held at £2.2 billion in the six-month period, with moderate net outflows being offset by investment performance.

Markets improved towards the end of 2023 and Brooks Macdonald investment performance gained 5.3%, broadly in line with the PIMFA Balanced index. Our Centralised Investment Process ("CIP") continues to achieve strong risk adjusted returns for clients.

Service and operational excellence

During the period we have continued to progress our technology enhancements to provide best-in-class client and adviser service. In doing so, we are committed to driving further growth across the business. We have implemented phase one of our new client relationship management system, which replaces multiple legacy systems and is focused on improving service for clients and advisers. We will shortly be implementing the second phase, which is aimed at our private clients. We have also introduced new software in our financial planning business to improve client service levels and ensure we provide a consistent service.

We have embedded outsourced systems and processes into the business and are positioned to deliver full efficiency benefits as the business grows and utilises the operational gearing, and ultimately deliver best-in-class client and intermediary experience. Our clients are now benefitting from automated onboarding, improved intermediary and client portal functionality and bespoke reporting across our business.

We recognise that there is always more to be done and the Group will continue to drive forward its digital transformation.

As our business grows, we are committed to giving more tailored focus to our distinct client groups, recognising the differences between our intermediated and private client bases. This includes different propositions and sales strategies across our distribution channels. Our integrated wealth management proposition for private clients continues to increase in importance, whilst our adviser-led outsourced investment management retains popularity for its scalability and cost-effectiveness for advisers and their clients. Both are positioned well for growth.

We see significant opportunity across our Group and distribution; we see opportunities to build relationships with more intermediaries and to extend our relationships with our current intermediaries, as well as growing our wealth business. As at 31 December, the Group had £5.2 billion Funds under Management or Advice ("FUM/A") with Private Clients, with £4.4 billion relating to portfolios within the Group's investment management and £0.8 billion to portfolios with third-party investment managers. The £0.8 billion Assets Under Advice held with third-party investment managers is not included in the £17.6 billion FUM as at 31 December 2023.

Selective high-quality acquisitions

Acquisitions continue to form an important part of our strategy and are indeed necessary to achieve our ambitious medium-term target of becoming a Top 5 wealth manager in the UK. 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.

During the last six months, while reviewing potential targets, we did not find an opportunity that met these criteria, however, we continue to see a steady pipeline of potential acquisitions. It is now just over a year since the acquisitions of Integrity Wealth Solutions and Adroit Financial Planning, announced at the end of 2022, which have both integrated well and helped to drive forward our Wealth business.

People

During the period, we were pleased to announce the appointment of Maarten Slendebroek as Chairman, subject to regulatory approval. Maarten has extensive experience in financial services, including as CEO of Jupiter for five years from February 2014 and as Chair of the Supervisory Board of Robeco since August 2020. Maarten succeeds Richard Price, who intends to step down from the Board once Maarten receives regulatory approval. Richard has served the Board of Brooks Macdonald for just over nine years in the roles of Chair of the Audit Committee, Senior Independent Director and, most recently, Acting Chairman, and we thank him for his significant contribution.

Ed Park, Chief Investment Officer ("CIO"), decided to leave Brooks Macdonald at the end of last year and we thank him for his commitment to the business and wish him well for the future. In response to his departure, we announced some changes to our Investment Committee and we are delighted to say that Philip Glaze has agreed to take over as external Chair of this Committee. Michael Toolan, Senior Portfolio Director, and Richard Larner, Head of Research, have been promoted to newly created roles as Co-CIOs. Together they will enhance the coordination and oversight of the Group's already rigorous investment process. These promotions underline our commitment to continuity and underscore the talent that we have in Brooks Macdonald.

We also completed the organisational changes that we communicated in October 2023, reducing the number of roles in the Group by around 10%. This will make the Group stronger with the resulting efficiencies increasing our competitiveness. As ever, we remain focused on delivering high-quality service to our clients and intermediaries.

Regulation

At the end of July 2023, the FCA's new Consumer Duty rules came into effect and we welcomed the Consumer Principle that requires firms to act to deliver good outcomes for retail customers. Our processes and client-centric culture and guiding principles are proving well-aligned to the new requirements and we recently became an Affiliate Member of the Consumer Duty Alliance, demonstrating our commitment to achieving good outcomes for our clients.

