Annual Report & Accounts
for the year ended 30 June 2013
Business performance
Financial highlights
Group overview
Chairman’s statement
Chief Executive’s review
Business review
Governance
Board committees’ report
Report of the directors
Statement of directors’ responsibilities
Consolidated financial statements
Independent auditors’ report to the members of Brooks Macdonald Group plc
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Company financial statements
Independent auditors’ report to the members of Brooks Macdonald Group plc
Company balance sheet
Notes to the company financial statements
Shareholders’ information
Explanation of Annual General Meeting business
Notice of Annual General Meeting
Form of proxy
Other information
Directors and advisers
1
2
3
4-5
6-7
8-15
16-18
19
20
21
22
23
24
25-55
56
57
58-62
63-66
67-69
71
IBC
Financial highlights
+45%
+22%
Discretionary funds under
management increased from
£3.52 billion to £5.11 billion
during the year
Total dividends per share
increased from 18.5p to 22.5p,
including a proposed final
dividend of 16.0p per share
+34%
+22%
Adjusted pre-tax profit† for the
year was £11.4 million compared
to £8.5 million in 2012
Pre-tax profit for the year was
£10.4 million compared to £8.5
million in 2012
+29%
+15%
Adjusted basic earnings per share†
increased from 57.43p to 74.33p
Basic earnings per share increased
from 57.43p to 65.76p
† Excludes the transactional costs of acquiring subsidiary companies of £1,047,000 (2012: £nil)
Funds under management (£m)
Earnings per share (p)
Dividend per share (p)
5,110
3,520
2,969
65.76
57.43
51.92
2,186
38.10
22.5
18.5
15.0
9.0
1,386
1,181
22.56
12.41
5.5
3.5
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
1
Annual Report & Accounts 2013Brooks Macdonald Group plc Group overview
Brooks Macdonald Group
plc (‘the Group’) is an AIM
listed, integrated wealth
management group.
The Group consists of six
principal companies:
The Brooks Macdonald Group has developed
under stable management since formation in
1991 and now has in excess of 370 staff
throughout the UK and Channel Islands. The
Group’s shares are listed on AIM, with
management and staff retaining considerable
ownership of the business.
London
110 and 111 Park Street Mayfair London
W1K 7JL
Taunton
Blackbrook Gate Blackbrook Park Avenue
Taunton Somerset TA1 2PX
Hampshire
The Long Barn Dean Estate Wickham Road
Fareham Hampshire PO17 5BN
York
Howard House 3 St Mary’s Court
Blossom Street York YO24 1AH
Manchester
1 Marsden Street Manchester M2 1HW
Jersey
Liberation House Castle Street St. Helier
Jersey JE2 3AT
Tunbridge Wells
2 Mount Ephraim Road Tunbridge Wells
Kent TN1 1EE
Guernsey
Yorkshire House Le Truchot St. Peter Port
Guernsey GY1 1WD
Edinburgh
10 Melville Crescent Edinburgh EH3 7LU
Leamington Spa
36 Hamilton Terrace Holly Walk
Leamington Spa Warwickshire CV32 4LY
Hale
Richmond House Heath Road Hale
Cheshire WA14 2XP
London
John Stow House 18 Bevis Marks London
EC3A 7JB
Brooks Macdonald Asset Management
Limited provides a bespoke, fee based,
discretionary investment management
service to private high net worth individuals,
charities and trusts. It also provides in-house
custody, nominee and dealing services and
has offices in London, Manchester,
Hampshire, Tunbridge Wells, Edinburgh,
Taunton, York and, opening in September,
Leamington Spa.
Brooks Macdonald Funds Limited is based in
Hale and acts as fund manager to our
regulated OEICs as well as managing
specialist funds in the property and
structured return sectors.
Brooks Macdonald Financial Consulting
Limited is a London based financial advisory
and employee benefits consultancy providing
fee based, independent advice to high net
worth individuals, families and businesses.
Brooks Macdonald Asset Management
(International) Limited and Brooks
Macdonald Retirement Services
(International) Limited are based in Jersey
and Guernsey and offer discretionary
portfolio management, advisory and
stockbroking services as well as retirement
planning advice. These two companies,
previously named Spearpoint Limited and
Spearpoint Retirement Services Limited
respectively, were acquired during the year,
as further detailed in note 9.
Braemar Estates Limited is an estate
management company based in Hale that
manages property assets on behalf of
Brooks Macdonald Funds and other clients.
2
Annual Report & Accounts 2013Brooks Macdonald Group plc Chairman’s statement
Christopher Knight, Chairman
“We remain focussed on
maintaining performance
levels for our clients, our
staff and our shareholders
and are pleased with
the significant progress
achieved by the Group
over the last financial year”
This has been another year of
considerable progress for the Group.
Profit before tax has increased by 22%
from £8.52m to £10.40m, and earnings
per share by 15% from 57.43p to 65.76p.
This is after charging £1.0m of costs
incurred in the acquisition of Spearpoint,
the Channel Islands fund management
business now renamed Brooks Macdonald
International.
The Board is recommending a final
dividend of 16p per share which, if
approved by shareholders, will result in
total dividends for the year of 22.5p. This
represents an increase of 22% over last
year’s total dividends of 18.5p per share.
The final dividend will be paid on 18
October 2013 to shareholders who are on
the register at the close of business on
20 September 2013.
Spearpoint became part of the Group in
November 2012, our first venture outside
the UK, which will be the focus of what we
hope will be a significant offshore business.
We now have offices in Jersey and
Guernsey, with two businesses: Asset
Management and Retirement Services. The
acquisition was in part funded by a
successful share placing with institutional
investors raising over £21m, the first fund
raising by the Group since our shares were
admitted to AIM in 2005.
Our discretionary funds under management
had a strong year and as at 30 June 2013
totalled £5.11bn (2012: £3.52bn), a rise of
45% over the 12 month period. Net of the
Spearpoint acquisition, this represents an
Property assets under administration grew
to £1.04bn, an increase of 20% (2012:
£865m) and third party assets under
administration are now in excess of £140m
(2012: £50m). In addition, as a result of
the acquisition of Spearpoint, we had
advisory funds under management of
£348m at the year end.
In addition to these acquisitions the Group
has continued to grow organically and
invest for the future. The number of
professional introducers using our asset
managers continues to rise, we have
recruited quality new fund managers and
consultants and we continue to invest in
our trainee programme, investment
management process and IT systems.
The last year has been a year of
considerable progress but also of change.
The introduction of the Retail Distribution
Review in January, something that we
supported, has led to changes across the
whole industry and to continued rises in
regulatory costs. Together with a re-pricing
of our Managed Portfolio Service (MPS)
and with the investments highlighted
above, as we indicated in July this year, this
will lead to an adverse effect on our
margins in the new financial year.
In spite of these changes we remain
focussed on maintaining performance
levels for our clients, our staff and our
shareholders and are pleased with the
significant progress achieved by the Group
over the last financial year and look forward
to the future with confidence.
increase of 25.6%, compared to growth of
9.8% in the APCIMS Balanced Index over
Christopher Knight
Chairman
the same period.
10 September 2013
3
Annual Report & Accounts 2013Brooks Macdonald Group plc Chief Executive’s review
Introduction
This has been a year of considerable
becoming increasingly different in part due
to the Retail Distribution Review (RDR) but
expansion for the Group against a backdrop
also due to significant changes in the
of significant regulatory changes and our
success over the last year has only been
possible with the continued hard work and
distribution landscape. BPS has not changed
in that we offer a complete investment
management service to high net worth
professionalism of all our staff, together with
clients including custody of assets. Whilst the
the support of our professional introducers
popularity of MPS continues, custody and
and shareholders. I would like to thank all
the use of platforms have altered the pricing
parties for their significant contributions to
of the service and to this end we have
these results.
I am pleased to report that we have seen
reacted to the changes in the industry and
rebased our fees for this service.
growth across all of our existing
In our funds business we continue to offer
businesses (Asset Management, Financial
highly niche funds or unitised versions of our
Consulting, Property Management,
MPS range of risk rated portfolios, and this
Investment Services and Funds) over the
continues to gain momentum with £390m
course of the financial year.
(£329m net of the acquisition) under
Funds under management
Our discretionary funds under management
went through a significant landmark in the
year going through £5bn. As at 30 June
management at the year end, growing from
£148m at the end of June 2012.
Strategies for growth
Our expansion has always revolved around
2013 this had risen to £5.11bn, a rise of
organic growth, ongoing investment in the
45% over the twelve month period
business and both service and performance
supported by rising investment markets and
development.
the acquisition of Spearpoint. Stripping out
market growth and the acquisition this
amounted to organic growth at over 15%
over the year. A large proportion of our new
business is introduced by professional
intermediaries and we remain firmly
committed to maintaining this strategy.
This past year has been no different in that we
completed two acquisitions, the first in July
2012 when we acquired JPAM Limited - a long
term introducer - and the second in
November 2012 when we acquired
Spearpoint. The latter comprised two
businesses: Investment Management and
We have three principal offerings: our
Retirement Services. It was a substantial step
Bespoke Portfolio Service (BPS) for high net
forward for the Group giving us the
worth individuals (whether this be private
opportunity to expand our ‘footprint’ outside
portfolios, Self Invested Personal Pensions or
the UK. The first seven months since
Trusts); Managed Portfolio Service (MPS),
acquisition have been focused around
which caters for smaller portfolios on a
integrating the business into the wider group.
modular basis; and our funds business, which
Going forward our collective aim is to grow
offers units in a number of funds. The
the business around BPS, advisory services,
dynamics behind all three services are
retirement advice and later this year the
Chris Macdonald, Chief Executive
“This has been a year of
considerable expansion
for the Group against a
backdrop of significant
regulatory changes”
“We continue to invest in
service and performance
development”
4
Annual Report & Accounts 2013Brooks Macdonald Group plc Chief Executive’s review
launch of an offshore MPS offering. The
‘central’ infrastructure spending (upgrading
support but the costs associated with
acquisition and integration has been
of our existing IT to hosting our data in
increased regulation have become and
successful and has taken a lot of hard work
third party data centres and web
remain substantial. Whilst we feel that these
from all parties but I would like to thank the
development), the re-papering of all our
costs have peaked in terms of percentage of
staff of Spearpoint for their considerable
clients with the recent developments
turnover, they have not been passed on to
endeavours in making this possible.
around suitability of advice and further
clients. This is something that we and, we
resources in investment research and
believe, the whole of the industry will have
monitoring. In the last example I am
to consider over the coming years.
Our organic growth has been strong across
the Group. This growth continues to be
supported by professional intermediaries and
more recently by a number of institutional
investors that have backed our new fund
pleased that we have continued to perform
well for our clients providing strong
risk-adjusted returns.
launches. We now have over 540 firms
The growth of SIPPs continues and this is now
introducing work to the firm from across the
further supported by legislative change
UK. This is supported by all our regional
around auto enrolment. We will be looking to
offices and is something we wish to repeat
launch a specific auto enrolment service later
offshore through our offices in Jersey and
this year utilising our own funds and this will
Guernsey. Our largest office remains our
apply both on and offshore. This is an
headquarters in London but we now have
opportunity we are increasingly excited about.
bases in Hampshire, Manchester, Tunbridge
Wells, Edinburgh, Hale (where our property
management business, Braemar Estates, is
based), Taunton, York, Jersey and Guernsey.
We will be opening an office in the Midlands
(in Leamington Spa) in mid September, thus
ensuring that we can support professional
intermediaries and clients alike in every region
in the UK.
Our brand development has also continued to
gain traction. Over the last three years we
have focussed most of our endeavours on the
professional intermediary market. We will
certainly continue this whilst also focusing on
increasing our brand recognition with our
underlying clients. I am also pleased that once
again we featured in the Sunday Times 100
Best Companies to work for, were awarded
Our staff numbers have increased over the
five star ratings from Defaqto for both MPS
year from 282 to 376. We have recruited at
and BPS and were also awarded Private Client
all levels across the Group including senior
Investment Manager of the year (AQC) and
management (for example Chris March
the Best Wealth Management Firm UK
being appointed as CEO of our Estates
(Wealth Advisor Awards).
business), further trainees (in Funds, Asset
Management and Financial Consulting) and
in central services. Whilst we continue to
grow it is imperative we both build for
future capacity but also retain the very
strong culture of the business.
We continue to invest in service and
performance development. This ranges from
Regulation
On 1 January 2013 RDR came into force.
This was a substantial change to the whole
of the financial services industry with a focus
on transparency of charging, greater
Summary and outlook
I will repeat the comments I made in my
review in 2012, that the last year was a
tough one. Investment markets were
supportive but the quantum of change,
particularly in the distribution of financial
services and regulation, meant that the
business had to be highly dynamic. I am
pleased that against this backdrop the
Group made substantial progress.
For the coming year our outlook for
investment returns remains cautiously
optimistic. We believe that there will be a
more stable background for regulatory
change, that there will continue to be margin
pressures on non-bespoke services and that
there will be numerous opportunities for the
Group. Despite the short term margin
pressures we have flagged, we are a
progressive business and therefore will
continue to invest for the future.
I am pleased to report further organic
growth in funds under management in the
early months of the new financial year. The
Board remains confident for the future
prospects of the Group.
Chris Macdonald
Chief Executive
consumer clarity and the raising of
10 September 2013
professional standards and corporate
stability. These are changes that we fully
5
Annual Report & Accounts 2013Brooks Macdonald Group plc Business review
Group overview
The Group has had a strong year of growth, audited pre-tax profits
The financial performance of the division is driven mainly by the
total funds under management and the net growth in new funds
increasing by 22% in the year to £10.4m and basic earnings per
achieved over the year.
share increasing from 57.43p per share last year to 65.76p for the
year ended 30 June 2013.
For the first six months of the year, fee income includes the share of
fees paid to introducers and their payments are shown within the
The Group has no borrowings and at 30 June 2013 its cash balances
administrative expenses of the division. Following the introduction of
totalled £18.4m. The detailed movement in group cash balances is
the Retail Distribution Review (RDR) on 1 January 2013 there has
shown in the consolidated statement of cash flows.
Investment management
The investment management division principally provides
been a change in the reporting of the fee income and the
corresponding share of the fee due to the third party introducer, if
applicable. Under RDR any payment due to the introducer is payable
on the instruction of the client from their client bank account and the
discretionary investment management services to private investors,
Group will simply become a facilitator for these payments. They will
charities and trusts. Despite difficult economic and investment
no longer form part of the administrative costs of the division and
conditions during the financial year the division has continued to
there will be a corresponding reduction in fee income.
grow funds under management both organically and through the
acquisition of Spearpoint Limited in November 2012.
The impact of RDR on fee income and administrative costs for the
division as described above has only impacted on the second half of
Funds under management (£m)
the financial year ended 30 June 2013 and has not affected
At 1 July 2012
Inflows
– net new discretionary business*
– acquired through Spearpoint Limited
– market movement
At 30 June 2013
3,520
574
650
366
5,110
arrangements with all introducers. Some introducers have made the
decision to retain an ‘old book’ of business whereby the fee charged
by the division continues to include the share of the fee payable to
the introducer, with the corresponding payment included within the
administrative expenses of the division. The impact of this change to
RDR on the results of the division is a reduction of approximately
Underlying rate of total net growth
45.17%
£5.9m of income with a matched reduction in administrative costs.
*Clients leaving and capital or income withdrawals of larger than £50,000 for
Bespoke Portfolio Service and larger than £20,000 for Managed Portfolio Service
The underlying rate of growth of 45% of funds compares to an
increase in the APCIMS Balanced Index of 10% and an increase in the
FTSE 100 index of 12% over the same period and represents a
continued growth in funds under management (FUM) over the last
five years as illustrated below.
There has been continued development and investment in our back
office functions in order to increase the efficiency and to further
enhance the overall service both to our own clients and to those
using our third party administration services.
)
m
£
(
M
U
F
6,000
5,000
4,000
3,000
2,000
1,000
0
6
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Annual Report & Accounts 2013Brooks Macdonald Group plc
Business review
On 19 November 2012 we completed the acquisition of Spearpoint
Limited (now renamed Brooks Macdonald Asset Management
Financial Consulting
The financial consulting division has had another good year with
(International) Limited (BMI)) together with Spearpoint Retirement
increased revenue and profits and it particularly benefited from
Services Limited (now renamed Brooks Macdonald Retirement
having a business model which required little or no change with the
Services (International) Limited (BMRS)) for an initial consideration
advent of RDR from 1 January 2013. The division continues to
of £22.5m (excluding the value of net assets acquired) with an
deliver both fee based financial planning to high net worth
additional projected deferred payment of £4.3m due in November
individuals and employee benefits consultancy to small and medium
2014. BMI is a Jersey and Guernsey based integrated wealth
sized employers throughout the UK.
management company and in addition to the discretionary funds of
£650m shown above, BMI also had advisory funds of £450m and
offers execution only and foreign exchange services to its clients.
The division is starting to work with BMRS in Jersey and Guernsey,
which was acquired in conjunction with BMI as described earlier
and it is also benefitting from the expansion in the existing group
The acquisition of BMI has added further scale and a significantly
office network, with the provision of employee benefits being a
enhanced offshore capability for our clients. Further details of
particular growth area due to the requirements of auto enrolment
the acquisition are disclosed in note 9 to the consolidated
for all UK employers.
financial statements.
Brooks Macdonald Funds and Braemar Estates
It has been a year of considerable growth for Brooks Macdonald
Funds with total funds under management increasing significantly
from £148m to £390m at 30 June 2013 following a rise of 46% in
the previous year to 30 June 2012. This growth was achieved both
organically through new investment in the existing seven funds as
well as by the acquisition of BMI which added a total £65m in a
further five funds through an offshore Dublin OEIC.
Braemar Estates has continued its growth in the property
management sector with the value of assets under administration
breaking through £1bn during the year to £1.04bn at 30 June
2013, an increase of over 20% in the year.
7
Annual Report & Accounts 2013Brooks Macdonald Group plc Board committees’ report
The principal board committees are the Audit, Remuneration and
The members of the Risk and Compliance Committee are the
Risk and Compliance committees, all of which have specific terms of
non-executive directors Colin Harris (Chairman), Christopher Knight
reference which are periodically reviewed and approved by the
and Diane Seymour-Williams. The meetings of the Committee are
Board. These terms of reference are available on the Group website.
also attended by Christopher Macdonald, Simon Jackson, Simon
Audit Committee
The members of the Audit Committee are two of the non-executive
Wombwell, Nick Holmes, Nicholas Lawes, Andrew Banks (Head of
Risk and Compliance), Meera Varsani, who was appointed during
the year as Group Risk Manager, and other senior members of the
directors Christopher Knight (Chairman) and Colin Harris. The
Risk and Compliance department.
Board is satisfied that both members have recent and relevant
financial experience.
