21 Lombard Street
London
EC3V 9AH
www.brooksmacdonald.com
Momentum building
Delivering on strategy
Annual Report and Accounts
for the year ended 30 June 2021
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In FY21 the Group has emerged as a stronger business,
building momentum and making substantial progress on
the delivery of its strategy.
Our Purpose
Realising ambitions and
securing futures
Our Purpose
Our Mission
To protect and enhance
our clients’ wealth
through the provision of
investment management
and advice underpinned
by excellent client service
Our Vision
To be the leading
investment manager for
intermediaries
Our Mission
Our Vision
Read more about our strategy
on pages 28 to 29
Our strategy
1
2
3
Market-leading
organic
growth
Service and
operational
excellence
Agile, high-
quality M&A
Our Guiding Principles
We do the
right thing
We are
connected
We care
We make a
difference
Contents
Introduction
Highlights of the year
Realising ambitions, securing futures
Our investment case
Our history
Strategic report
Chairman’s statement
CEO’s review
Business model
Marketplace
Our services
Supporting our clients and advisers
Our strategy
Key performance indicators
Financial review
Risks
Viability statement
How we engage with our stakeholders
Corporate responsibility report
Corporate governance
Introduction to Corporate governance
Board overview
Board and Committee structure
Board of Directors
Executive Committee
Audit Committee report
Nominations Committee report
Remuneration Committee report
Risk and Compliance Committee report
Report of the Directors
Statement of Directors’ responsibilities
Independent Auditors’ report
Financial statements
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
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the Company financial statements
Other information
Company information
Glossary
Our offices
02
04
05
06
10
14
18
20
22
26
28
30
32
42
48
50
54
72
73
74
77
82
84
88
90
106
110
112
114
124
125
126
127
128
168
169
170
171
178
179
180
In this report
Read more about how we are
building momentum with
our value creation strategy
pages 28 to 29
Read more on our
realising ambitions and
securing futures
page 4
Read more about our
engagement with
our stakeholders
pages 50 to 53
Visit our website at:
www.brooksmacdonald.com
01
IntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021 Highlights of the year
Financial highlights1
Strategic progress
Completed successful integration of
acquisitions of Cornelian Asset
Managers and Lloyds’ Channel Islands
wealth management and funds business
Rapid growth of our new B2B BM
Investment Solutions proposition with
strong pipeline for FY22
BPS specialised products also growing
strongly with FUM up almost 50%
Progress on digital transformation,
partnering with SS&C to deliver best-
in-class client and intermediary
experience and service levels
Andrew Shepherd appointed
CEO in May
Funds under management
(“FUM”) (£bn)
Revenue (£m)
Underlying2
profit before tax (£m)
Underlying2 profit
margin before tax (%)
16.5
118.2
105.7
108.6
13.1
13.7
30.6
25.9
23.0
20.7
21.2
19.6
FY19
FY20
FY21
FY19
FY20
FY21
FY19
FY20
FY21
FY19
FY20
FY21
Statutory profit before
tax from continuing
operations (£m)
Underlying2 diluted
earnings per share (p)
Statutory diluted earnings
per share from continuing
operations (p)
Total dividend
per share (p)
25.1
155.1
124.9
63.0
123.5
123.7
53.0
51.0
10.0
8.3
42.6
43.1
FY19
FY20
FY21
FY19
FY20
FY21
FY19
FY20
FY21
FY19
FY20
FY21
1. The comparatives for FY19 have been restated to reflect the correct recognition of the Authorised Corporate Director fees and associated costs
in respect of one of the Group’s managed OEICs and the correct VAT treatment on the fees recognised on the Managed Portfolio Service offered
through third-party platforms, as detailed in the Group’s FY20 Annual Report and Accounts.
2. The underlying figures represent the results for the Group’s continuing activities excluding certain adjusting items as listed on pages 38 to 39 of the
Strategic report. These represent an alternative performance measure for the Group. A reconciliation between the Group’s statutory and underlying
profit before tax is included on page 38.
02
IntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021
Realising ambitions, securing futures
Our investment case
The Group’s strategy is underpinned by our mission to
protect and enhance our client’s wealth, enabling them to
realise their ambitions and secure their futures.
Clients
Private
clients
Trustees
Pension
funds
Independent financial
advisers
Our model allows for our
centralised core team to
liaise with independent
financial advisers to
best understand clients’
needs, challenges and
concerns, allowing us
to efficiently deliver the
right service.