The FCA has also addressed the treatment of interest earned on customers' cash balances. Clients do not generally, and are not encouraged to, invest with us to earn interest on cash. Rather, our investment managers hold cash primarily so it is available for investment or withdrawals, and so cash balances in portfolios are typically low, currently at approximately 2%, in line with the Group's asset allocation guidelines. As part of our commitment to provide value to our clients, we have increased the amount of interest that we pay on cash balances in client portfolios. Instead of cash, we can offer our Gilts BPS, which meets client demand for their portfolios to take advantage of higher interest rates while avoiding equity risk. We believe this process offers a good client outcome in line with Consumer Duty.

Outlook

The outlook for profit for the year remains in line with market expectations. We expect continued momentum in gross inflows, primarily driven by Platform MPS and BMIS. However, the Group continues to see an elevated level of outflows given prevailing macroeconomic conditions and we now expect net outflows for the full year at the Group level. 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.

Review of the results for the period

The Group delivered a solid set of results for the first half of the financial year, with a strong underlying profit margin of 26.9%, against the continuing challenging macroeconomic environment. Net outflows in the period were offset by positive investment performance, leading to a record closing FUM of £17.6 billion. Revenue increased by 8.0% on the prior period, and underlying profit was up 17.9% to £17.1 million. On a statutory basis, the Group incurred a small loss before tax of £0.8 million after recognising a goodwill impairment charge at 31 December 2023 of £11.6 million. This is treated as a statutory adjustment and excluded from underlying earnings in view of its non-recurring and non-cash nature.

The table below shows the Group's financial performance for the six months ended 31 December 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

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").

Table 2 - Movements in funds under management

1. Capital-only index.

During H1 FY24, FUM increased by £0.7 billion or 4.3%, to £17.6 billion at 31 December 2023 (31 December 2022: £16.2 billion; 30 June 2023: £16.8 billion). The Group has delivered robust gross inflows of £1.2 billion in the period, however, gross outflows were elevated, particularly in BPS and Funds, driven by the prevailing backdrop of market volatility and higher interest rates continuing to affect client behaviour, resulting in net outflows for the period of £0.2 billion.

Investment performance of 5.3% was broadly in line with the MSCI PIMFA Private Investor Balanced Index, up 5.6% over the same period, adding £0.9 billion to the closing FUM.

BPS experienced net outflows of £0.2 billion or 2.3% during the first six months of the financial year, as clients withdrew funds to repay debt or to hold higher cash balances. Within BPS, the recently launched gilts offering had closing FUM of £0.2 billion at the end of the period, meeting client demand for their portfolios to take advantage of higher interest rates, while avoiding equity risk.

Platform MPS, including the Group's B2B offering for financial advisers, BM Investment Solutions ("BMIS"), grew to £3.9 billion, an increase of 12.6%, with organic net flows contributing 7.7%.

Funds saw net outflows during the period, driven by the wider market conditions and in line with the trend observed across the sector.

International FUM grew moderately by 2.7% over the period with marginal net outflows offset by investment performance.

As at 31 December 2023, the Group had £5.2 billion Funds under Management or Advice ("FUM/A") with private clients who deal with the Group directly. £4.4 billion related to portfolios in the Group's investment management and £0.8 billion to portfolios with third-party investment managers.

Revenue

Table 3 - Breakdown of the Group's total revenue

Total revenue for the Group increased by 8.0% to £63.6 million in the first half of the financial year. Fee income was flat at £45.7 million, a combination of impact from flows, product mix, and investment performance. Transactional and FX income of £6.7 million was up by 17.5% on the prior period as a result of increased trading volumes during the first half of the financial year.

Integrity Wealth Solutions and Adroit Financial Planning, the businesses acquired during H1 FY23, contributed additional financial planning income of £1.7 million in the current period.

Interest income, net of amounts paid out to clients on cash holdings, increased from £5.1 million to £7.1 million, driven by the rise in the Bank of England base rates since H1 FY23.

Revenue, yields and average FUM

Table 4 - Revenue, average FUM, and yields

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

The Group's average FUM increased by 7.9% from H1 FY23, which was ahead of the movement in the MSCI PIMFA Private Investor Balanced Index, which increased by 6.9% on an average basis from H1 FY23 to H1 FY24.

The yield on BPS fees for UKIM decreased by 1.5bps to 63.8bps driven by underlying product mix and rates achieved on new business.

The BPS non-fee transactional income yield increased by 3.1bps and the yield on interest turn, net of interest paid to clients, grew by 4.1bps to 13.2bps due to the increase of the Bank of England base rates between the two periods.