During the year ended 30 June 2013 the Committee met on six
occasions. Its principal responsibilities include overseeing the
The Committee met twice during the year ended 30 June 2013. As
current risk exposures of the Group, reviewing the risk assessment
well as being responsible for reviewing the external audit
processes, assessing material breaches of risk limits and the
arrangements with regard to compensation, scope and period of
adequacy of the proposed management action and reviewing
office, the Committee also considers the accounting policies of the
client complaints.
Group and the significant issues and judgements in connection with
regulatory financial reporting.
The risk management framework is broadly the same as for the
previous year. The principal risks assessed by management as having
The Committee reviews the audit control memorandum and the
a potential material impact on the Group are detailed below
audit engagement letters and has discussions with the auditor
together with the principal means in which these risks are mitigated.
without management present.
Risk and Compliance Committee
The Board believes the best way to manage risk across the Group is
The Group’s principal financial risks relate to credit risk, liquidity risk
and market risk and the measures and policies for the management of
to embed the risk management process throughout the
those risks are set out in note 28 to the consolidated financial
organisation and we endeavour to ensure that all identified risks are
statements. Further details on capital management processes can be
Financial risks
owned by specific committees who in turn report to the Risk and
found in note 29.
Compliance Committee.
8
Annual Report & Accounts 2013Brooks Macdonald Group plc Board committees’ report
Risk and Compliance Committee (continued)
Non–financial risks
The significant non-financial risks faced by the Group are as follows:
Reputational risk
Impact
The Group has a growing reputation as a provider of high quality
investment and wealth management services. There is a risk that
significant damage to reputation could lead to the loss of existing
clients as well as impacting on the ability to gain new clients, which
would lead to a fall in financial income. Such risk could arise from
events such as poor investment performance, poor client service or
regulatory censure.
Regulatory risk
Mitigation
This risk is minimised by ensuring the Group maintains a culture of
high ethical and professional standards whilst focussing on delivering
a first class service to all of our clients. The Group maintains an
independent Risk and Compliance department which ensures
conformity with the regulations of the Financial Conduct Authority,
as well as relevant statutes, in all of our dealings with our clients.
Impact
The sector in which the Group operates is heavily regulated and any
breach of regulations could lead to fines or disciplinary action
against the Group or its staff.
Mitigation
The Group monitors compliance with existing regulations and any
impending changes in regulations in order to assess the impact on
the business and to ensure that the Group has sufficient resources to
implement any necessary changes.
People risk
Impact
Our business is dependent on client relationships with our staff.
As the Group operates in a competitive market, there is a risk of
loss of existing clients due to poor performance or service, a
failure to respond to changes in the marketplace, or the loss of
key investment professionals.
Technology risk
Impact
A key part of the high quality service delivered to clients is
facilitated by a flexible and robust internal IT infrastructure.
Mitigation
To minimise this risk, the Group continues to invest in its employees
and monitors developments in the marketplace in which it operates
to ensure that the Group continues to offer a wide range of services.
Recruitment policies are designed to attract high quality staff and
the Group regularly reviews and benchmarks its remuneration
packages and contractual arrangements in order to retain and
motivate staff. The Learning & Development team, as part of
Human Resources, provides structured training plans in order to
ensure all staff continue to develop their careers within the Group.
Mitigation
New IT projects are regularly reviewed and appraised at Board
meetings in order to ensure that the Group continues to develop its
IT capabilities. As well as our regional offices providing back up
facilities for our London head office, we have a fully tested disaster
recovery plan which would facilitate remote working capabilities.
9
Annual Report & Accounts 2013Brooks Macdonald Group plc Board committees’ report
Risk and Compliance Committee (continued)
Operational risk
Impact
Operational risk is the risk that the Group suffers a loss of
business resulting from inadequate or failed internal processes,
people and systems or from the failure of outsourcing partners
or external suppliers.
Investment performance risk
Impact
There is a risk that portfolios will not meet their investment
objectives, which could result in the Group suffering loss of
business. There is a risk on the suitability of portfolios for clients
and where the suitability responsibility lies between a professional
introducing the client and the group company.
Mitigation
Management continuously monitors and reviews the internal
controls in place. Due diligence takes place prior to the
commencement of any outsourcing or supply, to maintain a robust
procurement process, good contract governance and regular
assessment of performance against pre-agreed service levels.
Mitigation
Portfolio performance, valuations and risk profiles are monitored by
management, allowing issues to be identified and mitigated as they
arise. The Group has in place BITA Monitor portfolio risk oversight
tools to assist with supervising portfolio management. The Group is in
the process of a re-papering exercise, writing to all clients in order to
agree the suitability of the individual portfolios.
Remuneration Committee
The Remuneration Committee comprises Diane Seymour-Williams (Chairman), Christopher Knight and Colin Harris. The Committee
determines the specific remuneration packages for each executive director and certain senior executives.
Remuneration policy
Brooks Macdonald recognises the importance of its employees to the success of the Group and consequently the remuneration policy is
designed to be market competitive in order to motivate, aid staff retention and recruitment and align employee behaviour with the
interests of shareholders. External third party data is used to validate rather than to benchmark the total reward.
The remuneration policy, which applies to directors and employees of the Group, is based on the following key principles:
• alignment to effective risk management;
• the need to provide market competitive total compensation;
• differentiation by merit and performance;
• an emphasis on variable, performance driven remuneration to bonus payments funded from retained profits;
• consistency with the FCA Remuneration Code;
• alignment with shareholders’ interests through significant and widespread equity ownership; and
• clarity, transparency and fairness of process.
The current remuneration package for an executive director has four main elements: basic salary and benefits, profit related bonus, long-term
equity based incentives and pension. The total reward is designed to include a balance of fixed and variable pay with a high level of deferral.
The elements of remuneration packages are summarised overleaf.
10
Annual Report & Accounts 2013Brooks Macdonald Group plc Board committees’ report
Remuneration Committee (continued)
Directors’ remuneration
Salary
or fee
Profit related
bonus -
cash
£’000
£’000
Profit related
bonus -
deferred
shares
£’000
Benefits
Total
2013
Total
2012
£’000
£’000
£’000
Phantom
Share
Scheme
2013
£’000
Phantom
Share
Scheme
2012
£’000
Chairman
C J Knight
Executives
C A J Macdonald
N I Holmes
S J Jackson
A W Shepherd
R H Spencer
S P Wombwell
J M Gumpel*
N H Lawes*
Non-executives
C R Harris
D Seymour-Williams
60
247
162
162
162
183
189
56
49
38
35
-
266
148
148
129
128
148
39
22
-
-
-
64
37
37
56
32
37
10
5
-
-
-
4
2
3
2
3
3
1
1
-
-
60
60
581
349
350
349
346
377
106
77
38
35
554
360
350
350
329
301
326
240
38
28
Total
1,343
1,028
278
19
2,668
2,936
-
-
-
-
-
-
-
-
-
-
-
-
-
270
541
541
541
270
-
270
541
-
-
2,974
*Resigned 19 October 2012
Basic salary and benefits
Pension
Pension
contributions contributions
2012
2013
£’000
£’000
-
-
24
24
24
-
-
-
7
-
-
79
-
32
24
32
24
24
24
24
24
-
-
208
Basic salary is determined by the Committee and any changes are implemented from 1 July each year or when an individual changes
position or responsibility. In deciding appropriate levels the Committee considers salaries throughout the Group and information on
comparable companies provided by advisers to the Committee. The views of the Chairman and Chief Executive are taken into consideration
when setting the salary of other directors.
There were no salary increases for the executive directors with effect from 1 July 2013 against an overall average increase for all employees of
3.6%. The non-executive directors’ salaries were reviewed and increased on average by 13.5% with the approval of the Board to reflect their
additional responsibilities and commitments as the Group grows. In addition, the Group provides a range of benefits including private medical,
life and permanent health insurance as well as interest free season ticket loans as disclosed in note 31 to the consolidated financial statements.
Profit related bonus
Awards to executive directors of profit related bonuses are made from a pool of profits of 15-25% of the Group pre-tax profit after the
payment of all bonuses to all other staff. The Committee determines the size of the pool based on the performance of the Group against a
number of key performance indicators including the growth in profits, the movement in funds under management, various internal client
service metrics and the performance against budget of each of the operating divisions. The total payment to executive directors, including
the amounts deferred into shares and the total payments to directors who only served for part of the financial year, represented 12.4%
(2012: 14.7%) of Group pre-tax profit.
11
Annual Report & Accounts 2013Brooks Macdonald Group plc
Board committees’ report
Remuneration Committee (continued)
Profit related bonus (continued)
Awards to individual directors are determined by the Remuneration Committee following recommendations by the Chief Executive taking
into account the performance of the director, the results of the business where the director has responsibility (where relevant) and market
data where this is available. The Remuneration Committee has decided that 20% of the bonus awarded will be made in shares deferred for
a period of three years under a Long Term Incentive Scheme (LTIS). In addition, directors may choose to defer a further amount of any
bonus awarded, up to a maximum of 20%, making 40% in total, into shares under the LTIS. The scheme has performance conditions
attached to the deferred award, requiring a minimum growth in the diluted earnings per share of the Group of 2% per annum above the
increase in the Retail Price Index (RPI) over the three year period.
Phantom Share Scheme
The Brooks Macdonald Group Phantom Share Scheme was adopted by the Board on 15 October 2008 with the intention of creating an
incentive plan for senior key directors and employees of the Group.
The scheme was a cash settled scheme based on the increase in the ordinary share price of the Company. The award could be exercised if
there was compound annual growth of at least 20% in earnings per share of the Company over a three year performance period from 1 July
2008 to 30 June 2011 and the amount was payable in October 2011.
In July 2011 the Board decided to amend the rules of the scheme, in agreement with the members, whereby the share price used in the
calculation of the cash payment on the exercise of the option would be fixed at £13.00 with an initial payment of £12.35 in October 2011
and a further payment of 65p in October 2012 in respect of each option granted.
The comparative amounts shown within the table on page 11 for directors’ remuneration for the year ended 30 June 2012 represent the
total amount which was paid in both instalments.
Equity incentives
Long Term Incentive Scheme (LTIS) and Employee Benefit Trust (EBT)
The Group established an EBT on 3 December 2010. The trust was established to acquire ordinary shares in the Company in connection
with the deferred share element of the profit share bonus under the LTIS as detailed above. The EBT is also used for other long term awards
to members of the Board and other long term awards to other senior employees.
The Remuneration Committee has made additional awards under the LTIS to certain executive directors and other senior employees. The
conditional awards are subject to the same performance and other conditions as those applying to the deferred profit related bonus shares.
Details of the awards granted to the directors of the Company under the terms of the LTIS during the year ended 30 June 2013, in respect
of the deferred element of the profit related bonus for the previous year together with any additional awards, are detailed below. The
market value of the Company’s shares at the date the awards were made, 25 October 2012, was £12.70.
12
Annual Report & Accounts 2013Brooks Macdonald Group plc Board committees’ report
Remuneration Committee (continued)
Equity incentives (continued)
C A J Macdonald
N I Holmes
S J Jackson
A W Shepherd
R H Spencer
S P Wombwell
J M Gumpel*
N H Lawes*
At
30 June
2012
4,112
6,536
-
2,095
9,886
-
2,715
3,596
-
2,095
9,804
-
2,405
3,105
-
11,847
-
1,862
2,941
1,474
1,634
Profit related bonus -
deferred shares
2013
Additional awards
under terms of LTIS
2013
-
-
5,354
-
-
3,149
-
-
2,992
-
-
2,992
-
-
2,677
-
2,205
-
-
-
-
-
-
-
-
-
1,575
-
-
1,575
-
-
1,575
-
-
-
-
1,575
-
-
-
-
At
30 June
2013*
4,112
6,536
5,354
2,095
9,886
4,724
2,715
3,595
4,567
2,095
9,804
4,567
2,405
3,105
2,677
11,847
3,780
1,862
2,941
1,474
1,634
Earliest
exercise
date
27.10.13
20.10.14
25.10.15
27.10.13
20.10.14
25.10.15
27.10.13
20.10.14
25.10.15
27.10.13
20.10.14
25.10.15
27.10.13
20.10.14
25.10.15
20.10.14
25.10.15
27.10.13
20.10.14
27.10.13
20.10.14
*Or at date of resignation
During the year none of the directors exercised any shares under the LTIS (2012: none). The LTIS options have a £nil exercise price and no expiry date.
Sharesave Scheme
All directors are entitled to take part in the HMRC-approved Brooks Macdonald Group Sharesave Scheme on the same terms as all other
employees. Option grants were made on 1 June 2011 and 1 June 2013 for new three year fixed-term contracts and the details of the grants
to directors are shown below:
C A J Macdonald
N I Holmes
S J Jackson
A W Shepherd
R H Spencer
S P Wombwell
J M Gumpel*
N H Lawes*
*Or at date of resignation
At 30 June
2012
Awarded
in the year
Exercised
in the year
At 30 June
2013*
985
985
985
-
985
985
985
985
-
-
-
767
-
-
-
-
-
-
-
-
-
-
-
-
985
985
985
767
985
985
985
985
Exercise
price
916p
916p
916p
1,172p
916p
916p
916p
916p
Earliest
exercise date
01.06.14
01.06.14
01.06.14
01.06.16
01.06.14
01.06.14
01.06.14
01.06.14
Expiry
date
30.11.14
30.11.14
30.11.14
30.11.16
30.11.14
30.11.14
30.11.14
30.11.14
Given the nature of the scheme as a three year fixed-term contract, there were no options exercised and there were no realised gains during
the year (2012: £nil).
13
Annual Report & Accounts 2013Brooks Macdonald Group plc
Board committees’ report
Remuneration Committee (continued)
Equity incentives (continued)
Enterprise Management Incentive Scheme (EMI)
The Brooks Macdonald Group EMI Scheme was adopted by the shareholders of the Company on 11 February 2005.
Options granted can be exercised if there has been an increase in the diluted earnings per share of the Company of at least 2% per annum
more than the increase in the RPI over the period of three financial years starting with the financial year in which the date of grant falls and
ending with the financial year in which the third anniversary of the date of grant falls.
Options may not normally be exercised before the third anniversary of the date of the grant and expire on the tenth anniversary of the grant.
The details of the grants under the scheme to directors are shown below:
C A J Macdonald
N I Holmes
S J Jackson
R H Spencer
J M Gumpel*
N H Lawes*
*Or at date of resignation
At 30 June
2012
Awarded
in the year
17,500
15,000
4,500
6,000
17,000
12,500
12,500
10,000
12,500
12,500
-
-
-
-
-
-
-
-
-
-
Exercised
in the year
(17,500)
-
-
-
-
-
(12,500)
-
-
-
At 30 June
2013*
-
15,000
4,500
6,000
17,000
12,500
-
10,000
12,500
12,500
Exercise
price
290.5p
155.5p
215.0p
290.5p
215.0p
290.5p
290.5p
155.5p
290.5p
290.5p
Earliest
exercise date
Expiry
date
17.10.10
01.11.08
18.10.09
17.10.10
18.10.09
17.10.10
17.10.10
01.11.08
17.10.10
17.10.10
31.10.17
01.11.15
17.10.16
31.10.17
17.10.16
31.10.17
31.10.17
01.11.15
31.10.17
31.10.17
The aggregate gain during the year from the exercise of the above EMI share options was £301,000 (2012: £326,000). The Company’s
share price at the exercise date was £12.905 (2012: range of £12.33 to £13.25).
A W Shepherd held no EMI share options at either the beginning or the end of the year.
C R Harris, C J Knight, S P Wombwell and D Seymour-Williams held no EMI share options or Phantom Share Scheme awards at either the
beginning or the end of the year or at the date of their appointment.
Under the rules of the scheme, C R Harris, C J Knight and D Seymour-Williams were not eligible to participate in the Sharesave Scheme and
therefore held no options at either the beginning or the end of the year or at the date of their appointment.
The average share price during the year was £13.27 (2012: £11.99). Details of the share option schemes are provided in note 19 and note
24 to the consolidated financial statements. The market price at the end of the year was £14.35 (2012: £11.50) and the highest and lowest
price during the year was £14.96 (2012: £13.65) and £11.35 (2012: £9.28) respectively.
Company Share Option Plan (CSOP)
Following discussions regarding remuneration structures and incentives schemes for senior employees and directors the Company has
decided to set up a CSOP, subject to approval from HMRC and by shareholders at the forthcoming Annual General Meeting.
14
Annual Report & Accounts 2013Brooks Macdonald Group plc
Board committees’ report
Remuneration Committee (continued)
Equity incentives (continued)
Company Share Option Plan (CSOP) (continued)
The proposed scheme is a discretionary scheme whereby employees or directors are granted an option to purchase the Company’s shares in
the future at a price set on the date of the grant. The maximum award under the terms of the scheme is a total market value of £30,000.
There will be performance conditions attaching to the scheme similar to those in place for the EMI Scheme whereby there must be an
increase in the diluted earnings per share of the Company of 2% more than the increase in the RPI over the three years starting with the
financial year in which the option is granted.
Subject to both of the above approvals for the scheme the following grants have been made to the directors as detailed below. The number
of shares and the option price will be determined based on the share price at the award date which will be in October 2013.
N I Holmes
S J Jackson
A W Shepherd
S P Wombwell
Total
At 30 June
2012
Awarded
in the year
Exercised
in the year
At 30 June
2013
-
-
-
-
-
30,000
30,000
30,000
30,000
120,000
-
-
-
-
-
30,000
30,000
30,000
30,000
120,000
Dilution
Not more than 15% of the issued ordinary share capital of the Company (adjusted for bonus and rights issues) will be issued for all EMI and
share incentive schemes operated by the Company in any ten year rolling period. The Company satisfies the various equity based schemes
it operates using a combination of market purchased, newly issued and treasury shares.
Pension arrangements
Following a satisfactory completion of a probationary period all employees are offered the opportunity to become members of a group
defined contribution plan established with Legal & General. In the case of certain directors and senior employees, the Group contributes to
their personal pension arrangements.
Service contracts for executive directors
The Company has service contracts with its executive directors with a notice period of 12 months and it is company policy that such
contracts should not normally contain periods of more than 12 months.
External appointments
Executive directors are encouraged to take on external appointments as non-executive directors but are discouraged from taking more than
one other position given the time commitment. Prior approval of any new appointment is required by the Board with any fees in excess of
£10,000 per annum paid to the Company.
Advisers to the Remuneration Committee
During the year the Remuneration Committee have employed professional advisers to assist with the implications of the FCA Remuneration
Code and to provide industry specific comparative information regarding compensation and pay packages.
Non-executive directors
Non-executive directors do not have contracts of employment but as with other directors are now required to stand for re-election. The
executive directors are responsible for determining the fees of the non-executive directors who do not receive pension or other benefits from
the Group and do not participate in any Group incentive schemes.