In d e
e
p
S u
Services
We offer a comprehensive range of
investment products and services, sold
direct or through intermediaries, from
bespoke discretionary portfolios to
model portfolios and unitised solutions.
Read more about our
services on pages 22 to 25
C l ients
n d e n t F inancial A
d
vis
e
r
s
t
r
o
a n d Innovatio
p
p
n
e r vices
S
CIP
Read more about our
clients on pages 26 to 27
Support and innovation
We drive innovation
in our products and
services. From our
core Bespoke Portfolio
Service, we have rolled
out a cost-efficient
Managed Portfolio
Service, a unitised Multi-
Asset Fund range and
a number of specialist
products.
CIP
Our Centralised Investment Process
allows us to continuously meet client’s
expectations and make great sustainable
investment decisions.
Read more about our
Centralised Investment
Process on pages 22 to 23
1
Strong fundamental market
opportunity, driven by
demographic, regulatory and
technological changes.
2 Strong brand and relationships in
intermediary channel, positioned
to take advantage of increasing
demand for outsourcing investment
management.
3 Clear vision for Brooks Macdonald as
the leading investment manager for
intermediaries, with complementary
Private Clients business.
4 Three value drivers: strong organic
growth, service and operational
excellence, and selective high-quality
acquisitions.
5
Robust Centralised Investment
Process, driving consistently strong
investment returns for clients.
6 Compelling investment proposition,
differentiated set of specialised BPS
products, funds and unitised solutions,
and business-to-business investment
solutions tailored to adviser.
7
Building market-leading
intermediary experience and client
service levels, through partnership
with SS&C, our world-class
technology and services provider.
8 Strong leadership team with depth
of investment management, adviser-
facing and client-facing experience,
complemented by functional expertise.
Read more about our investment case in the
Strategic report on pages 18 to 29
04
Brooks Macdonald Group plc / Annual Report and Accounts 2021
05
IntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021 Our history
The Group marks its 30th year anniversary since its inception in 1991. The last
30 years were marked by several milestones including listing on AIM in 2005,
the completion of a number of acquisitions and growing its footprint across the
UK and the Channel Islands.
Name change
to Brooks
Macdonald
First acquisition –
Canterbury
fund manager
Lawrence House
2002
2009
2002–2011
Brooks Macdonald Gayer
& Co Ltd founded by CEO
Chris Macdonald along
with three others including
Richard Spencer who is still
with Brooks Macdonald today
1991
1991–2001
Caroline Connellan
replaces Chris
Macdonald as CEO
Acquisition of
Edinburgh based
Cornelian Asset
Managers
Andrew Shepherd
replaces
Caroline Connellan
as CEO
FUM £3 billion
FUM £10 billion
FUM £13 billion
FUM £16 billion
2012
2017
2019
2021
2012–2021
2016
2018
2020
2005
2011
25 year anniversary
Launch of Guiding
Principles
Acquisition of
Lloyds Bank
Group’s
Channel Islands
wealth management
and funds business
1993
Listed on the
Alternative Investment
Market (“AIM”)
Acquisition of
Clarke Willmott
FUM £250 million
FUM £500 million
FUM denotes Funds Under Management
06
1991
Then vs Today
2021
FUM
£5 million
5
Employees
FUM
£16.5 billion
420+
Employees
07
IntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021
Strategic report
A comprehensive review
of our business and strategy
Contents
Chairman’s statement
CEO’s review
Business model
Marketplace
Our services
Supporting our clients and advisers
Our strategy
Key performance indicators
Financial review
Risks
Viability statement
How we engage with our stakeholders
Corporate responsibility report
10
14
18
20
22
26
28
30
32
42
48
50
54
Chairman’s statement
Brooks Macdonald has had a strong year, setting records for FUM and revenue.
155.1p
63.0p
Underlying diluted EPS up 25.4% to 155.1p from the
FY20 figure of 123.7p.
Dividend up 10p or 18.9% to 63p (FY20: 53p).