The yield on MPS custody increased by 0.8bps, whilst the yield on MPS Platform decreased by 1.3bps to 18.0bps. Within MPS Platform, BMIS attracts relatively larger mandates, which benefit from discounted tiered rates. This has resulted in the overall MPS yield decreasing from 33.4bps to 29.3bps in the current period.

The Funds fee yields reduced by 1.5bps to 47.3bps during the first half of the year, as a result of intra-month market volatility and timing of flows during the period.

International fee income yield decreased by 0.5bps during the first half of the year as a result of the change in product mix, whilst non-fees interest turn yield increased by 2.0bps due to higher interest rates earned on both GBP and foreign currency account balances.

Underlying costs

Total underlying costs of £46.5 million increased by 4.7% on the prior period (H1 FY23: £44.4 million) in line with guidance. This included the full period impact of the two recent acquisitions, adding £1.4 million to the Group's cost base compared to H1 FY23.

Table 5 - Breakdown of net movement in total underlying costs into staff and non-staff costs

The below commentary excludes the full period impact of the acquisitions.

Staff costs

Excluding the impact of acquisitions, staff costs increased by 7.0% from £25.6 million to £27.4 million. Fixed staff costs increased by 3.3% from £21.3 million to £22.0 million driven by inflationary pay rises and net new hires. As announced in October 2023, the Group will benefit from savings in staff costs in H2 FY24 arising from an organisational restructure undertaken in December 2023.

Variable staff costs increased by £1.1m to £5.4 million, largely driven by an increase in the pre-variable pay profit. The share-based payment charge was down £0.2 million due to lapses recognised in H1 FY24 and a reduction in the Group's share price impacting the associated employer national insurance contributions.

Non-staff costs

Non-staff costs from ongoing activities, amounted to £18.9 million, a net increase of £0.2 million from the prior period, a reflection of management's continued cost discipline to help mitigate cost inflation.

Profit before tax

Combined, the above gave rise to an underlying profit before tax for the half year of £17.1 million, an increase of 17.9% on the prior period (H1 FY23: £14.5 million) resulting in a profit margin of 26.9%, up 2.3 percentage points on last year (H1 FY23: 24.6%).

The Group recognised a statutory loss before tax of £0.8 million (H1 FY23: £9.8 million), contributed by the impairment charge in relation to the goodwill held in respect of the International business.

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.

Table 6 - Segmental analysis

UKIM, which includes the Group's Private Clients business, reported a 11.1% increase in revenue driven by higher Financial Planning revenue, interest and transactional income. The segment reported an underlying profit £17.9 million, up 5.9% from the prior period, and an underlying profit margin of 33.0%, a reduction of 1.6 percentage points on the prior period.

International saw an improvement in segmental performance, going from an underlying loss of £0.2 million in H1 FY23 to an underlying profit of £0.4 million in the current period, returning an underlying profit margin of 4.3%. The reduction in revenue of 6.5% was offset by a decrease in total costs of 10.5%.

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 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 2023, with comparatives is shown in the following table:

Table 7 - Reconciliation between underlying profit and statutory (loss)/profit before tax

Goodwill impairment (£11.6 million charge)

Goodwill is reviewed for impairment indicators at each reporting period, and if indicators are present, an impairment test is carried out based on the carrying value of the asset compared to its expected recoverable amount. The review of our International business indicated that the estimated recoverable amount arising from future cash flows, is less than the carrying value of the goodwill held on the Group's Condensed consolidated statement of financial position that was recognised upon the acquisition of the business in 2012. The goodwill impairment charge has been excluded from underlying profit in view of its non-recurring nature, and the fact that it does not impact cash or regulatory capital. Refer to Note 11 to the Condensed consolidated financial statements for more details.

Organisational restructure (£3.0 million charge)

The Group carried out an organisational restructure in December 2023 to ensure it is set up for future success. The Group identified opportunities to streamline and remove duplication from core processes, resulting in redundancy and associated third-party consultancy costs. These have been excluded from underlying earnings in view of their one-off nature.

Amortisation of client relationships (£3.0 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 full period impact of the prior year 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 11 of the Condensed consolidated financial statements for more details.

Acquisition and integration-related costs (£0.3 million charge)

These represent the share-based payment integration charge for share options awarded to acquired employees as part of acquisitions in the prior period. Prior year costs were incurred in relation to the acquisitions of Integrity Wealth Solutions on 31 October 2022 and Adroit Financial Planning on 15 December 2022.

FY23 Dual running operating platform costs (£1.6 million charge)

The Group has outsourced certain middle and back-office processes to a suite of systems offered by the technology partner SS&C. The migration to the outsourced platform 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 were excluded from underlying profit in view of their non-recurring nature.