15
Annual Report & Accounts 2013Brooks Macdonald Group plc
Report of the directors
The directors present herewith their annual report, together with
Directors and their interests
the audited financial statements of the Group for the year ended
Those who served as directors of the Company at any time during
30 June 2013.
the year and their beneficial interests in the share capital of the
Company at the beginning and end of the year were as follows:
Principal activities and business review
A review of the Group’s activities and future developments,
including the financial performance during the year, key
performance indicators and a description of the principal risks and
uncertainties facing the group, is included within the group
overview, the Chairman’s statement, the Chief Executive’s review,
the business review and the board committees’ report, which form
part of the report of the directors.
Results and dividends
The profit before taxation for the year ended 30 June 2013 was
£10,398,000 (2012: £8,520,000) and the profit after taxation was
£8,030,000 (2012: £6,256,000).
The Company paid an interim dividend during the year of 6.5p
(2012: 6.0p). The directors recommend a final dividend of 16.0p
N I Holmes
S J Jackson
A W Shepherd
R H Spencer
S P Wombwell
J M Gumpel*
N H Lawes*
Non-executives
C R Harris
Chairman
C J Knight
Executives
At 30 June 2013*
Number of shares
At 30 June 2012
Number of shares
71,585
71,585
C A J Macdonald
827,889
808,103
40,510
56,799
51,165
773,353
88,204
640,174
37,057
6,086
5,000
47,624
55,657
49,261
758,853
88,204
640,174
37,057
4,944
4,000
per share (2012: 12.5p). This results in total dividends for the year
of 22.5p (2012: 18.5p) per ordinary share. These dividends amount
D Seymour-Williams
* Or at date of resignation
to a total distribution to shareholders of £2,938,000 (2012:
Details of share options held by the directors at the beginning and
the end of the year can be found within the Remuneration
Committee report on pages 10 to 15.
Retirement and re-appointment of directors
Christopher Knight, Christopher Macdonald and Colin Harris will
retire by rotation at the Annual General Meeting and are eligible to
nominate themselves for re-election.
Directors’ indemnities
The Company has made qualifying third party indemnity provisions
for the benefit of its directors and these remain in force at the date
of the report.
£2,007,000).
16
Annual Report & Accounts 2013Brooks Macdonald Group plc
Report of the directors
Employment policies
Substantial shareholdings
Employees are encouraged to identify and become involved with
As at 31 August 2013, the Company had received notification of
the financial performance of the Group and are rewarded by
substantial interests in its shares of 3% or more as follows:
involvement in profit sharing arrangements. Employees also have
the opportunity to participate in the Group’s share incentive plans.
The Group considers that communication with our employees is
Liontrust Asset Management
very important and indeed vital for the success of the Group.
Artemis Investment Management
Employees are informed of important issues by electronic mail
C A J Macdonald
and seminars.
The Group considers that regular training is extremely important.
This is achieved by the provision of in-house and external training
courses and the training team provide a number of continuing
professional development activities. All staff are encouraged to
report their specific training needs to their line managers.
The Group operates a graduate training scheme in respect of its
Hargreave Hale
Standard Life Investments
R H Spencer
Kames Capital
J M Gumpel
Spearpoint Holdings
Invesco Asset Management
Number
of shares
2,017,447
1,257,331
827,889
784,942
780,640
773,353
683,030
642,460
428,227
412,414
Percentage
holding
15.11%
9.42%
6.20%
5.88%
5.85%
5.79%
5.12%
4.81%
3.21%
3.09%
trainee investment fund managers and financial planning consultants.
Political and charitable donations
The group is an equal opportunities employer. All job applicants and
employees are treated fairly and on merit, regardless of their race,
No contributions were made for political purposes during the year
(2012: £nil).
gender, marital status, age, disability, religious belief or sexual
During the year, the group made contributions of £20,000 (2012:
orientation. Applications from disabled persons are always
£15,000) to the Brooks Macdonald Foundation, which is
considered and where employees become disabled, efforts are made
administered by the Charities Aid Foundation (CAF). Staff are
to continue their employment within the Group by providing
encouraged to donate to charity in a tax efficient manner through
training and the supply of equipment if necessary so that they are
the Give As You Earn (GAYE) payroll giving scheme.
able to continue their role.
The objective of the foundation is to make charitable donations and
All staff have the option to take an interest-free annual season ticket
support community activities, as suggested by employees, as well as
loan. To retain the Group’s employees and to improve staff morale,
to support employees’ participation in a wide range of activities
the Group recognises the need for employees to have an
involving both local and international charities.
appropriate work-life balance. Long-serving employees are entitled
to additional annual leave dependent on their length of service.
Payment policy
Employees who have been with the Group for more than one year
are encouraged to join the Group’s pension scheme.
The Group does not apply a specific payment code. The payment of
suppliers’ invoices is made in accordance with the terms agreed
with individual suppliers subject to the resolution of any
disagreement regarding the supply. In the majority of cases, the
terms agreed with suppliers are for payment within 30 days of their
invoice date. At the year end, trade payables for the Group
represented, on average, 37 days (2012: 39 days) of credit based on
the Group’s annual purchases.
17
Annual Report & Accounts 2013Brooks Macdonald Group plc
Report of the directors
Events since the end of the year
Details of events after the reporting date are set out in note 32 to
the consolidated financial statements.
Independent auditors
The Audit Committee has recommended to the Board of Directors
that the incumbent auditor, PricewaterhouseCoopers LLP, be
reappointed. PricewaterhouseCoopers LLP have expressed their
willingness to continue in office as auditor and a resolution to
reappoint them as auditor will be proposed at the forthcoming
Annual General Meeting.
Each of the directors in office at the date of signing this report
confirms that, so far as they are aware, there is no relevant audit
information of which the Company’s auditor is unaware. Each
director has taken all reasonable steps that he or she ought to have
taken as a director in order to make him or herself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
Annual General Meeting
The 2013 Annual General Meeting will be held on 17 October 2013
at 111 Park Street, London, W1K 7JL. The notice of the meeting is
on pages 63 to 69 with details of the resolutions proposed and
explanatory notes.
On behalf of the Board of Directors,
S J Jackson
Finance Director
10 September 2013
18
Annual Report & Accounts 2013Brooks Macdonald Group plc
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and
The directors are responsible for keeping adequate accounting
the financial statements in accordance with applicable law and
records that are sufficient to show and explain the Company’s
regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared
the group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union, and the parent company financial statements in accordance
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
with United Kingdom Generally Accepted Accounting Practice
The directors are responsible for the maintenance and integrity of
(United Kingdom Accounting Standards and applicable law). Under
the Group’s website. Legislation in the United Kingdom governing
company law the directors must not approve the financial
the preparation and dissemination of financial statements may differ
statements unless they are satisfied that they give a true and fair
from legislation in other jurisdictions.
view of the state of affairs of the Group and the Company and of
the profit or loss of the Company and Group for that period. In
preparing these financial statements, the directors are required to:
•
select suitable accounting policies and then apply them
consistently;
•
make judgements and accounting estimates that are reasonable
and prudent;
•
state whether IFRSs as adopted by the European Union and
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in
the group and parent company financial statements
respectively; and
•
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
19
Annual Report & Accounts 2013Brooks Macdonald Group plc Independent auditor’s report
to the members of Brooks Macdonald Group plc
We have audited the group financial statements of Brooks
Opinion on financial statements
Macdonald Group plc for the year ended 30 June 2013 which
In our opinion the group financial statements:
comprise the consolidated statement of comprehensive income, the
consolidated statement of financial position, the consolidated
statement of changes in equity, the consolidated statement of cash
flows and the related notes. The financial reporting framework that
•
give a true and fair view of the state of the Group’s affairs as at
30 June 2013 and of its profit and cash flows for the year then
ended;
has been applied in their preparation is applicable law and
•
have been properly prepared in accordance with IFRSs as
International Financial Reporting Standards (IFRSs) as adopted by
adopted by the European Union; and
the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities
set out on page 19, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
•
have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors
for the financial year for which the group financial statements are
prepared is consistent with the group financial statements.
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
Ethical Standards for Auditors.
where the Companies Act 2006 requires us to report to you if, in
This report, including the opinions, has been prepared for and only
for the Company’s members as a body in accordance with Chapter
our opinion:
•
certain disclosures of directors’ remuneration specified by law
3 of Part 16 of the Companies Act 2006 and for no other purpose.
are not made; or
We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
•
we have not received all the information and explanations we
require for our audit.
Other matter
We have reported separately on the parent company financial
statements of Brooks Macdonald Group plc for the year ended
30 June 2013.
Marcus Hine (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
estimates made by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial and
London
non-financial information in the Annual Report & Accounts to
10 September 2013
identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
20
Annual Report & Accounts 2013Brooks Macdonald Group plc Consolidated statement of comprehensive income
for the year ended 30 June 2013
Revenue
Administrative expenses
Operating profit
Analysed as:
Operating profit before exceptional items
Costs of acquiring subsidiary companies
Operating profit after exceptional items
Finance income
Finance cost
Profit before tax
Analysed as:
Profit before tax and exceptional items
Costs of acquiring subsidiary companies
Profit before tax
Taxation
Profit for the year attributable to owners of the parent
Other comprehensive income:
Revaluation of available for sale financial assets
Total comprehensive income for the year net of tax
attributable to owners of the parent
Earnings per share*
Basic
Diluted
Note
4
5
5
7
7
5
8
13
25
25
2013
£’000
63,159
(52,661)
10,498
11,545
(1,047)
10,498
179
(279)
10,398
11,445
(1,047)
10,398
(2,368)
8,030
(9)
8,021
65.76p
65.16p
* Comparative amounts have been restated to reflect the impact of new shares issued
The accompanying notes on pages 25 to 55 form an integral part of the consolidated financial statements.
2012
£’000
53,288
(44,886)
8,402
8,402
-
8,402
166
(48)
8,520
8,520
-
8,520
(2,264)
6,256
27
6,283
57.43p
56.58p
21
Annual Report & Accounts 2013Brooks Macdonald Group plc
Consolidated statement of financial position
as at 30 June 2013
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Available for sale financial assets
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Deferred consideration
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Total current liabilities
Net assets
Equity
Share capital
Share premium account
Other reserves
Retained earnings
Total equity
Note
11
12
13
14
15
16
17
14
18
19
20
22
22
23
23
2013
£’000
44,624
2,421
1,582
858
49,485
17,773
18,440
36,213
85,698
(5,804)
(4,498)
(125)
(10,427)
(13,779)
(1,149)
(2,783)
(17,711)
57,560
133
31,868
3,952
21,607
57,560
2012
£’000
10,432
2,367
1,657
668
15,124
12,780
13,489
26,269
41,393
(959)
(693)
(418)
(2,070)
(13,845)
(79)
(1,689)
(15,613)
23,710
109
4,423
2,988
16,190
23,710
The consolidated financial statements were approved by the Board of Directors and authorised for issue on 10 September 2013, signed on
their behalf by:
C A J Macdonald
Chief Executive
S J Jackson
Finance Director
Company Registration Number 4402058.
The accompanying notes on pages 25 to 55 form an integral part of the consolidated financial statements.
22
Annual Report & Accounts 2013Brooks Macdonald Group plc
Consolidated statement of changes in equity
for the year ended 30 June 2013
Balance at 1 July 2011
108
4,125
2,563
12,255
19,051
Share capital
£’000
Share premium
account
£’000
Other reserves
£’000
Retained earnings
£’000
Total
£’000
Comprehensive income
Profit for the year
Other comprehensive income:
Revaluation of available for sale financial asset
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share-based payments transfer
Purchase of own shares by employee benefit trust
Deferred tax on share options
Dividends paid (note 10)
Total transactions with owners
-
-
-
1
-
-
-
-
-
1
Balance at 30 June 2012
109
Comprehensive income
Profit for the year
Other comprehensive income:
Revaluation of available for sale financial asset
Total comprehensive income
-
-
-
-
-
-
298
-
-
-
-
-
298
4,423
-
-
-
Transactions with owners
Issue of ordinary shares
Share-based payments
Share-based payments transfer
Purchase of own shares by employee benefit trust
Deferred tax on share options
Dividends paid (note 10)
Total transactions with owners
Balance at 30 June 2013
24
27,445
-
-
-
-
-
24
133
-
-
-
-
-
27,445
31,868
-
27
27
-
702
(188)
-
(116)
-
398
2,988
-
(9)
(9)
-
1,111
(350)
-
212
-
973
3,952
The accompanying notes on pages 25 to 55 form an integral part of the consolidated financial statements.
6,256
6,256
-
6,256
27
6,283
-
-
188
(785)
-
(1,724)
(2,321)
16,190
299
702
-
(785)
(116)
(1,724)
(1,624)
23,710
8,030
8,030
-
8,030
(9)
8,021
-
-
350
(779)
-
(2,184)
(2,613)
21,607
27,469
1,111
-
(779)
212
(2,184)
25,829
57,560
23
Annual Report & Accounts 2013Brooks Macdonald Group plc
Consolidated statement of cash flows
for the year ended 30 June 2013
Note
21
Cash flows from operating activities
Cash generated from operations
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of available for sale financial assets
Acquisition of subsidiary companies, net of cash acquired
9
Interest received
Proceeds of sale of property, plant and equipment
Proceeds of sale of intangible assets
Proceeds of sale of available for sale financial assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of shares
Purchase of own shares by employee benefit trust
Dividends paid to shareholders
Net cash generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
16
2013
£’000
9,518
(1,661)
7,857
(863)
(617)
-
(20,757)
179
-
32
63
2012
£’000
3,571
(1,460)
2,111
(1,215)
(2,113)
(63)
-
166
6
-
-
(21,963)
(3,219)
22,020
(779)
(2,184)
19,057
4,951
13,489
18,440
298
(785)
(1,724)
(2,211)
(3,319)
16,808
13,489
The accompanying notes on pages 25 to 55 form an integral part of the consolidated financial statements.
24
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
1. General information
Brooks Macdonald Group plc (‘the Company’) is the parent company of a group of companies (‘the Group’), which offers a range of investment
management services and related professional advice to private high net worth individuals, charities, and trusts. The Group also provides financial
planning as well as offshore fund management and administration services and acts as fund manager to regulated OEICs, providing specialist funds
in the property and structured return sectors and managing property assets on behalf of these funds and other clients.
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 111 Park Street, Mayfair, London, W1K 7JL.
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 have been prepared in accordance with International Financial Reporting Standards as adopted
by the European Union, IFRIC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The financial
statements have been prepared on the historical cost basis, except for the revaluation of available for sale financial assets 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.
(b) Basis of consolidation
The Group’s financial statements comprise a consolidation of the financial statements of the parent company (Brooks Macdonald Group plc)
and its subsidiaries. The underlying financial statements of the subsidiaries are prepared for the same reporting year as the parent company,
using consistent accounting policies. Subsidiaries are all entities controlled by the Company, deemed to exist where the Company has the
power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the
subsidiaries are included from the date on which control is transferred to the Group to the date that control ceases.
All intercompany transactions and balances between group companies are eliminated on consolidation.
(c) Changes in accounting policies
The Group’s accounting policies applied to these financial statements are consistent with those disclosed within the financial statements for the
year ended 30 June 2012, except as described below.
New standards, amendments and interpretations affecting the reported results of the Group
In the current year no new standards, amendments or interpretations adopted by the Group have had a material effect on the amounts
reported in these financial statements.
New standards, amendments and interpretations not affecting the reported results of the Group
The following standards, amendments and interpretations have been adopted in the current period. Their adoption has not had a significant
impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements:
Amendment to IAS 1 ‘Financial statement presentation regarding other comprehensive income’ (effective for annual periods beginning on or
after 1 July 2012).
25
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(c) Changes in accounting policies (continued)
New standards, amendments and interpretations not yet effective
A number of new standards, amendments and interpretations have been issued, which are effective for annual and interim periods beginning
after 1 July 2012 and have therefore not been applied in preparing these financial statements:
Standard, Amendment or Interpretation
Amendment to IFRS 1 ‘First-time Adoption of IFRS’
Amendment to IFRS 7 ‘Financial Instruments: Disclosures’
Amendment to IAS 19 ‘Employee Benefits’
IFRS 10 ‘Consolidated Financial Statements’
IFRS 11 ‘Joint Arrangements’
IFRS 12 ‘Disclosures of Interests in Other Entities’
IFRS 13 ‘Fair Value Measurement’
IAS 27 (revised 2011) ‘Separate Financial Statements’
IAS 28 (revised 2011) ‘Associates and Joint Ventures’
Amendment to IAS 32 ‘Financial instruments: Presentation’
IFRS 9 ‘Financial Instruments: Classification and Measurement’
Effective date
1 January 2013
1 January 2013
1 January 2013
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 January 2014
1 January 2014
1 January 2014
1 January 2015
These changes are currently being assessed but none are expected to have a significant impact on the Group’s future financial statements.
(d) Critical accounting estimates and 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, management believes that the accounting policies where judgement is necessarily applied are those that relate to the
measurement of intangible assets, deferred consideration, the estimation of the fair value of share-based payments and client compensation
provisions.
The underlying assumptions made are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period 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 new teams of fund managers as described in note 9 and note 11 and in assessing the fair value
of those assets the Group has estimated their finite life based on information about existing client relationships. Contracts acquired with fund
managers and acquired client relationship contracts are amortised on a straight line basis over 5 to 20 years.
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 cash generating units are determined based on value in use calculations, which require the use
of estimates (note 11).
26
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(d) Critical accounting estimates and judgements (continued)
Deferred consideration
As described in note 17, the Group has a deferred consideration balance in respect of the acquisition of client relationship contracts from Clarke
Willmott LLP in October 2011, the acquisition of JPAM Limited in July 2012 and the acquisition of Brooks Macdonald Asset Management
(International) Limited and Brooks Macdonald Retirement Services (International) Limited in November 2012. Deferred consideration is
recognised at its fair value, being an estimate of the amount that will ultimately be payable in future periods. This has been calculated allowing
for estimated growth in the acquired funds, discounted by the cost of capital. The Group considers that potential changes to these assumptions
would not result in a material change in the fair value of the deferred consideration.
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 (notes 19 and
24). 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.
Provisions
In the ordinary course of business, the Group may receive complaints from clients in relation to the services provided. Complaints are assessed
on a case-by-case basis and provisions are made where it is judged to be likely that compensation will be paid.
(e) Exceptional items
Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further
understanding of the underlying financial performance of the Group. These include material items of income or expense that are shown
separately due to the significance of their nature or amount.
(f) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the aggregate
amount of the consideration transferred at the acquisition date, irrespective of the extent of any minority interest. Acquisition costs are charged
to the consolidated statement of comprehensive income in the year of acquisition.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. If the business combination is
achieved in stages, the fair value of the Group’s previously held equity interest is re-measured at the acquisition date and the difference is
credited or charged to the consolidated statement of comprehensive income. Identifiable assets and liabilities assumed on acquisition are
recognised in the consolidated statement of financial position at their fair value at the date of acquisition.
Any contingent consideration to be paid by the Group to the vendor is recognised at its fair value at the acquisition date. Subsequent changes
to the fair value of contingent consideration are recognised in accordance with IAS 39 in the consolidated statement of comprehensive income.
Goodwill is initially measured at cost, being the excess of the consideration transferred over the acquired company’s net identifiable assets
acquired and liabilities assumed. If the consideration is lower than the fair value of the net assets acquired, the difference is recognised as a gain
on a bargain purchase in the consolidated statement of comprehensive income.
27
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(f) Business combinations (continued)
Impairment
Goodwill and other intangible assets with an indefinite life are tested annually for impairment. For the purposes of impairment testing, goodwill
acquired in a business combination is allocated to each of the Group’s cash generating units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquisition are assigned to those units. The carrying amount of each cash generating unit
is compared to its recoverable amount, which is determined using a discounted future cash flow model.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash
generating unit retained.
(g) Fees, commissions and interest
Portfolio management and other advisory and custody services are billed in arrears but are recognised over the period the service is provided.
Fees are calculated on the basis of a percentage of the value of the portfolio over the period. Dealing charges are levied at the time a deal is
placed for a client. Fees are only recognised when the fee amount can be estimated reliably and it is probable that the fee will be receivable.
Amounts are shown net of rebates paid to significant investors.
Financial consulting fees are charged to clients using an hourly rate or by a fixed fee arrangement and are recognised over the period the
service is provided. Commissions receivable and payable are accounted for in the period in which they are earned.
Where amounts due are conditional on the successful completion of fund raising for investment vehicles, revenue is recognised where, in the
opinion of the directors, there is reasonable certainty that sufficient funds have been raised to enable the successful operation of that investment
vehicle. Amounts due on an annual basis for the management of third party investment vehicles are recognised on a time apportioned basis.
Interest receivable is recognised on an accruals basis.
(h) Cash and cash equivalents
Cash comprises of cash in hand and call deposits held with banks. Cash equivalents comprise of short-term, highly liquid investments, with a
maturity of less than three months from the date of acquisition.
(i) Share-based payments
Equity settled schemes
The Group engages in equity settled share-based payment transactions in respect of services received from certain employees. The fair value of
the services received is measured by reference to the fair value of the shares or share options on the grant date. This cost is then recognised in
the consolidated statement of comprehensive income over the vesting period, with a corresponding credit to equity.
The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current
share price, the risk free rate of interest, the expected volatility of the Company’s share price over the life of the award and other relevant factors.
Cash settled schemes
The Group engages in cash settled share-based payment transactions in respect of services received from certain employees. On the grant date,
the liability is measured at its fair value. The liability is subsequently re-measured at the end of each reporting period and on the date of
settlement, with any changes in fair value recognised in the consolidated statement of comprehensive income. The cost of the services received
from the employee in respect of this scheme is recognised in the consolidated statement of comprehensive income with a corresponding credit
to accruals.
28
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(j) Segmental reporting
The Group determines and presents operating segments based on the information that is provided internally to the Group Board of Directors,
which is the Group’s chief operating decision maker.
(k) Fiduciary activities
The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals,
trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as
they are not assets of the Group.
The Group holds money on behalf of some clients in accordance with the client money rules of the Financial Conduct Authority. Such monies
and the corresponding liability to clients are not included within the consolidated statement of financial position as the Group is not beneficially
entitled thereto.
(l) Property, plant and equipment
All property, plant and equipment is included in the consolidated statement of financial position at historical cost less accumulated depreciation
and impairment. Costs include the original purchase cost of the asset and the costs attributable to bringing the asset into a working condition
for its intended use.
Provision is made for depreciation to write off the cost less estimated residual value of each asset, using a straight line method, over its expected
useful life as follows:
Fixtures and fittings
Equipment
Leasehold improvements
Motor vehicles
3 to 6.67 years
5 years
over the term of the lease
4 years
The assets’ residual values and useful economic lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and
losses arising on disposal are determined by comparing the proceeds with the carrying amount. These are included in the consolidated
statement of comprehensive income.
(m) Intangible assets
Amortisation of intangible assets is charged to administrative expenses in the consolidated statement of comprehensive income on a straight line
basis over the estimated useful lives of the assets (4 to 15 years).
Acquired client relationship contracts and contracts acquired with fund managers
Intangible assets are recognised where client relationship contracts are either separately acquired or acquired with investment managers. These
are initially recognised at cost and are subsequently amortised on a straight line basis over their estimated useful economic life. Separately
acquired client relationship contracts are amortised over 15 years and those acquired with investment managers over 5 years. Both types of
intangible asset are reviewed annually to determine whether an indicator of impairment exists.
Computer software
Computer software costs are amortised on a straight line basis over an estimated useful life of four years.
29
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(m) Intangible assets (continued)
Goodwill
Goodwill arising as part of a business combination is initially measured at cost, being the excess of the fair value of the consideration transferred
over the Group’s interest in the net fair value of the separately identifiable assets, liabilities and contingent liabilities of the subsidiary at the date
of acquisition. In accordance with IFRS 3 Business Combinations, goodwill is not amortised but is reviewed annually for impairment and is
therefore stated at cost less any provision for impairment of value. Any impairment is recognised immediately in the consolidated statement of
comprehensive income and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold. On acquisition, any goodwill acquired is allocated to cash generating units for the purposes of impairment testing. If
the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the
consolidated statement of comprehensive income.
(n) Financial assets
The Group classifies financial assets in the following categories: available for sale; held to maturity; and loans and receivables. The classification
is determined by management on initial recognition of the financial asset, which depends on the purpose for which it was acquired.
Loans and receivables
Loans and receivables are non-derivative assets with fixed or determinable payments that are not quoted in an active market. They are included
in current assets except where they have maturities of more than 12 months after the end of the reporting period, in which case they are
classified as non-current assets. The Group’s loans and receivables are recognised within ‘trade and other receivables’.
Available for sale
Available for sale financial assets are non-derivatives that are either specifically designated in this category or are not classified in any of the
other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12
months of the end of the reporting period. Available for sale financial assets are initially recognised at fair value and are subsequently revalued
based on the current bid prices of the asset as quoted in active markets.
Held-to-maturity
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinate payments and fixed maturities that the Group’s
management has the positive intention and ability to hold to maturity. If the Group were to sell anything other than an insignificant amount of
held-to-maturity financial assets, the whole category would be tainted and reclassified as available for sale. Held-to-maturity financial assets are
measured at amortised cost.
(o) Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, where it is probable that it will result in an
outflow of economic benefits and can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the obligation.
Client compensation
Complaints are assessed on a case-by-case basis and provisions for compensation are made where it is judged necessary.
30
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(p) Foreign currency translation
The Group’s functional and presentational currency is the Pound Sterling. Foreign currency transactions are translated using the exchange rate
prevailing at the transaction date. At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the prevailing rates on that date. Foreign exchange gains and losses resulting from settlement of such transactions and from the
translation of period-end monetary assets and liabilities are recognised in the consolidated statement of comprehensive income.
(q) Retirement benefit costs
Contributions in respect of the Group’s defined contribution pension scheme are charged to the consolidated statement of comprehensive
income as they fall due.
(r) Taxation
Tax on the profit for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the Group’s financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realised or the liability settled based on tax rates (and laws) that have been enacted or substantially
enacted at the reporting date.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
(s) Trade receivables
Trade receivables are initially recognised and subsequently measured at the original invoice amount less an allowance for any amounts that are
expected to be uncollectable. Doubtful debts are provided for when the collection of the full amount is no longer probable, whilst bad debts
are immediately written off when identified.
(t) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. These are
classified as current liabilities if payment is due within 12 months or less (or in the normal operating cycle of the business if longer). Otherwise,
they are presented as non-current liabilities in the consolidated statement of financial position.
Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.
(u) Operating lease payments
Rent payments due under operating leases are charged to the consolidated statement of comprehensive income on a straight line basis over the
term of the lease. Where leases include lease incentives such as rent-free periods, the benefit of these incentives is recognised over the lease
term as a reduction in the rental expense.
31
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
2. Principal accounting policies (continued)
(v) Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on the consolidated
statement of financial position at fair value when the Group becomes a party to the contractual provisions of the instrument.
(w) Carried interest receivable
The Group earns a performance fee, carried interest receivable, on funds it manages on behalf of its investors. Carried interest receivable is
recognised where, at the reporting date, the performance criteria have been met based on the valuations of the funds. Carried interest that has
been earned, but is not yet due for payment, is discounted to its present value. This is included within current liabilities in the consolidated
statement of financial position.
(x) Employee Benefit Trust (EBT)
The Company provides finance to an EBT to purchase the Company’s shares on the open market in order to meet its obligation to provide
shares when an employee exercises certain options or awards made under the Group’s share-based payment schemes. The administration and
finance costs connected with the EBT are charged to the consolidated statement of comprehensive income. The cost of the shares held by the
EBT is deducted from equity. A transfer is made between other reserves and retained earnings over the vesting periods of the related share
options or awards to reflect the ultimate proceeds receivable from employees on exercise. The trustees have waived their rights to receive
dividends on the shares.
The EBT is considered to be a Special Purpose Entity (SPE) where the substance of the relationship between the Group and the SPE indicates
that the SPE is controlled by the Group. In substance, the activities of the trust are being conducted on behalf of the Group according to its
specific business needs, in order to obtain benefits from its operation. On this basis, the assets held by the trust are consolidated into the
Group’s financial statements.
(y) Share capital
Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
Where the parent company purchases the Company’s equity share capital (treasury shares) the consideration paid, including any directly
incremental costs (ie net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or
reissued. Where such ordinary shares are subsequently reissued, any consideration received (net of any directly attributable incremental
transaction costs and the related income tax effects) is included within equity attributable to the Company’s equity holders.
(z) Dividend distribution
The dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividend is approved by the Company’s shareholders.
3. Segmental information
For management purposes the Group’s activities are organised into three operating divisions: investment management (including the results of
Brooks Macdonald (International) Limited, financial planning (including the results of Brooks Macdonald Retirement Services (International)
Limited) and fund and property management. The Group’s other activity, offering nominee and custody services to clients, is included within
investment management. These divisions are the basis on which the Group reports its primary segmental information.
32
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
3. Segmental information (continued)
Revenues and expenses are allocated to the business segment that originated the transaction. Revenues and expenses that are not directly originated
by a particular business segment are reported as unallocated. Sales between segments are carried out at arm’s length. Centrally incurred expenses
are allocated to business segments on an appropriate pro-rata basis. Segmental assets and liabilities comprise operating assets and liabilities, being
the majority of the balance sheet.
In accordance with IFRS 8 ‘Operating Segments’, disclosures are required to reflect the information which the Board uses internally for evaluating the
performance of its operating segments and allocating resources to those segments. The information presented in this note follows the presentation
for internal reporting to the Group Board of Directors.
Year ended 30 June 2013
Total segment revenues
Inter segment revenues
External revenues
Segment result
Unallocated items
Profit before tax
Taxation
Profit for the year
Year ended 30 June 2012
Total segment revenues
Inter segment revenues
External revenues
Segment result
Unallocated items
Profit before tax
Taxation
Profit for the year
(a) Geographic analysis
Investment
management
£’000
55,598
-
55,598
14,764
Investment
management
£’000
47,922
-
47,922
10,255
Financial
planning
£’000
4,242
(1,317)
2,925
332
Fund and
property management
£’000
4,636
-
4,636
(482)
Financial
planning
£’000
Fund and
property management
£’000
2,955
(825)
2,130
67
3,236
-
3,236
(1,057)
Total
£’000
64,476
(1,317)
63,159
14,614
(4,216)
10,398
(2,368)
8,030
Total
£’000
54,113
(825)
53,288
9,265
(745)
8,520
(2,264)
6,256
The Group’s operations are located in the United Kingdom and the Channel Islands. The following table presents underlying operating income
analysed by the geographical location of the Group entity providing the service.
United Kingdom
Channel Islands
Total operating income
(b) Major clients
2013
£’000
56,533
6,626
63,159
The Group is not reliant on any one client or group of connected clients for the generation of revenues.
2012
£’000
53,288
-
53,288
33
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
4.
Revenue
Fee income
Financial services commission
Total revenue
5. Operating profit
Operating profit is stated after charging:
Staff costs (note 6)
Acquisition costs (see below)
Auditors’ remuneration (see below)
Financial Services Compensation Scheme levy (see below)
Depreciation (note 12)
Amortisation (note 11)
A more detailed analysis of auditors’ remuneration is provided below:
Fees payable to the Company’s auditor for the audit of the
consolidated group and parent company financial statements
Fees payable to the Company’s auditor and its associates for other services:
– Audit of the Company’s subsidiaries pursuant to legislation
– Audit-related assurance services
– Tax advisory services
– Other assurance services
– Other advisory services
Total auditors’ remuneration
Acquisition costs
2013
£’000
59,431
3,728
63,159
2013
£’000
26,907
1,047
282
359
863
1,865
2013
£’000
44
150
22
6
60
-
282
2012
£’000
48,479
4,809
53,288
2012
£’000
20,477
-
206
235
734
530
2012
£’000
32
88
23
12
-
51
206
Administrative costs for the year ended 30 June 2013 include £1,047,000 of directly attributable acquisition costs in 2013, comprised of £30,000 in
respect of the acquisition of JPAM Limited and £1,017,000 in respect of the acquisition of Brooks Macdonald Asset Management (International)
Limited and Brooks Macdonald Retirement Services (International) Limited (note 9) (2012: £nil).
Financial Services Compensation Scheme levies
Administrative costs for the year ended 30 June 2013 include a charge of £359,000 for the Financial Services Compensation Scheme (‘FSCS’) levy
(2012: £235,000). During the year, the Group received invoices totalling £119,000 in respect of additional levies on previous scheme years. An
amount of £240,000 has also been provided for the estimated levy by the FSCS for the 2013/14 scheme year.
34
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
6. Employee information
(a) Staff costs
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Total staff costs
Pension costs relate entirely to a defined contribution scheme.
(b) Number of employees
The average monthly number of employees during the year, including directors, was as follows:
Professional staff
Administrative staff
Total staff
(c) Directors’ emoluments
Key management personnel comprise solely of the Group Board of Directors.
Salaries
Non-executive directors’ fees
Benefits in kind
Pension contributions
Amounts receivable under long term incentive schemes
Gains on exercise of share options
Total directors’ remuneration
Highest paid director
Remuneration and benefits in kind
Pension contributions
Amounts receivable under long term incentive schemes
Gains on exercise of share options
Total remuneration
2013
£’000
21,920
2,738
625
1,624
26,907
2013
156
207
363
2013
£’000
2,238
133
19
2,390
79
278
301
3,048
517
-
64
176
757
Retirement benefits are accruing to 6 directors (2012: 8) under a defined contribution pension scheme.
2012
£’000
16,648
1,866
570
1,393
20,477
2012
99
185
284
2012
£’000
2,794
126
22
2,942
208
2,974
326
6,450
486
32
68
378
964
35
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
7. Finance income and finance costs
Finance income
Bank interest on deposits
Tax repayment supplement
Total finance income
Finance costs
Finance cost of deferred consideration
Total finance costs
8. Taxation
The tax charge on profit on ordinary activities for the year is as follows:
UK Corporation Tax at 23.75% (2012: 25.50%)
Under provision in prior years
Total current tax
Deferred tax (credit) / charge
Income tax expense
2013
£’000
177
2
179
2013
£’000
279
279
2013
£’000
2,618
424
3,042
(674)
2,368
2012
£’000
163
3
166
2012
£’000
48
48
2012
£’000
1,866
6
1,872
392
2,264
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the time apportioned tax rate applicable to
profits of the consolidated entities in the UK as follows:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the standard
rate of tax in the UK of 23.75% (2012: 25.50%)
Tax effect of:
– Lower tax rates in other countries in which the Group operates
– Disallowable expenses
– Non-taxable income
– Tax losses utilised on which no deferred tax is provided
– Change in rate of Corporation Tax
– Under provision in prior years
Tax charge for the year
36
2013
£’000
10,398
2,469
(398)
189
(260)
(55)
(1)
424
2,368
2012
£’000
8,520
2,173
-
102
(116)
-
99
6
2,264
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
8. Taxation (continued)
The deferred tax credit of £674,000 (2012: charge of £392,000) represents a credit of £286,000 (2012: £414,000 charge) arising from the share
option reserve at the balance sheet date, a credit of £10,000 (2012: £22,000) relating to accelerated capital allowances and a credit of £377,000
(2012: £nil) arising from the amortisation of acquired client relationship contracts.
On 1 April 2013, the standard rate of Corporation Tax in the UK was reduced from 24% to 23%. As a result the effective rate of Corporation Tax
applied to the taxable profit for the year ended 30 June 2013 is 23.75% (2012: 25.50%).
In addition to the change in the rate of UK Corporation Tax disclosed above, a number of further changes to the UK Corporation Tax system were
announced in the March 2013 budget, proposing that the main rate of UK Corporation Tax rate be reduced to 21%. The rate will further reduce to
20% and will become unified with the small companies rate from 1 April 2015. At 30 June 2013 only part of this reduction, taking the rate to 23%,
had been substantively enacted. Deferred tax assets and liabilities are calculated at the rate that is expected to be in force when the temporary
differences unwind, but limited to the extent that such rates have been substantively enacted. Consequently the tax rate used to determine the
deferred tax assets and liabilities is 23% (2012: 24%).
The tax charge relating to components of other comprehensive income is as follows:
Revaluation of available for sale investments
Tax charge / (credit) on revaluation of available for sale investments
Total other comprehensive income
9. Business combinations
2013
£’000
(12)
3
(9)
2012
£’000
33
(6)
27
On 1 July 2012, the Group acquired the entire share capital of JPAM Limited (‘JPAM’). JGHP Limited, a subsidiary company of JPAM, has a portfolio of
client relationships and offers financial advice to high net worth individuals. The company is a long standing professional introducer of private clients
and their portfolios to the Group. The acquisition bought out the Group’s continuing obligations to JPAM in advance of the retirement of the
principal.
The total consideration of £5,240,000 was satisfied by cash on acquisition of £3,005,000 and contingent deferred consideration for the balance of
£2,235,000, due in three annual instalments and based on the value of the discretionary funds under management retained at each instalment date.
The fair value of the liability has been re-measured at the period end assuming that the value of the discretionary funds retained follows a similar
growth pattern to that experienced by the rest of the Group. A range of final outcomes cannot be estimated as the future value of the funds under
management is dependent on several unpredictable variables including client retention and market movements.