FY23 Changes in fair value and finance cost of deferred contingent consideration (£0.2 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 16 of the Condensed consolidated financial statements for more details.

Taxation

The Group's Corporation Tax charge on underlying profits for the period was £4.0 million (H1 FY23: £2.8 million) representing an effective tax rate of 23.4% (H1 FY23: 19.0%). The increase is driven by higher profits and the higher Corporation Tax rate of 25.0% for the full current period, coming into force from April 2023. Moreover, the H1 FY23 numbers reflected the benefit of an R&D credit, which has not been recognised in H1 FY24 as this process is still in progress. The statutory Corporation Tax charge was £2.6 million, up 62.5% from the prior period (H1 FY23: £1.6 million).

Earnings per share

The Group's basic statutory loss per share for the six months ended 31 December 2023 was (21.1)p, as a result of the International goodwill impairment (H1 FY23: basic EPS 51.8p). On an underlying basis, basic earnings per share increased by 9.7% to 81.6p (H1 FY23: 74.4p). Details on the basic and diluted earnings per share are provided in Note 9 of the Condensed consolidated financial statements.

Financial position and regulatory capital

Net assets decreased by 2.3% to £147.6 million at 31 December 2023 (H1 FY23: £151.1 million), as a result of the impairment to goodwill. Excluding this, the net assets increased by 5.4%. The Group's tangible net assets (net assets excluding intangibles) were £61.7 million at 31 December 2023 (H1 FY23: £48.6 million). As at 31 December 2023, the Group had regulatory capital resources of £64.3 million (H1 FY23: £52.7 million). As at 31 December 2023, the Group had an own funds adequacy ratio of 295.9% (H1 FY23: 267.8%). 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.

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 29.0p (H1 FY23: 28.0p). This represents an increase of 3.6% compared to the previous period. The interim dividend will be paid on 16 April 2024 to shareholders on the register as at 15 March 2024. Refer to Note 10 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 2023 of £59.0 million had increased by £5.6 million from the cash balance at 30 June 2023 (H1 FY23: £37.6 million; FY23: £53.4 million). This increase was a direct impact of the cash generated from operating activities, refer to the Condensed consolidated statement of cashflows for further details. The Group continued to have no borrowings at 31 December 2023.

During the six months ended 31 December 2023, the Group incurred capital expenditure of £0.7 million down considerably from prior periods as increased capital expenditure was incurred by the Group in relation to the migration of services and processes to SS&C in advance of, and shortly after the migration at the end of July 2022. The current period expenditure comprised technology-related development of £0.6 million and property-related costs of £0.1 million.

Condensed consolidated statement of comprehensive income

for the six months ended 31 December 2023

Condensed consolidated statement of financial position

as at 31 December 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 £3,642,000, which has been netted off in the deferred tax liabilities balance.

The Condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 6 March 2024, signed on their behalf by:

Andrew Shepherd

CEO

Andrea Montague

CFO

Company registration number: 4402058

Condensed consolidated statement of changes in equity

for the six months ended 31 December 2023

Condensed consolidated statement of cash flows

for the six months ended 31 December 2023

Notes to the condensed consolidated financial statements

for the six months ended 31 December 2023

1. General information

Brooks Macdonald Group plc ("the Company") is the Parent Company of a group of companies ("the Group"), which provides leading wealth management services in the UK and internationally. The Group offers outsourced discretionary investment management for intermediaries and integrated wealth management for private clients, 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 6 March 2024. 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 Standards ("IAS") 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority ("FCA"). The Condensed consolidated 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.

At the time of approving the Condensed consolidated 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 Condensed consolidated financial statements.

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 2023 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 2023, which are prepared in accordance with UK-adopted International Accounting Standards.

Developments in reporting standards and interpretations

Standards and interpretations adopted during the current reporting period

In the six months ended 31 December 2023, 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 2023 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 2023.

In the six months ended 31 December 2023, 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.

? IFRS 17 'Insurance contracts'

? Narrow scope (Amendment to IAS 1, IAS 8, and IFRS Practice statement 2)

? Deferred tax assets and liabilities arising from a single transaction (Amendments to IAS 12)

? Changes in Accounting Estimates and Errors - Definition of Accounting Estimates (Amendments to IAS 8)

? International tax reform - pillar two model rules (Amendments to IAS 12)

c) Critical estimates and significant judgements

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 2023.

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 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, 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.

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.

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 £3,642,000, which has been netted off in the deferred tax liabilities balance.