Directly attributable acquisition costs of £30,000 were incurred in the acquisition, which have been charged to the consolidated statement of
comprehensive income.
The fair value of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable. The fair value of the identifiable
assets and liabilities acquired, at the date of acquisition, are detailed in (a) below.
On 19 November 2012, the Group acquired the entire share capital of Brooks Macdonald Asset Management (International) Limited (BMI) (formerly
Spearpoint Limited) and Brooks Macdonald Retirement Services (International) Limited (BMRS) (formerly Spearpoint Retirement Services Limited),
incorporated in Guernsey and Jersey respectively. BMI is an integrated wealth management business based in the Channel Islands with discretionary
and advisory funds and assets under management of £1.1 billion. BMRS offers retirement planning services to clients. The acquisition also added
scale to the Group, as well as offshore capability and access to the expanding international pensions market.
37
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
9. Business combinations (continued)
The total consideration of £33,669,000 was satisfied by cash of £21,478,000, the issue of 418,627 new shares in Brooks Macdonald Group plc with a
value of £5,450,000 and a contingent deferred balance of £6,741,000, payable in two instalments in March 2013 and November 2014 and based
on the future value of the discretionary funds under management acquired. The fair value of the liability has been re-measured at the period end
assuming that the value of the discretionary funds retained follows a similar growth pattern to that experienced by the rest of the Group. A range of
final outcomes cannot be estimated as the future value of the funds under management is dependent on several unpredictable variables including
client retention and market movements.
Directly attributable acquisition costs of £1,017,000 were incurred in the acquisition, which have been charged to the consolidated statement of
comprehensive income.
Goodwill of £17,208,000 was recognised on acquisition in respect of expected synergies from combining the operations of BMI and BMRS with
those of the Group, as well as intangible assets that do not qualify for separate recognition and the experience of the investment management and
pensions staff employed by the companies.
The fair value of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable. The fair value of the identifiable
assets and liabilities acquired, at the date of acquisition, are detailed in (a) below.
(a) Net assets acquired through business combinations
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Other current assets
Trade and other payables
Other current liabilities
Total net assets recognised by acquired companies
Fair value adjustments:
– Client relationship contracts
– Software
– Deferred tax liability on client relationship contracts and software
Net identifiable assets
Goodwill
Total purchase consideration
JPAM
£’000
-
159
694
-
-
(143)
710
5,881
-
(1,351)
5,240
-
5,240
BMI and BMRS
£’000
54
4,190
3,032
735
(1,088)
-
6,923
12,156
227
(2,845)
16,461
17,208
33,669
38
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
9. Business combinations (continued)
(b) Impact on reported results from date of acquisition
JPAM Limited
Spearpoint entities:
– Brooks Macdonald Asset Management (International) Limited
– Brooks Macdonald Retirement Services (International) Limited
Total Spearpoint entities
Total impact of business combinations
Revenues from
external customers
£’000
798
6,017
609
6,626
7,424
Profit for the
year
£’000
438
1,660
109
1,769
2,207
Had JPAM, BMI and BMRS been consolidated from 1 July 2012, the consolidated statement of comprehensive income would show pro-forma
revenue of £67,462,000 and post-tax profit for the year of £9,363,000.
(c) Net cash outflow resulting from business combinations
Total purchase consideration (note 9a)
Less:
– Shares issued as consideration
– Deferred cash consideration
Cash paid to acquire subsidiaries
Less: cash held by subsidiaries acquired
Cash paid to acquire subsidiaries net of cash acquired
JPAM
£’000
5,240
-
(2,235)
3,005
(694)
2,311
10. Dividends
Amounts recognised as distributions to equity holders of the Company in the year:
Final dividend paid for the year ended 30 June 2012 of 12.5p (2011: 10.0p) per share
Interim dividend paid for the year ended 30 June 2013 of 6.5p (2012: 6.0p) per share
Total dividends
BMI and BMRS
£’000
33,669
(5,450)
(6,741)
21,478
(3,032)
18,446
2013
£’000
1,348
836
2,184
Final dividend proposed for the year ended 30 June 2013 of 16.0p (2012: 12.5p) per share
2,102
The interim dividend of 6.5p (2012: 6.0p) per share was paid on 18 April 2013.
Total
£’000
38,909
(5,450)
(8,976)
24,483
(3,726)
20,757
2012
£’000
1,082
642
1,724
1,365
A final dividend for the year ended 30 June 2013 of 16.0p (2012: 12.5p) per share was declared by the Board of Directors on 10 September 2013
and is subject to approval by the shareholders at the Company’s Annual General Meeting. It will be paid on 18 October 2013 to shareholders who
are on the register at the close of business on 20 September 2013. In accordance with IAS 10, this dividend has not been included as a liability in
these financial statements.
39
Annual Report & Accounts 2013Brooks Macdonald Group plc
11. Intangible assets
Cost
At 1 July 2011
Additions
Disposals
At 30 June 2012
Additions
Additions on acquisition of subsidiaries at fair value
Disposals
At 30 June 2013
Accumulated amortisation
1 July 2011
Amortisation charge
Disposals
At 30 June 2012
Amortisation charge
At 30 June 2013
Net book value
At 1 July 2011
At 30 June 2012
At 30 June 2013
(a) Goodwill
Goodwill
£’000
Computer
software
£’000
Acquired client
relationship contracts
£’000
Contracts acquired
with fund managers
£’000
3,550
-
-
3,550
-
17,208
-
20,758
-
-
-
-
-
-
3,550
3,550
20,758
87
5
(2)
90
16
227
-
333
23
25
(2)
46
113
159
64
44
174
2,056
4,811
-
6,867
-
18,037
(32)
24,872
229
307
-
536
1,477
2,013
1,827
6,331
22,859
1,850
123
-
1,973
601
-
-
2,574
1,268
198
-
1,466
275
1,741
582
507
833
Total
£’000
7,543
4,939
(2)
12,480
617
35,472
(32)
48,537
1,520
530
(2)
2,048
1,865
3,913
6,023
10,432
44,624
Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from
that business combination. The carrying amount of goodwill at 30 June 2013 comprises £3,550,000 in respect of the Braemar Group Limited
(‘Braemar’) CGU and £17,208,000 in respect of the Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald
Retirement Services (International) Limited (collectively ‘Brooks Macdonald International’) CGU.
Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2013 by comparing the carrying amount of
the CGUs to their expected recoverable amount, estimated on a value-in-use basis. The value-in-use of each CGU has been calculated using
pre-tax discounted cash flow projections based on the most recent budgets approved by the Board, covering a period of up to five years. Cash
flows are then extrapolated beyond the forecast period using an expected long-term growth rate.
The key underlying assumptions of the value-in-use calculations are the discount rate, short-term growth in funds under management and the
long-term growth rate. A pre-tax discount rate of 10% has been used, based on the Group’s assessment of risk-free rates of interest and specific
risks relating to the Braemar and Brooks Macdonald International businesses. The 2% long-term growth rate is considered prudent in the context
of the comparative long-term average growth rate for the funds, real estate and investment management industries in which the CGUs operate.
While it is possible that one of the key assumptions in the calculation could change, no reasonably forseeable change would result in an
impairment of goodwill given the margin by which the estimated recoverable amount exceeds the carrying amount of the CGUs.
40
Annual Report & Accounts 2013Brooks Macdonald Group plc
11. Intangible assets (continued)
(b) Computer software
Software costs are amortised over an estimated useful life of four years on a straight line basis.
(c) Acquired client relationship contracts
This asset represents the fair value of future benefits accruing to the Group from acquired client relationship contracts. The amortisation of client
relationships is charged to the consolidated statement of comprehensive income on a straight line basis over their estimated useful lives (15 to
20 years).
During the year, the Group acquired client relationship contracts totalling £18,037,000 (2012: £4,811,000), as part of business combinations
(note 9), which were recognised as separately identifiable intangible assets in the consolidated statement of financial position. This included
contracts with a fair value of £5,881,000 related to the acquisition of JPAM Limited and £12,156,000 related to the acquisition of Brooks
Macdonald Asset Management (International) Limited.
(d) Contracts acquired with fund managers
This asset represents the fair value of future benefits accruing to the Group from contracts acquired with fund managers. Payments made to
acquire such contracts are stated at cost and amortised on a straight line basis over an estimated useful life of 5 years.
12. Property, plant and equipment
Cost
At 1 July 2011
Additions
Disposals
At 30 June 2012
Additions
Additions on acquisition of subsidiaries
Disposals
At 30 June 2013
Accumulated depreciation
At 1 July 2011
Depreciation charge
Disposals
At 30 June 2012
Depreciation charge
Disposals
At 30 June 2013
Net book value
At 1 July 2011
At 30 June 2012
At 30 June 2013
Motor
vehicles
£’000
Fixtures and
fittings
£’000
Equipment and leasehold
improvements
£’000
-
-
-
-
35
-
-
35
-
-
-
-
4
-
4
-
-
31
696
736
(15)
1,417
151
54
-
1,622
295
154
(15)
434
234
-
668
401
983
954
3,643
479
(51)
4,071
677
-
-
4,748
2,152
580
(45)
2,687
625
-
3,312
1,491
1,384
1,436
Total
£’000
4,339
1,215
(66)
5,488
863
54
-
6,405
2,447
734
(60)
3,121
863
-
3,984
1,892
2,367
2,421
41
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
13. Available for sale financial assets
The Group holds an investment of 1,426,793.64 B shares in Braemar Group PCC Limited Student Accommodation Cell. The fund is managed by
Brooks Macdonald Funds Limited, a subsidiary of the Group. Trading is currently suspended on this fund, however the fund manager continues to
publish a price based on the fair value of the underlying assets of the fund. At 30 June 2013, the fair value of the investment was £1,582,000 (2012:
£1,594,000), the loss of £12,000 (2012: gain of £33,000) being recognised in other comprehensive income in the consolidated statement of
comprehensive income.
There were no additions during the year (2012: £63,000). A £50,000 investment in UK Farming plc was de-recognised as the entity is now
considered to be controlled by the Group and its assets and liabilities have been consolidated accordingly. The Group disposed of further
investments of £13,000 (2012: £nil).
At beginning of year
Additions
Disposals
De-recognised on consolidation of former investment
(Loss) / gain from changes in fair value
At end of year
14. Deferred income tax
2013
£’000
1,657
-
(13)
(50)
(12)
1,582
Deferred income tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised. An analysis of the Group’s deferred assets and deferred tax liabilities is shown below.
Deferred tax assets
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
Total deferred tax assets
Deferred tax liabilities
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax liabilities to be recovered within 12 months
Total deferred tax liabilities
The gross movement on the deferred income tax account during the year is as follows:
At 1 July
Credit / (charge) to the consolidated statement of comprehensive income (note 8)
Credit / (charge) recognised in other comprehensive income
Charge recognised in equity
Additions on acquisition of subsidiaries
At 30 June
42
2013
£’000
234
624
858
(4,468)
(30)
(4,498)
2013
£’000
(25)
674
3
(97)
(4,195)
(3,640)
2012
£’000
1,561
63
-
-
33
1,657
2012
£’000
260
408
668
(672)
(21)
(693)
2012
£’000
1,495
(392)
(6)
(473)
(649)
(25)
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
14. Deferred income tax (continued)
The change in deferred income tax assets and liabilities during the year is as follows:
Deferred tax assets
At 1 July 2011
Charge to the consolidated statement of comprehensive income
Charge to equity
At 30 June 2012
Credit to the consolidated statement of comprehensive income
Charge to equity
At 30 June 2013
Deferred tax liabilities
At 1 July 2011
Additions on acquisition of subsidiaries
Credit to the consolidated statement of comprehensive income
Charge to other comprehensive income
At 30 June 2012
Additions on acquisition of subsidiaries
Credit to the consolidated statement of comprehensive income
Charge to other comprehensive income
At 30 June 2013
15. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Total trade and other receivables
16. Cash and cash equivalents
Cash at bank
Cash held in Employee Benefit Trust
Total cash and cash equivalents
Accelerated capital
allowances
£’000
Available for sale
financial assets
£’000
Intangible asset
amortisation
£’000
44
-
(22)
-
22
-
(10)
-
12
-
649
-
-
649
4,195
(377)
-
4,467
16
-
-
6
22
-
-
(3)
19
2013
£’000
5,158
766
11,849
17,773
2013
£’000
18,420
20
18,440
Share-based payments
£’000
1,555
(414)
(473)
668
287
(97)
858
Total
£’000
60
649
(22)
6
693
4,195
(387)
(3)
4,498
2012
£’000
1,719
1,123
9,938
12,780
2012
£’000
13,470
19
13,489
Cash and cash equivalents are distributed across a range of financial institutions with high credit ratings in accordance with the Group’s treasury
policy. Cash at bank comprises current accounts and immediately accessible deposit accounts.
43
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
17. Deferred consideration
Deferred consideration, which is also included within provisions in current liabilities to the extent that it is due to be paid within one year of the
reporting date (note 20), relates to the directors’ best estimate of amounts payable in the future in respect of certain client relationships and
subsidiary undertakings that were acquired by the Group. Deferred consideration is measured at its fair value based on the discounted expected
future cash flows. The movements in the deferred consideration balance during the year were as follows:
At 1 July
Added on acquisitions during the year
Interest accrued
Payments made during the year
At 30 June
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total deferred consideration
2013
£’000
2,309
8,976
279
(3,637)
7,927
2,123
5,804
7,927
2012
£’000
794
2,177
49
(711)
2,309
1,350
959
2,309
Deferred consideration of £8,976,000 (2012: £2,177,000) was recognised during the year (note 9), £6,741,000 on the acquisition of BMI and BMRS
and £2,235,000 on the acquisition of JPAM (2012: £2,177,000 on the acquisition of the client relationship contracts of Clarke Willmott LLP).
Payments of £3,637,000 (2012: £711,000) were made during the year, representing £2,396,000 to the vendors of BMI and BMRS and £1,241,000
to Clarke Willmott LLP.
Amounts falling due after more than one year from the reporting date are presented in non-current liabilities as shown below:
At 1 July
Added on acquisitions during the year
Interest accrued
Transfer to current liabilities
At 30 June
2013
£’000
959
5,597
207
(959)
5,804
2012
£’000
-
910
49
-
959
The amount payable in respect of acquisitions during the period of £5,597,000 (2012: £910,000) comprises deferred consideration of £4,345,000
relating to the acquisition of BMI and BMRS and £1,252,000 relating to the acquisition of JPAM (note 9). An amount of £959,000, representing the
deferred consideration payable in respect of the acquired client relationships of Clarke Willmott LLP, was transferred to provisions within current
liabilities (2012: £nil).
18. Other non-current liabilities
Other non-current liabilities relate to employer’s National Insurance contributions arising from share option awards under the LTIS scheme. An
additional liability of £90,000 (2012: 244,000) was recognised during the year in respect of existing awards, granted in previous years, that are
expected to vest in the future. During the year, an amount of £383,000 (2012: £452,000) was transferred to current liabilities, reflecting awards that
will vest within the next 12 months.
44
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
19. Trade and other payables
Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
Total trade and other payables
2013
£’000
2,631
1,394
2,621
7,133
13,779
2012
£’000
2,699
1,333
308
9,505
13,845
Included within accruals and deferred income is an accrual of £837,000 (2012: £985,000) in respect of the Phantom Share Schemes granted in
October 2008 and October 2009 and employer’s National Insurance contributions arising from share option awards under the LTIS (note 24b). The
schemes are cash settled and payments are made to participants in respect of their awards by the Group’s subsidiary undertakings. The options are
awarded at no cost to the participants. The amount that is ultimately payable to participants of the scheme is equal to the increase in market value of
the Company’s ordinary shares over a three year vesting period. The award will vest after three years to the extent that the performance conditions
are satisfied and will be forfeited in total if performance fails to meet the minimum criteria.
The options have been valued using a Black Scholes model based on the market price of the Company’s shares at the grant date (note 24). The total
charge to the consolidated statement of comprehensive income for the year for all Phantom Share Schemes and employer’s National Insurance
contributions arising from share option awards under the LTIS (note 24b) was £423,000 (2012: £1,325,000). The number of Phantom Share Options
outstanding at 30 June 2013 was as follows:
At 1 July
Forfeited in the year
Exercised in the year
At 30 June
20. Provisions
2013
Number of
options
133,103
(45,000)
(51,000)
37,103
2013
Weighted average
base price (£)
6.875
7.750
4.255
9.415
2012
Number of
options
595,603
-
(462,500)
133,103
Client
compensation
£’000
Deferred
consideration
£’000
At 1 July 2011
Charge to the consolidated statement of comprehensive income
Added on acquisitions during the year
Utilised during the year
At 30 June 2012
Charge to the consolidated statement of comprehensive income
Added on acquisitions during the year
Interest accrued
Transfer from non-current liabilities
Utilised during the year
At 30 June 2013
243
182
-
(86)
339
246
-
-
-
(165)
420
794
-
1,267
(711)
1,350
-
3,379
72
959
(3,637)
2,123
FSCS
levy
£’000
-
140
-
(140)
-
240
-
-
-
-
240
2012
Weighted average
base price (£)
3.235
-
2.185
6.875
Total
£’000
1,037
322
1,267
(937)
1,689
486
3,379
72
959
(3,802)
2,783
45
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
20. Provisions (continued)
(a) Client compensation
Client compensation provisions relate to the potential liability arising from client complaints against the Group. Complaints are assessed on a case by
case basis and provisions for compensation are made where judged necessary. Complaints are on average settled within eight months (2012: eight
months) from the date of notification of the complaint.
(b) Deferred consideration
Deferred consideration has been included within provisions as a current liability to the extent that it is due to be paid within one year of the
reporting date (note 17).
Deferred consideration payable within one year of £3,379,000 (2012: £1,267,000) was recognised during the year, comprising of £2,396,000 relating
to the acquisition of BMI and BMRS and £983,000 relating to the acquisition of JPAM. An amount of £959,000 (2012: £nil) was transferred from
non-current liabilities, representing the final tranche of deferred consideration payable to Clarke Willmott LLP in November 2013 in respect of client
relationships acquired in October 2011. Provisions of £3,802,000 (2012: £711,000) were utilised during the year on payment of £1,241,000 to Clarke
Willmott LLP and £2,396,000 to the vendors of Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement
Services (International) Limited.
(c) FSCS levy
Following confirmation by the FSCS in April 2013 of its proposed 2013/14 industry levy, the Group has made a provision of £240,000 (2012: £nil) for
its estimated share. The 2012/13 annual levy was billed in June 2012, hence this was included as a trade payable rather than a provision in the 2012
financial statements.
21. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Decrease / (increase) in receivables
Decrease in payables
(Decrease) / increase in provisions
Decrease in non-current liabilities
Share-based payments
Net cash inflow from operating activities
2013
£’000
10,498
863
1,865
91
(1,301)
(2,284)
(1,325)
1,111
9,518
2012
£’000
8,402
734
530
(2,920)
(4,319)
652
(210)
702
3,571
In the year ended 30 June 2013, the Group obtained control of JPAM, BMI and BMRS (note 9). The net cash outflow resulting from these business
combinations is presented in note 9(c).
46
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
22. Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
At 1 July 2011
Shares issued:
– on exercise of options
– to Sharesave Scheme
At 30 June 2012
Shares issued:
– on placing
– on exercise of options
– to Sharesave Scheme
At 30 June 2013
Number
of shares
10,788,167
Exercise
price
p
75,900
63,429
240.0
155.0 - 290.5
10,927,496
2,288,193 1,150.0 - 1,301.9
73,100
59,185
140.0 - 290.5
240.0 - 578.0
13,347,974
Share
capital
£’000
108
1
-
109
23
1
-
133
Share premium
account
£’000
4,125
146
152
4,423
26,927
327
191
31,868
Total
£’000
4,233
147
152
4,532
26,950
328
191
32,001
The total number of ordinary shares, issued and fully paid at 30 June 2013 was 13,347,974 (2012: 10,927,496) with a par value of 1p per share.
On 19 November 2012, the Company issued 1,869,566 ordinary shares by way of a placing for cash consideration which raised £21,500,000 and
an additional 418,627 ordinary shares with a market value of £5,450,000 as consideration to the vendors of Brooks Macdonald Asset Management
(International) Limited and Brooks Macdonald Retirement Services (International) Limited.
Shares issued to Sharesave Scheme members are shown as £nil (2012: £nil) due to rounding.
Employee Benefit Trust
The Group established an Employee Benefit Trust (EBT) on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the
Group’s Long Term Incentive Scheme (LTIS) and other share-based payment schemes (note 24). At 30 June 2013, the EBT held 212,172 (2012:
151,139) 1p ordinary shares in the Company, acquired for a total consideration of £2,544,000 (2012: £1,765,000). The market value of these shares
was £3,044,668 (2012: £1,738,000). They are presented as treasury shares in the consolidated financial statements and their cost has been
deducted from retained earnings within shareholders’ equity.
23. Other reserves and retained earnings
Other reserves are comprised of the following balances:
Share option reserve
Merger reserve
Available for sale reserve
Total other reserves
2013
£’000
3,697
192
63
3,952
2012
£’000
2,724
192
72
2,988
47
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
23. Other reserves and retained earnings (continued)
The movements in other reserves during the year were as follows:
Share option reserve
At beginning of the year
Share-based payments
Transfer to retained earnings
Deferred tax on share-based payments
At end of the year
Merger reserve
At beginning of the year
At end of the year
Available for sale reserve
At beginning of the year
Revaluation of available for sale financial assets
At end of the year
The movements in retained earnings during the year were as follows:
At beginning of the year
Profit for the financial year
Purchase of own shares by Employee Benefit Trust
Transfer from share option reserve
Dividends paid
At end of the year
24. Equity settled share-based payments
2013
£’000
2,724
1,111
(350)
212
3,697
192
192
72
(9)
63
2013
£’000
16,190
8,030
(779)
350
(2,184)
21,607
2012
£’000
2,326
702
(188)
(116)
2,724
192
192
45
27
72
2012
£’000
12,225
6,256
(785)
188
(1,724)
16,190
All share options granted to employees under the Group’s equity settled share-based payment schemes are valued using a Black Scholes model, based
on the market price of the Company’s shares at the grant date and volatility ranging from 15% to 50% on an historic price, covering the period to the
end of the contractual life. Volatility has been estimated on the basis of the Company’s historical share prices subsequent to flotation. The risk-free
annual rate of interest is deemed to be the yield on a gilt edged security with a maturity term of ten years, ranging from 0.34% to 2.00%.
For options granted during the year, the Black Scholes model was based on the market price of the Company’s shares at each respective grant date
and volatility of 50% with no dividend yield, an expected vesting period of three years and a risk-free annual rate of interest of 0.34%. The fair value
of the cash settled Phantom Share Options has been calculated using the same assumptions, but it is re-calculated on a quarterly basis.
The share options issued under the various equity settled share-based payment schemes have been valued at prices ranging from £nil to £11.62 per
share. The charge to the consolidated statement of comprehensive income for the year in respect of these was £1,111,000 (2012: £702,000). The
weighted average remaining contractual life of all equity settled share-based payment schemes at 30 June 2013 was 2.61 years (2012: 3.18 years).
The weighted average share price of all options exercised during the year was £13.75 (2012: £12.05). The total charge to the consolidated
statement of comprehensive income for the year for all share-based payment schemes was £1,624,000 (2012: £1,393,000).
48
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
24. Equity settled share-based payments (continued)
The exercise price and fair value of share options granted during the year was as follows:
Long Term Incentive Scheme
Employee Sharesave Scheme
No options were granted under the EMI Scheme during the year.
(a) Enterprise Management Incentive (EMI) Scheme
Exercise price
p
nil
1,172
Fair value
p
1,270
607
Under the approved EMI Scheme, certain employees hold options to subscribe for shares in the Company at prices ranging from 140p to 775p.
Options are conditional on the employee completing three year’s service (the vesting period) and are exercisable three years from the grant date.
The options have a contractual option term of seven years from the date they become exercisable. The Group has no legal or constructive obligation
to repurchase or settle the options in cash.
At 1 July
Forfeited in the year
Exercised in the year
At 30 June
2013
Number
of options
182,657
(10,804)
(73,100)
98,753
2013
Weighted average
exercise price £
3.00
7.75
2.61
2.77
2012
Number
of options
258,557
-
(75,900)
182,657
2012
Weighted average
exercise price £
2.69
-
1.94
3.00
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
Exercise price (p)
Vesting period
2013
Number of options
2012
Number of options
2005
2005
2006
2007
2010
All years
140.0
155.5
215.0
290.5
775.0
2008 - 2015
2008 - 2015
2009 - 2016
2010 - 2017
2013 - 2020
-
25,000
23,500
42,150
8,103
98,753
6,000
31,000
29,350
97,400
18,907
182,657
(b) Long Term Incentive Scheme (LTIS)
The Company has made annual awards under the LTIS to executive directors and other senior executives. The conditional awards, which vest three
years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period. All such
conditional awards are made at the discretion of the Remuneration Committee.
2013
Number of options
2012
Number of options
At 1 July
Granted in the year
Forfeited in the year
At 30 June
128,343
78,954
(1,684)
205,613
37,959
94,005
(3,621)
128,343
49
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
24. Equity settled share-based payments (continued)
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
Exercise price (p)
Vesting period
2010
2011
2012
All years
(c) Employee Benefit Trust (EBT)
nil
nil
nil
2013
2014
2015
2013
Number of options
2012
Number of options
33,848
92,811
78,954
205,613
34,338
94,005
-
128,343
Brooks Macdonald Group plc established an Employee Benefit Trust (‘the Trust’) on three December 2010. The Trust was established to acquire
ordinary shares in the Company to satisfy rights to purchase shares on the exercise of options awarded under the LTIS. All finance costs and
administration expenses connected with the Trust are charged to consolidated statement of comprehensive income as they accrue. The Trust has
waived its rights to dividends. The following table shows the number of shares held by the Trust that have not yet vested unconditionally.
At 1 July
Acquired in the year
At 30 June
(d) Employee Sharesave Scheme
2013
Number of shares
2012
Number of shares
151,139
61,033
212,172
37,959
113,180
151,139
Under the scheme, employees can contribute up to £250 a month over a three year period to acquire shares in the Company. At the end of the
savings period, employees can elect to receive shares or receive their savings in cash.
At 1 July
Granted in the year
Forfeited in the year
Exercised in the year
At 30 June
2013
Number
of options
180,566
39,489
(13,547)
(59,185)
147,323
2013
Weighted average
exercise price £
8.33
11.72
9.54
5.54
10.23
2012
Number
of options
196,171
54,231
(6,407)
(63,429)
180,566
2012
Weighted average
exercise price £
5.78
10.54
7.73
2.40
8.33
The number of share options outstanding at 30 June 2013 was as follows:
Scheme year (grant date)
Exercise price (p)
Vesting period
2013
Number of options
2012
Number of options
2009
2010
2011
2012
2013
All years
50
240.0
578.0
916.0
1,054.0
1,172.0
2012
2013
2014
2015
2016
-
2,040
58,536
48,332
38,415
4,269
58,526
63,813
53,958
-
147,323
180,566
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
25. Earnings per share
The directors believe that adjusted earnings per share provide a truer reflection of the Group’s performance for the period. Adjusted earnings per
share are shown below and are calculated based on ‘adjusted earnings’, representing earnings before the costs of acquiring subsidiary companies
during the period (note 5).
Profit for the year
Costs of acquiring subsidiary companies
Adjusted earnings attributable to ordinary shareholders
The weighted average number of shares in issue during the year was as follows:
Weighted average number of shares in issue during the year
Dilutive shares issuable on exercise of share options
Diluted weighted average number of shares in issue during the year
2013
£’000
8,030
1,047
9,077
2013
Number of shares
12,210,418
111,793
12,322,211
Basic and diluted earnings per share based on both reported and adjusted earnings are shown in the table below:
Based on reported earnings:
Basic earnings per share
Diluted earnings per share
Based on adjusted earnings:
Basic earnings per share
Diluted earnings per share
2013
p
65.76
65.16
74.33
73.66
2012
£’000
6,256
-
6,256
2012*
Number of shares
10,893,468
162,633
11,056,101
2012*
p
57.43
56.58
57.43
56.58
* The comparative weighted average number of shares in issue and therefore basic and diluted earnings per share have been restated for the effect of shares issued at a
discount to their market value as part of the Spearpoint acquisition.
26. Lease commitments
The Group leases various office premises under non-cancellable operating lease arrangements. The future aggregate minimum lease payments under
these leases are as follows:
Within one year
Second to fifth years inclusive
After five years
2013
£’000
1,162
2,240
38
2012
£’000
813
1,720
-
51
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
27. Client funds under management
The Group holds client money and assets on behalf of clients in accordance with the client money rules of the Financial Conduct Authority. Such
money and the corresponding liabilities to clients are not shown in the consolidated statement of financial position as the Group is not beneficially
entitled thereto. The total market value of client money and assets held is shown below:
Client money bank accounts
Client assets under management
Total client funds under management
28. Financial risk management
2013
£’000
595,365
4,514,635
5,110,000
2012
£’000
479,000
3,041,000
3,520,000
The Group has identified the financial risks arising from its activities and has established policies and procedures as part of a formal structure for managing
risk, including establishing risk lines, reporting lines, mandates and other control procedures. The structure is reviewed regularly. The Group does not use
derivative financial instruments for risk management purposes.
(a) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due.
The primary objective of the Group’s treasury policy is to manage short-term liquidity requirements and to ensure that the Group maintains a surplus of
immediately realisable assets over its liabilities, such that all known and potential cash obligations can be met.
The table below shows the cash inflows and outflows from the Group under non-derivative financial assets and liabilities, together with cash and bank
On demand
£’000
Not more than
three months
£’000
After three months
but not more
than one year
£’000
After one year
but less than
five years
£’000
-
18,440
-
-
18,440
-
-
-
18,440
-
-
5,159
-
5,159
2,631
10,609
13,240
(8,081)
-
-
-
107
107
-
1,928
1,928
1,582
-
-
-
1,582
-
5,929
5,929
(1,821)
(4,347)
Total
£’000
1,582
18,440
5,159
107
25,288
2,631
18,466
21,097
4,191
balances available on demand.
At 30 June 2013
Cash flows from financial assets
Available for sale financial assets
Cash and balances at bank
Trade receivables
Other receivables
Cash flows from financial liabilities
Trade payables
Other financial liabilities
Net liquidity gap
52
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
28. Financial risk management (continued)
(a) Liquidity risk (continued)
At 30 June 2012
Cash flows from financial assets
Available for sale financial assets
Cash and balances at bank
Trade receivables
Other receivables
Cash flows from financial liabilities
Trade payables
Other financial liabilities
On demand
£’000
Not more than
three months
£’000
After three months
but not more
than one year
£’000
After one year
but less than
five years
£’000
-
13,470
-
-
13,470
-
-
-
-
-
1,719
-
1,719
2,699
9,869
12,568
-
-
-
115
115
-
2,231
2,231
Total
£’000
1,657
13,470
1,719
115
16,961
2,699
13,476
16,175
786
1,657
-
-
-
1,657
-
1,376
1,376
281
Net liquidity gap
13,470
(10,849)
(2,116)
(b) Market risk
Interest rate risk
The Group may elect to invest surplus cash balances in short-term cash deposits with maturity dates not exceeding three months. Consequently, the
Group has a limited exposure to interest rate risk due to fluctuations in the prevailing level of market interest rates.
A 1% fall in the average monthly interest rate receivable on the Group’s cash and cash equivalents would have the impact of reducing interest
receivable and therefore profit before taxation by £184,000 (2012: £135,000). An increase of 1% would have an equal and opposite effect.
Foreign exchange risk
The Group does not have any material exposure to transactional foreign currency risk and therefore no analysis of foreign exchange risk is provided.
Price risk
Price risk is the risk that the fair value of the future cash flows from financial instruments will fluctuate due to changes in market prices (other than
those arising from interest rate risk or currency risk). The Group is exposed to price risk through its holdings of equity securities that are measured at
fair value in the consolidated statement of financial position (note 13). A 1% fall in the value of these equity securities would have the impact of
reducing other comprehensive income by £12,000. An increase of 1% would have an equal and opposite effect.
53
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the consolidated financial statements
28. Financial risk management (continued)
(c) Credit risk
The Group may elect to invest surplus cash balances in highly liquid money market instruments with maturity dates not exceeding three months.
The difference between the fair value and the net book value of these instruments is not material. To reduce the risk of a counterparty default, the
Group deposits the rest of its funds in approved, high quality banks. At 30 June 2013 there was no significant concentration of credit risk in any
particular counterparty (2012: none).
Assets exposed to credit risk recognised on the consolidated statement of financial position total £18,440,000 (2012: £13,489,000), being the
Group’s total cash and cash equivalents.
Trade receivables with a carrying amount of £5,159,000 (2012: £1,719,000) are neither past due nor impaired. Trade receivables have no external
credit rating as they relate to individual clients, although the value of investments held in each individual client’s portfolio is always in excess of the
total value of the receivable. All trade receivables fall due within three months (2012: all).
29. Capital management
Capital is defined as the total of share capital, share premium, retained earnings and other reserves of the Company. Total capital at 30 June 2013
was £57,560,000 (2012: £23,710,000). Regulatory capital is derived from the group Internal Capital Adequacy Assessment Process (ICAAP), which is
a requirement of the Capital Requirements Directive. The ICAAP draws on the Group’s risk management process which is embedded within the
individual businesses, function heads and executive committees within the Group.
The Group’s objectives when managing capital are to comply with the capital requirements set by the Financial Conduct Authority, to safeguard the
Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to
maintain a strong capital base to support the development of the business.
Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management. The Group’s 2013 ICAAP was approved in May
2013. There have been no capital requirement breaches during the year. Brooks Macdonald Group plc’s Pillar III disclosure is presented on our
website at www.brooksmacdonald.com.
30. Guarantees and contingent liabilities
The Company has an agreement with the Royal Bank of Scotland plc to guarantee settlement for trading with CREST stock on behalf of clients. The
Group holds client assets to fund such trading activity.
Additional levies by the Financial Services Compensation Scheme may give rise to further obligations based on the Group’s income in the current or
previous years. Nevertheless, the ultimate cost to the Group of these levies remains uncertain and is dependent upon future claims resulting from
institutional failures.
54
Annual Report & Accounts 2013Brooks Macdonald Group plc Notes to the consolidated financial statements
31. Related party transactions
Certain directors have taken advantage of the Group’s interest free season ticket loan facility which is available to all employees. The directors who
have such loans are as follows:
Director
N I Holmes
S J Jackson
Loan balance
2013
£’000
Loan balance
2012
£’000
Maximum amount
2013
£’000
Maximum amount
2012
£’000
1
5
1
4
2
10
2
8
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The Company’s individual
financial statements include the amounts attributable to subsidiaries. These amounts have been disclosed in aggregate in the relevant Company
financial statements and in detail in the following table:
Amounts owed by
related parties
2013
£’000
Amounts owed by
related parties
2012
£’000
Amounts owed to
related parties
2013
£’000
Amounts owed to
related parties
2012
£’000
Braemar Group Limited
Brooks Macdonald Financial Consulting Limited
Brooks Macdonald Asset Management Limited
Brooks Macdonald Nominees Limited
2,150
955
-
-
2,150
1,579
-
-
-
-
17,018
2,727
-
-
14,391
1,869
All of the above amounts are interest free and, with the exception of the subordinated loan to Braemar Group Limited, are repayable on demand.
The Group manages a number of collective investment funds that are considered related parties. Available for sale financial assets include (note 13)
an investment of 1,426,793.64 B shares in Braemar PCC Limited Student Accommodation Cell. This transaction was conducted on an arms length
basis at market value.
32. Events since the end of the year
No material events have occurred between the reporting date and the date of signing the Annual Report & Accounts.
55
Annual Report & Accounts 2013Brooks Macdonald Group plc
Independent auditor’s report
to the members of Brooks Macdonald Group plc
We have audited the parent company financial statements of Brooks
Macdonald Group plc for the year ended 30 June 2013 which comprise
Opinion on financial statements
In our opinion the parent company financial statements:
the Company Balance Sheet and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United
•
give a true and fair view of the state of the Company’s affairs as at
30 June 2013;
Kingdom Generally Accepted Accounting Practice).
•
have been properly prepared in accordance with United Kingdom
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities set
out on page 19, the directors are responsible for the preparation of the
parent company financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express an
opinion on the parent company financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for
Generally Accepted Accounting Practice; and
•
have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for
the financial year for which the parent company financial statements are
prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
the Company’s members as a body in accordance with Chapter 3 of Part
Companies Act 2006 requires us to report to you if, in our opinion:
16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
•
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
consent in writing.
•
the parent company financial statements are not in agreement with
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that
the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are
not made; or
the financial statements are free from material misstatement, whether
•
we have not received all the information and explanations we
caused by fraud or error. This includes an assessment of: whether the
require for our audit.
accounting policies are appropriate to the parent company’s
circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made
Other matter
We have reported separately on the group financial statements of Brooks
by the directors; and the overall presentation of the financial statements.
Macdonald Group plc for the year ended 30 June 2013.
In addition, we read all the financial and non-financial information in the
Annual Report & Accounts to identify material inconsistencies with the
audited financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications
for our report.
Marcus Hine (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
10 September 2013
56
Annual Report & Accounts 2013Brooks Macdonald Group plc Company balance sheet
as at 30 June 2013
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Note
£’000
£’000
£’000
£’000
2013
2012
36
37
46,631
11,863
7,127
10,274
17,401
7,739
7,893
15,632
Creditors: amounts falling due within one year
38
(25,290)
(21,723)
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
39
Net assets
Financed by:
Capital and reserves
Called up share capital
Share premium account
Share option reserve
Revaluation reserve
Profit and loss account
Total shareholders’ funds
40
40
41
41
41
42
(7,889)
38,742
(4,482)
34,260
133
31,868
3,023
63
(827)
34,260
(6,091)
5,772
-
5,772
109
4,423
1,912
94
(766)
5,772
The Company financial statements were approved by the Board of Directors and authorised for issue on 10 September 2013, signed on their
behalf by:
C A J Macdonald
Chief Executive
Company Registration Number: 4402058
S J Jackson
Finance Director
The accompanying notes from pages 58 to 62 form an integral part of the Company financial statements.
57
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the company financial statements
33. 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 Company’s financial statements are prepared in accordance with in accordance with the Companies Act 2006 and applicable accounting
standards in the United Kingdom. The financial statements have been prepared on the historical cost basis, except for the revaluation of
investments 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 has 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.
(b) Investments in subsidiary companies
Investments in subsidiaries are recognised at cost less provisions for impairment.
(c) Share-based payments
The Company has applied the requirements of FRS 20 Share-based payments and has adopted the requirements of UITF 44. Equity settled
share-based payments are measured at fair value at the grant date and the charge to the Profit and Loss Account is recognised on a straight line
basis over the period in which the related services are provided, based on the number of shares that are expected to vest.
(d) Operating lease payments
Rent payments due under operating leases are charged to the Profit and Loss Account on a straight line basis over the term of the lease.
The Company benefited from a rent-free period under the terms of its current property lease. In accordance with UITF 28 Operating Leases
Incentives, the benefit is allocated over the shorter of the lease term and the date of the market rent review specified in the lease. During the
rent-free period a rental charge has been recognised in the Profit and Loss Account and accrued as a liability in the Balance Sheet.
(e) Retirement benefit costs
Contributions in respect of the Group’s defined contribution pension scheme are charged to the Profit and Loss Account as they fall due.
(f) Employee Benefit Trust (EBT)
Where the Company holds its own equity shares through an EBT these shares are shown as a reduction in shareholders’ equity. Any consideration
paid or received for the purchase or sale of these shares is shown as a reduction in the reconciliation of movements in shareholders’ funds. No gain
or loss is recognised in the profit and loss account or the statement of total recognised gains or losses on the purchase, sale, issue or cancellation of
these shares.
(g) Other investments
Other listed investments are re-valued each reporting period to their fair value according to the most recently available market information.
34. Profit for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the financial
year. Brooks Macdonald Group plc reported profit after tax for year ended 30 June 2013 of £2,902,000 (2012: £1,654,000). Auditors’ remuneration
is disclosed in note 5 of the consolidated financial statements. The average monthly number of employees during the year was 9 (2012: 11).
Directors’ emoluments are set out in note 6 of the consolidated financial statements.
35. Dividends
Details of the Company’s dividends paid and proposed, subject to approval at the Annual General Meeting, are set out in note 10 of the consolidated
financial statements.
58
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the company financial statements
36. Investments
Net book value
At 1 July 2011
Additions:
– Share options
Revaluation
At 30 June 2012
Additions:
– Share options
– Acquisition of subsidiary
Revaluation
At 30 June 2013
Group undertakings
£’000
Listed investments
£’000
9,567
702
-
10,269
1,111
33,669
-
45,049
1,561
-
33
1,594
-
-
(12)
1,582
Total
£’000
11,128
702
33
11,863
1,111
33,669
(12)
46,631
Listed investments represent the Company’s holding of 1,426,793.64 B shares in Braemar Group PCC Limited Student Accommodation Cell. The
fund is managed by Brooks Macdonald Funds Limited, a subsidiary of the Company. Trading is currently suspended on this fund, however the fund
manager continues to publish a price based on the fair value of the underlying assets of the fund. At 30 June 2013, the investment was re-valued to
its fair value of £1,582,000 (2012: £1,594,000), representing a loss during the year of £12,000 (2012: gain of £33,000).
Investments in group undertakings are recorded at cost, which is the fair value of the consideration paid to acquire the Company’s subsidiaries.
Additions to group undertakings of £1,111,000 (2012: £702,000) represent the cost of share options issued during the year in accordance with
FRS20. Additions on acquisition of subsidiaries of £33,669,000 (2012: £nil) represent the cost of the Company’s investment in Brooks Macdonald
Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited. Details of the Company’s subsidiary
undertakings as at 30 June 2013, all of which were wholly owned and included in the consolidated financial statements, are shown below:
Company
Braemar Group Limited
Brooks Macdonald Asset Management Limited
Type of share
and par value
Ordinary 1p
Ordinary £1
Country of
incorporation
Nature of
business
UK
UK
Investment management
Investment management
Brooks Macdonald Asset Management (International) Limited
Ordinary £1
Channel Islands
Investment management
Brooks Macdonald Asset Management (Tunbridge Wells) Limited
Ordinary £1
Brooks Macdonald Financial Consulting Limited
Brooks Macdonald Investment Services Limited
Brooks Macdonald Nominees Limited
Ordinary 5p
Ordinary £1
Ordinary £1
UK
UK
UK
UK
Non-trading
Financial consulting
Dormant
Nominee services
Brooks Macdonald Retirement Services (International) Limited
Ordinary £1
Channel Islands
Retirement planning
Brooks Macdonald Tax Services Limited
JPAM Limited
Ordinary £1
Ordinary £1
UK
UK
Dormant
Non-trading
59
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the company financial statements
37. Debtors
Amounts owed by subsidiary undertakings
Other debtors
Total debtors
2013
£’000
7,105
22
7,127
2012
£’000
7,729
10
7,739
Amounts owed by subsidiary companies are unsecured, interest free and, with the exception of the subordinated loan to Braemar Group Limited, are
repayable on demand.
38. Creditors: amounts falling due within one year
Trade creditors
Amounts owed to subsidiary undertakings
Deferred tax
Accruals
Other creditors
Total creditors due within one year
2013
£’000
30
23,747
19
1,374
120
25,290
2012
£’000
8
20,260
-
1,455
-
21,723
Amounts owed to subsidiary companies are unsecured, interest free and are repayable on demand.
39. Creditors: amounts falling due after more than one year
The creditors balance of £4,482,000, falling due after more than one year, relates to the directors’ best estimate of the deferred consideration
payable in respect of the client relationships and subsidiary undertakings that were acquired by the Company. Deferred consideration is measured at
its fair value based on the discounted expected future cash flows.
40. Called up share capital and share premium account
The movements in share capital and share premium during the year were as follows:
At 1 July 2011
Shares issued
At 30 June 2012
Shares issued
At 30 June 2013
Number of
shares
10,788,167
139,329
10,927,496
2,420,478
13,347,974
Share capital
£ ’000
Share premium
account
£ ’000
108
1
109
24
133
4,125
298
4,423
27,445
31,868
Total
£’000
4,233
299
4,532
27,469
32,001
The total number of ordinary shares, issued and fully paid at 30 June 2013 was 13,347,974 (2012: 10,927,496) with a par value of 1p per share.
Excluding 212,172 (2012: 151,139) treasury shares held by the EBT, the Company had 13,135,802 (2012: 10,776,357) ordinary 1p shares in issue
as at 30 June 2013.
60
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the company financial statements
40. Called up share capital and share premium account (continued)
Long Term Incentive Scheme (LTIS)
The Group established an Employee Benefit Trust (EBT) on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the
Group’s LTIS and other share-based payment schemes (note 24). At 30 June 2013, the EBT held 212,172 (2012: 151,139) 1p ordinary shares in the
Company, acquired for a total consideration of £2,544,000 (2012: £1,765,000). The market value of these shares was £3,044,668 (2012: £1,738,000).
They are presented as treasury shares in the consolidated financial statements and their cost has been deducted from retained earnings within
shareholders’ equity.
The Company has made annual awards under the LTIS to executive directors and other senior executives. The conditional awards, which vest three
years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period. All such
conditional awards are made at the discretion of the remuneration committee.
41. Reserves
Share option reserve
At beginning of the year
Share-based payments
At end of the year
Revaluation reserve
At beginning of the year
Revaluation of available for sale investments
Deferred tax on revaluation
At end of the year
Profit and loss account
At beginning of the year
Profit for the financial year
Dividends paid
Purchase of own shares
At end of the year
2013
£’000
1,912
1,111
3,023
94
(9)
(22)
63
(766)
2,902
(2,184)
(779)
(827)
2012
£’000
1,210
702
1,912
61
33
-
94
89
1,654
(1,724)
(785)
(766)
61
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notes to the company financial statements
42. Reconciliation of movements in total shareholders’ funds
Profit for the financial year
Revaluation of investments
Total recognised gains and losses for the financial year
Dividends paid
Share-based payments
Issue of new shares
Purchase of own shares by EBT
Net additions to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
43. Lease commitments
2013
£’000
2,902
(31)
2,871
(2,184)
1,111
27,469
(779)
28,488
5,772
34,260
2012
£’000
1,654
33
1,687
(1,724)
702
299
(785)
179
5,593
5,772
The Company leases office premises under non-cancellable operating lease arrangements. The future aggregate minimum lease payments under
these leases are as follows:
Within one year
Second to fifth years inclusive
After five years
44. Related party transactions
2013
£’000
908
1,626
38
2012
£’000
734
1,464
-
The Company has applied the exemption available under FRS 8 in electing not to disclose transactions and balances with its wholly owned subsidiary
companies. Details of related party transactions with directors are detailed in note 31 of the consolidated financial statements.
62
Annual Report & Accounts 2013Brooks Macdonald Group plc
Explanation of Annual General Meeting business
Enclosed with this document is a notice convening the Annual General
Colin Harris (60) became a non-executive director of the Group in
Meeting of the Company for 17 October 2013. This explanatory note
2010. Now retired from full time employment, Colin’s career culminated
gives further information on resolutions numbered 2 to 10 set out in the
in a number of senior management roles at Newton Investment
notice of Annual General Meeting.
Management which included Chief Executive and Deputy Chairman.
Resolution 2 – To declare a final dividend
The directors recommend a final dividend of 16 pence per ordinary
share. Subject to approval by shareholders, the final dividend will be
paid on 18 October 2013 to shareholders on the register on
20 September 2013.
He is a qualified solicitor and before joining Newton was the senior legal
counsel at international insurance brokers Alexander & Alexander Inc
(now part of Aon).
A copy of each service contract is available for inspection at the
Registered Office of the Company and will be available for inspection at
the Annual General Meeting.
Resolutions 3 to 5 – To re-elect certain of the directors
The Company’s articles of association state that one third of the
directors (or the nearest whole number closest to one third) must retire
Resolution 6 – To appoint PricewaterhouseCoopers LLP as auditors
This Resolution proposes that PricewaterhouseCoopers LLP should be
from office at each Annual General Meeting and offer themselves for
appointed as the Company’s auditors and authorises the directors to
re-election. In addition, any director who has been in office for more
determine their remuneration.
than three years since their last appointment or re-appointment should
also retire and offer themselves for re-election. Christopher Macdonald,
Christopher Knight and Colin Harris are therefore offering themselves for
re-election on this basis.
Information on each of the directors standing for re-election is set out
below. The Board confirms that each of the directors offering themselves
for re-election has extensive relevant experience of the Group and its
business. The Board is therefore of the opinion that all such persons
should be re-elected to the Board.
Christopher Macdonald (52) is the Chief Executive of the Group. He is
a qualified investment manager and was a founding director of the
Company in 1991. Chris has worked in investment management and
financial services since the start of his career in 1982 and has won
several investment management awards.
Chris is also the non-executive director of the Invesco AiM VCT and an
associate of the Institute of Continuing Professional Development.
Christopher Knight (67) has been a non-executive director of Brooks
Macdonald Group since 2002; he was appointed Chairman in 2005.
A chartered accountant, Chris was an investment banker for nearly 30
years, for much of that time with Morgan Grenfell and, following its
takeover, with Deutsche Bank. He has extensive corporate finance
experience gained during his banking career in London, New York and
Hong Kong.
He is a non-executive director of Intertek Group plc and of Powerflute Oyj.
Resolution 7 – Authority to allot shares
The Companies Act 2006 prevents directors from allotting unissued
shares without the authority of shareholders in general meeting. In
certain circumstances this could be unduly restrictive. The directors’
existing authority to allot shares, which was granted at the Annual
General Meeting held in 2012, will expire at the end of this year’s
Annual General Meeting.
Resolution 7 in the notice of Annual General Meeting will be proposed, as
an ordinary resolution, to authorise the directors to allot ordinary shares of
1 pence each in the capital of the Company up to a maximum nominal
amount of £44,490 (ie up to 4,449,000 ordinary shares) representing
approximately 33% of the ordinary shares in issue on 10 September
2013. The Company does not currently hold any shares in treasury.
The authority conferred by this resolution will expire on the date which
is fifteen months after the passing of this resolution or, if sooner, at the
end of next year’s Annual General Meeting.
Resolution 8 – To disapply pre-emption rights
Unless they are given an appropriate authority by shareholders, if the
directors wish to allot any of the unissued shares for cash or grant rights
over shares or sell treasury shares for cash (other than pursuant to an
employee share scheme) they must first offer them to existing
shareholders in proportion to their existing holdings. This is known as
pre-emption rights.
63
Annual Report & Accounts 2013Brooks Macdonald Group plc Explanation of Annual General Meeting business
The existing disapplication of these statutory pre-emption rights, which
The authority conferred by this resolution will expire on the date which
was granted at the Annual General Meeting held in 2012, will expire at
falls 15 months after the passing of this resolution or, if sooner, at the
the end of this year’s Annual General Meeting. Accordingly, Resolution 8
end of next year’s Annual General Meeting.
in the notice of Annual General Meeting will be proposed, as a special
resolution, to give the directors power to allot shares without the
application of these statutory pre-emption rights: first, in relation to offers
of equity securities by way of rights issue, open offer or similar
arrangements; and second, in relation to the allotment of equity securities
for cash up to a maximum aggregate nominal amount of £13,340 (ie up
to 1,334,000 ordinary shares) representing approximately 10% of the
ordinary shares in issue on 10 September 2013.
The authority sought and limits set by this resolution will also apply to a
sale by the Company of any shares it holds as treasury shares. The
Treasury Share Regulations allow shares purchased by the Company out
of distributable profits to be held as treasury shares, which may then be
cancelled, sold for cash or used to meet the Company’s obligations
under its employee share based incentive schemes. Any subsequent
transfers of treasury shares by the Company to satisfy the requirements
of employee share-based incentive schemes will be counted towards the
anti-dilution limits for such share issues to the extent required by the
Association of British Insurers guidelines.
The directors are committed to managing the Company’s capital
effectively. Although the directors have no plans to make such
purchases, buying back the Company’s ordinary shares is one of the
options they keep under review. Purchases would only be made after
considering the effect on earnings per share, and the benefits for
shareholders generally.
The Company may hold in treasury any of its own shares that it purchases
pursuant to the Treasury Share Regulations and the authority conferred by
this resolution. This would give the Company the ability to re-issue
treasury shares quickly and cost effectively and would provide the
Company with greater flexibility in the management of its capital base.
Resolution 10 – Adoption of the Brooks Macdonald Group
Company Share Option Plan
The Company is seeking approval for the establishment of the Brooks
Macdonald Group Company Share Option Plan (the ‘CSOP’). The CSOP,
which is intended to be approved by HM Revenue & Customs, is
designed to help the Company incentivise and retain key employees in a
The power conferred by this resolution will expire on the date which
way that is tax efficient and aligned with shareholders’ interests while
falls fifteen months after the passing of this resolution or, if sooner, at
being sensitive to the current economic and market environment. A
the end of next year’s Annual General Meeting.
summary of the main features of the CSOP is set out in the Appendix to
this document.
Resolution 9 – Company’s authority to purchase its own shares
Resolution 9 in the notice of Annual General Meeting, which will be
proposed as a special resolution, will authorise the Company to make
market purchases of up to 1,334,000 ordinary shares. The existing
authority to make market purchases of ordinary shares, which was
granted at the Annual General Meeting held in 2012, will expire at the
end of this year’s Annual General Meeting.
The number of ordinary shares stated in this resolution equals
approximately 10% of the Company’s ordinary shares in issue on 10
September 2013. The minimum price that may be paid is the nominal
value of an ordinary share (ie 1 pence), and the maximum price shall
not exceed 5% above the average of the middle market quotations for
an ordinary share for the five business days before each purchase is
made (exclusive of expenses).
64
Annual Report & Accounts 2013Brooks Macdonald Group plc Explanation of Annual General Meeting business
Appendix
Summary of the principal terms of the Brooks Macdonald Group
(ii)
The number of ordinary shares required to be issued to satisfy the
Company Share Option Plan (the ‘CSOP’)
Options granted under the CSOP or any of the Company’s other
Operation
The Remuneration Committee of the Board of Directors of the Company
(the ‘Committee’) will supervise the operation of the CSOP.
Eligibility
The Company or the Trustee of the Company’s Employee Benefit Trust
discretionary employee share schemes in any rolling ten year period
shall not exceed 10% of the Company’s issued share capital from
time to time.
For the purpose of these limits, shares transferred from treasury shall be
included until such time as the guidelines published by the ABI permit
such shares to be excluded.
(the ‘Grantor’) may grant options over ordinary shares in the capital of
A participant may at any time hold Options over ordinary shares with a
the Company (‘Options’) to employees and directors of the Company
total market value, as at the date of grant, of no more than £30,000 (or
and its subsidiaries.
the relevant statutory limit at the time of grant).
Options
Options may normally only be granted within the period of 42 days after
Performance conditions
Any performance condition will be set by the Grantor at the time the
the CSOP receives formal approval from HMRC or the announcement of
the Company’s results for any period. Options may also be granted within
Options are granted. Options granted to directors of the Company will
be subject to performance conditions. However, the Grantor shall have
21 days after the falling away of any restrictions which prevented grants
discretion to grant Options without performance conditions to
being made during such 42 day period. Options may be granted at other
employees who are not directors.
times in exceptional circumstances. It is intended that the first awards will
be made shortly following the adoption of the CSOP.
If events have occurred which cause the Grantor to consider that a
performance condition in respect of an Option has become unfair or
The exercise price at which each share subject to the Option may be
impractical, it may in its discretion amend waive or relax such condition
acquired will be set at the date of grant and will not be less than the
so that it would represent an equivalent achievement to when it was
market value of the share at that time.
originally imposed or last amended or relaxed, as the case may be.
An Option cannot be granted more than ten years after the CSOP
The performance condition in respect of the first Options to be granted
receives formal approval from HMRC.
No payment is required for the grant of an Option.
under the CSOP is that there must be an increase in the diluted earnings
per share of the Company of 2% per annum more than the increase in
the Retail Prices Index over the three financial years starting with the
Options will vest, and become exercisable, on or shortly after the third
financial year in which the Option is granted.
anniversary of the date of grant subject normally to continued
employment and the satisfaction of performance conditions (as further
described below).
Satisfaction of awards
It is envisaged that ordinary shares required under the CSOP will
Termination of employment
Options held by participants who cease to be employed by a member of
the Company’s group in circumstances in which they are “good leavers”
will vest and be exercisable for a period of six months (or 12 months in
the case of death) from cessation of employment, provided the
generally be purchased in the market by the Company’s employee
performance condition (if any) has been satisfied (as measured over the
benefit trust, funded by the Company. However the Company may
shortened period). In such a circumstance, there will be a pro-rata
satisfy awards by issuing shares or transferring shares out of treasury,
reduction in the size of the Option corresponding to the proportion of
subject to the following dilution limits:
(i)
The number of ordinary shares required to be issued to satisfy the
Options granted under the CSOP or any of the Company’s other
employee share schemes in any rolling ten year period shall not
exceed 15% of the Company’s issued share capital from time to time.
the vesting period which has elapsed (unless the Committee determines
that it would be inappropriate to apply a pro-rata reduction).
65
Annual Report & Accounts 2013Brooks Macdonald Group plc Explanation of Annual General Meeting business
Appendix
A “good leaver” is a person who ceases to be an employee of a member
of the Company’s group by reason of injury, disability or redundancy
(within the meaning of the Employment Rights Act 1996), retirement,
the employing company ceasing to be a member of the Company’s
Amendment
The Committee may amend the CSOP in any way it thinks fit save that:
(i)
the provisions relating to:
group or the employing business being transferred outside the
(a)
the persons to whom Options can be granted;
Company’s group.
Corporate events
In the event of a takeover, scheme of arrangement or winding up of the
Company (other than in respect of an internal corporate reorganisation)
all Options will vest early subject to:
(i)
the extent that the performance condition (if any) has been
satisfied at that time (measured over the shortened period); and
(b)
the limitations on the number of shares subject to Options;
(c)
the maximum entitlement for any one participant; and
(d)
adjustments to be made in the event of a variation in the
share capital of the Company;
cannot be altered to the advantage of a participant without the prior
approval of shareholders in general meeting (save for minor
amendments to benefit the administration of the CSOP, to take account
(ii)
the pro-rating of the Options to reflect the reduced period of time
of any change in legislation or to obtain or maintain favourable tax,
between their grant and vesting (although the Committee can
exchange control or regulatory treatment for participants, the Company
decide not to pro-rate an Option if it regards it as inappropriate to
or its subsidiaries); and
(ii)
no amendment shall be made which would alter adversely any of
the existing rights of a participant unless the amendment is made
either with the consent of the participant or required by law.
General
Benefits under the CSOP will not be pensionable.
do so in the particular circumstances).
In the event of an internal corporate reorganisation, Options will be
replaced by equivalent new options over shares in the new holding
company and the new options will continue to vest in accordance with
the rules of the CSOP.
Variation
On any variation of the share capital of the Company, the number and
nominal value of any ordinary shares comprised in an Option may be
varied in such manner as the Committee may in its absolute discretion
determine to be fair and reasonable.
Rights attaching to shares
Any ordinary shares issued or transferred when an Option is exercised
will rank equally with the ordinary shares then in issue (except for rights
arising by reference to an earlier record date).
Assignment
Options granted under the CSOP shall not be transferable or assignable.
66
Annual Report & Accounts 2013Brooks Macdonald Group plc
Notice of Annual General Meeting
Company Registration number: 4402058
Notice is given that the Annual General Meeting of Brooks Macdonald
Disapplication of pre-emption rights
Group plc (the ‘Company’) will be held at 111 Park Street, London, W1K
To resolve as a special resolution:
7JL on Thursday 17 October 2013 at 9.30 am. for the following purposes.
Ordinary business
To resolve as ordinary resolutions:
1
To receive and consider the accounts and reports of the directors
and the auditors for the year ended 30 June 2013.
2
To declare a final dividend of 16 pence per ordinary share for the
year ended 30 June 2013.
To re-elect Christopher Macdonald as a director.
To re-elect Christopher Knight as a director.
To re-elect Colin Harris as a director.
3
4
5
6
8
That, subject to the passing of resolution 7 above, the directors be
generally empowered pursuant to sections 570 and 573 of the Act
to allot equity securities (within the meaning of section 560 of the
Act) for cash, pursuant to the authority conferred by resolution 7,
as if section 561 of the Act did not apply to such allotment,
provided that this power shall expire on the date which is 15
months after the passing of this resolution or, if sooner, the end of
the next Annual General Meeting of the Company. This power shall
be limited to the allotment of equity securities:
8.1
in connection with an offer of equity securities (including,
To appoint PricewaterhouseCoopers LLP as the Company’s auditors
without limitation, under a rights issue, open offer or similar
and to authorise the directors to determine their remuneration.
Special business
Directors’ authority to allot shares
To resolve as an ordinary resolution:
7
That the directors be generally and unconditionally authorised
pursuant to section 551 of the Companies Act 2006 (the ‘Act’) to
exercise all the powers of the Company to allot shares in the
arrangement) in favour of holders of ordinary shares in the
capital of the Company in proportion (as nearly as may be
practicable) to their existing holdings of ordinary shares but
subject to such exclusions or other arrangements as the
directors deem necessary or expedient in relation to fractional
entitlements or any legal, regulatory or practical problems
under the laws of any territory, or the requirements of any
regulatory body or stock exchange; and
Company and to grant rights to subscribe for, or to convert any
8.2
otherwise than pursuant to paragraph 8.1 up to an aggregate
security into, shares in the Company (‘Relevant Securities’), up to a
maximum aggregate nominal amount of £44,490, for a period
expiring (unless previously revoked, varied or renewed) on the date
which is 15 months after the passing of this resolution or, if sooner,
the end of the next Annual General Meeting of the Company.
However, in each case the Company may, before such expiry, make
an offer or agreement which would or might require Relevant
Securities to be allotted after this authority expires and the directors
may allot Relevant Securities in pursuance of such offer or
agreement as if this authority had not expired.
All previous unutilised authorities given to the directors pursuant to
section 551 of the Act shall cease to have effect at the conclusion of
the Annual General Meeting, save to the extent that those
authorities are exercisable pursuant to section 551(7) of the Act by
reason of any offer or agreement made prior to the date of this
resolution which would or might require shares to be allotted or
rights to be granted on or after that date.
nominal amount of £13,340; but the Company may, before
such expiry, make an offer or agreement which would or might
require equity securities to be allotted after this power expires
and the directors may allot equity securities in pursuance of
such offer or agreement as if this power had not expired.
This power applies in relation to a sale of shares which is an
allotment of equity securities by virtue of section 560(2)(b)
of the Act as if in the first paragraph of this resolution the
words “pursuant to the authority conferred by resolution 7”
were omitted.
All previous unutilised powers given to the directors pursuant
to sections 570 and 573 of the Act shall cease to have effect at
the conclusion of this Annual General Meeting.
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Annual Report & Accounts 2013Brooks Macdonald Group plc
Notice of Annual General Meeting
Company’s authority to purchase its own shares
By order of the Board
To resolve as a special resolution:
9
That the Company be generally authorised pursuant to section 701
of the Act to make market purchases (within the meaning of section
Simon Jackson
Company Secretary
693(4) of the Act) of its ordinary shares of £0.01 each on such
10 September 2013
Registered Office:
111 Park Street, Mayfair, London W1K 7JL
terms and in such manner as the directors shall determine,
provided that:
9.1 the maximum number of ordinary shares hereby authorised to
be purchased is 1,334,000;
9.2 the maximum price which may be paid for each ordinary
share shall be 5% above the average of the middle market
quotations for an ordinary share (as derived from The Stock
Exchange Daily Official List) for the five business days
immediately before the day on which the purchase is made
(in each case exclusive of expenses);
9.3 the minimum price which may be paid for each ordinary share
shall be £0.01; and
9.4 this authority (unless previously revoked, varied or renewed)
shall expire on the date which is 15 months after the passing of
this resolution or, if sooner, the end of the next Annual General
Meeting of the Company, except in relation to the purchase of
ordinary shares the contract for which was concluded before
such date and which will or may be executed wholly or partly
after such date.
Adoption of the Brooks Macdonald Group Company Share
Option Plan
To resolve as an ordinary resolution:
10
That the Brooks Macdonald Group Company Share Option Plan
(the ‘CSOP’), a copy of the draft rules of which is produced to the
meeting initialled by the Chairman for the purposes of identification
and the principal terms of which are summarised in the Appendix,
be adopted, that such rules be and are hereby approved in the
form of the draft subject to any amendments which may be
required in order to obtain the approval of HM Revenue & Customs
and that the directors be and are hereby authorised to do all acts
and things which they may consider necessary or expedient for
implementing, giving effect to and operating the CSOP.
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Annual Report & Accounts 2013Brooks Macdonald Group plc
Notice of Annual General Meeting
Notes:
Rights to appoint a proxy
1
Members of the Company are entitled to appoint a proxy to
exercise all or any of their rights to attend and to speak and vote at
a meeting of the Company. A proxy does not need to be a member
Corporate representatives
6
Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all of its
powers as a member provided that they do not do so in relation to
the same shares.
of the Company. A member may appoint more than one proxy in
Other rights of members
relation to a meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by
that member.
7
Any member attending the meeting has the right to ask questions.
The Company must cause to be answered any such question
relating to the business being dealt with at the meeting but no
2
A proxy form which may be used to make such appointment and
such answer need be given if (a) to do so would interfere unduly
give proxy directions accompanies this notice. If you do not receive
with the preparation for the meeting or involve the disclosure of
a proxy form and believe that you should have one, or if you
confidential information, (b) the answer has already been given on
require additional proxy forms in order to appoint more than one
a website in the form of an answer to a question, or (c) it is
proxy, please contact Capita Registrars Limited, PXS, 34 Beckenham
undesirable in the interests of the Company or the good order of
Road, Kent BR3 4TU.
the meeting that the question be answered.
Procedure for appointing a proxy
Documents available for inspection
3
To be valid, the proxy form must be received by post or (during
8
There will be available for inspection at the Registered Office of the
normal business hours only) by hand at Capita Registrars Limited,
Company during normal business hours on any weekday
PXS, 34 Beckenham Road, Kent BR3 4TU no later than 9.30 am. on
(excluding Saturdays and public holidays) and at the place of the
Tuesday 15 October 2013. It should be accompanied by the power
meeting for at least 15 minutes prior to and during the Annual
of attorney or other authority (if any) under which it is signed or a
General Meeting copies of:
•
•
the service contract of each executive director; and
the letter of appointment of each non-executive director.
notarially certified (or certified by a solicitor with a current
practising certificate) copy of such power or authority.
4
The return of a completed proxy form will not preclude a member
from attending the Annual General Meeting and voting in person if
he or she wishes to do so.
Record date
5
To be entitled to attend and vote at the Annual General Meeting
(and for the purpose of the determination by the Company of the
votes they may cast), members must be registered in the Register
of Members of the Company at 6:00 pm on Tuesday 15 October
2013 (or, in the event of any adjournment, at 6:00 pm on the day
48 hours before the time of the adjourned meeting). Changes to
the register of members after the relevant deadline will be
disregarded in determining the right of any person to attend and
vote at the meeting.
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Annual Report & Accounts 2013Brooks Macdonald Group plc
Form of proxy
Annual General Meeting 17 October 2013 at 9.30am
Brooks Macdonald Group plc
Please read the notice of meeting and the explanatory notes below before completing this form.
I/We (see note 5) Name
Address
being a member/members of the above-named Company hereby appoint the chairman of the meeting (see note 6) OR
Name
Address
as my/our proxy to attend, speak and vote in my/our name and on my/our behalf at the Annual General Meeting of the Company to be held on
17 October 2013 at 9.30 am and at any adjournment thereof.
Please tick this box if this proxy appointment is one of multiple appointments being made by the same member (see note 2).
D
L
O
F
The above proxy is appointed to exercise the rights attached to [all] OR Number shares
held by me.
(see notes 1 and 2) of the ordinary shares
I/we direct my/our proxy to vote on the resolutions set out in the notice of Annual General Meeting as I/we have indicated by placing a mark in the
appropriate box below (see notes 7 and 8).
D
L
O
F
Ordinary business
FOR
AGAINST
VOTE WITHHELD
Resolution 1: To receive and consider the Annual Report and Accounts for the year ended 30 June 2013
Resolution 2: To declare a final dividend of 16 pence per ordinary share
Resolution 3: To re-elect Christopher Macdonald as a director
Resolution 4: To re-elect Christopher Knight as a director
Resolution 5: To re-elect Colin Harris as a director
Resolution 6: To appoint PricewaterhouseCoopers LLP as the Company’s auditors and to authorise the directors
to determine their remuneration
Special business
FOR
AGAINST
VOTE WITHHELD
Resolution 7: Ordinary resolution to give the directors authority to allot shares
Resolution 8: Special resolution to give the directors power to disapply pre-emption rights in relation to the
allotment of shares
Resolution 9: Special resolution to give the Company a general authority to purchase its own shares
Resolution 10: Ordinary resolution to approve the adoption of a Company Share Option Plan
Signature:
(To be valid, this proxy form must be signed) (see note 11)
Notes:
Date:
/
/2013
Your rights to appoint a proxy
1
As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend and to speak and vote at a meeting of the Company. A proxy does not need to
be a member of the Company. You may appoint more than one proxy in relation to a meeting provided that each proxy is appointed to exercise the rights attached to a different share or
shares held by you.
You may appoint a proxy in respect of all or some only of the shares held by you. If you do not want to appoint a proxy in respect of all of the shares held by you, delete the word “all” in
square brackets and insert the number of shares in respect of which you wish to appoint your proxy in the box provided. If you sign and return this proxy form with no number inserted, you
will be deemed to have appointed your proxy in respect of all of the shares held by you.
If you require additional proxy forms in order to appoint more than one proxy, please contact the Company’s registrar, Capita Registrars Limited, or you may copy this form. Please indicate by
ticking the box provided if the proxy appointment is one of multiple appointments being made. You must also indicate in the separate box the number of shares in relation to which the proxy
holder is authorised to act as your proxy. All proxy forms must be signed and should, wherever possible, be returned together in one envelope.
If you appoint a proxy, this does not preclude you from attending the meeting and voting in person.
2
3
4
Procedure for appointing a proxy
5 Please insert your full name and address in block capitals in the box.
6
To appoint as your proxy a person other than the chairman of the meeting, delete the words in square brackets and insert the full name and address of your chosen proxy in block capitals in
the box. If you sign and return this proxy form with no name inserted in the box, the chairman of the meeting will be deemed to be your proxy. Where you appoint as your proxy someone
other than the chairman of the meeting, it is your responsibility to ensure that that person attends the meeting and is aware of your voting intentions. If you wish your proxy to make any
comments on your behalf, you will need to appoint someone other than the chairman of the meeting and give that person your directions.
Directing your proxy how to vote
7
To direct your proxy how to vote on the resolutions mark the appropriate box with a “✔”or an “X”. If no voting direction is given, your proxy can vote or abstain from voting as he or she
chooses. Your proxy has the right to vote (or abstain from voting) as he or she chooses in relation to any other business (including a resolution to adjourn the meeting or to amend a
resolution) which may properly come before the meeting.
The “vote withheld” option is provided to enable you to abstain on any particular resolution. However, it should be noted that a “vote withheld” is not a vote in law and will not be counted
in the calculation of the proportion of the votes “for” and “against” a resolution.
8
Other
9
To be valid, this proxy form must be received by post or (during normal business hours only) by hand at Capita Registrars Limited, PXS, 34 Beckenham Road, Kent BR3 4TU no later than
9.30am on Tuesday 15 October 2013.
10 In the case of joint holders of any share, where more than one of the joint holders purports to appoint a proxy in respect of the same share, only the appointment submitted by the person
whose name stands first in the register as one of the joint holders will be accepted.
11 This proxy form must be signed and dated by the member or his or her attorney duly authorised in writing. In the case of a member which is a company, this proxy form must be executed
under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or other authority under which this proxy form is signed, or
a copy of such power or authority, must be included with the proxy form.
12 In accordance with Regulation 41 of the Uncertificated Securities Regulations Act only those shareholders entered on the register of members at 6.00pm on Tuesday 15 October 2013 are
entitled to attend and vote at the Annual General Meeting to be held at 9.30am on 17 October 2013.
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Annual Report & Accounts 2013Brooks Macdonald Group plc
Directors and advisers
Chairman
Chief Executive
Non-executive Director
Finance Director
Non-executive Director
Directors
C J Knight
C A J Macdonald
C R Harris
N I Holmes
S J Jackson
D Seymour-Williams
A W Shepherd
R H Spencer
S P Wombwell
Offices
110 and 111 Park Street Mayfair London W1K 7JL
The Long Barn Dean Estate Wickham Road Fareham Hampshire PO17 5BN
1 Marsden Street Manchester M2 1HW
2 Mount Ephraim Road Tunbridge Wells Kent TN1 1EE
10 Melville Crescent Edinburgh EH3 7LU
Richmond House Heath Road Hale Cheshire WA14 2XP
Blackbrook Gate Blackbrook Park Avenue Taunton Somerset TA1 2PX
Howard House 3 St Mary’s Court Blossom Street York YO24 1AH
Liberation House Castle Street St. Helier Jersey JE2 3AT
Yorkshire House Le Truchot St. Peter Port Guernsey GY1 1WD
36 Hamilton Terrace Holly Walk Leamington Spa Warwickshire CV32 4LY
John Stow House 18 Bevis Marks London EC3A 7JB
Company Secretary
S J Jackson
Registered Office
111 Park Street Mayfair London W1K 7JL
Company Registration Number
4402058
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside London SE1 2RT
Solicitors
Macfarlanes LLP
20 Cursitor Street London EC4A 1LT
Public Relations
MHP Communications Limited
60 Great Portland Street London W1W 7RT
Principal Bankers
The Royal Bank of Scotland plc
40 Islington High Street London N1 8JX
Registrars
Capita Registrars Limited
The Registry 34 Beckenham Road Kent BR3 4TU
Nominated Adviser and Broker
Canaccord Genuity Limited
9th Floor 88 Wood Street London EC2V 7QR
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Annual Report & Accounts 2013Brooks Macdonald Group plc
www.brooksmacdonald.com