Introduction
I am pleased to report that Brooks Macdonald has had a
strong year, setting records for FUM and revenue. The Group
has also delivered further improvement in underlying profit
and underlying profit margin in line with our medium-term
commitments. The closing FUM figure of £16.5 billion was
delivered through strong investment performance and the
completion of our acquisition of Lloyds Banking Group’s
Channel Islands wealth management and funds business
(“Lloyds Channel Islands”), partially offset by net outflows over
the year. Although net flows for the full year were negative,
they improved each quarter and we were pleased to return to
positive net flows in Q4 and for H2 overall.
Our Centralised Investment Process continues to deliver strong
performance, underpinning our mission to protect and enhance
our clients’ wealth. Overall investment performance of 15.8%
for the financial year to June was well ahead of the MSCI PIMFA
Private Investor Balanced Index which was up 12.9%.
In May, I was delighted to announce the appointment
of Andrew Shepherd as our new Group CEO, subject to
regulatory approval, following the resignation of Caroline
Connellan. Andrew’s unrivalled knowledge of the industry
and commitment to the Group made him uniquely qualified to
build on the significant momentum in the business and he has
certainly hit the ground running since his appointment.
I would also like to reiterate my thanks to Caroline for her
leadership of Brooks Macdonald over a four-year period,
where she has been central to the transformation of the
business, leaving it in a position of strength and primed for
further growth.
Andrew has a strong focus on people and culture and, as we
emerge from the pandemic and associated restrictions, he
will continue to prioritise the wellbeing and safety of
our people, while ensuring that the Group supports its
intermediaries and clients.
Performance overview
Brooks Macdonald continues to grow strongly, driven by
our strategy of focusing on intermediaries, for whom we
aim to be partner of choice. Underlying profit before tax was
£30.6 million, up 33.0% on the year (FY20: £23.0 million), and
underlying diluted earnings per share (“EPS”) was up 25.4% to
155.1p (FY20: 123.7p).
Statutory profit before tax rose 151.0% to £25.1 million
(FY20: £10.0 million), driven mainly by a gain related to the
Lloyds Channel Islands acquisition. Statutory diluted EPS
rose 189.8% to 124.9p (FY20: 43.1p).
Dividend
The Board has recommended a final dividend of 40.0p
(FY20: 32.0p) which, subject to approval by shareholders, will
result in total dividends for the year of 63.0p (FY20: 53.0p).
This represents an increase of 25.0% in the final dividend and
18.9% in the total dividend on the previous year and underlines
the Board’s confidence in the prospects for the Group, and
our commitment to a progressive dividend policy. The final
dividend will be paid on 5 November 2021 to shareholders on
the register at the close of business on 24 September 2021.
11
Our 25% increase in the final
dividend underlines the Board’s
confidence in the Group’s
prospects.
Alan Carruthers
Chairman
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Introduction
Strategic report
Corporate governance
Financial statements
Chairman’s statement continued
Read more about our Corporate
governance on pages 72 to 112
Read more about our
performance on pages 32 to 41
Board changes
There have been several changes to the Board during the
financial year and in the post-close period. As mentioned in
last year’s Annual Report and Accounts, Dagmar Kershaw and
Robert Burgess joined the Board with effect from 1 July 2020
and 1 August 2020 respectively. Following her resignation as
CEO, Caroline Connellan formally stepped down from the
Board with effect from 27 May 2021. Post-close, our new CEO
designate, Andrew Shepherd, and the Group Chief Operating
Officer, Lynsey Cross, were appointed to the Board with effect
from 13 July 2021.
Looking ahead
The macroeconomic outlook in the short term remains
tightly linked to progress in moving beyond the pandemic
and its impact on the economy, markets and client sentiment.
The fundamental opportunity for Brooks Macdonald remains
strong, driven by demographic and policy trends as well
as increasing adviser demand for outsourced investment
management, where we aim to be the partner of choice.
The Group has a strong balance sheet, supportive shareholders
and an ambitious growth agenda. We look to the future with
confidence.
Alan Carruthers
Chairman
15 September 2021
12
Brooks Macdonald Group plc / Annual Report and Accounts 2021
CEO’s review
Another year when Brooks Macdonald delivered strong financial performance.
£16.5bn
25.9%
FUM reached a new record of £16.5bn driven by strong
investment performance and the Lloyds Channel Islands
acquisition.
Reported an increase in underlying profit margin of
4.7 points on prior year, delivering on our commitment.
Introduction
Having taken over as CEO of Brooks Macdonald in May, I am
delighted to present my first report covering another year
when we delivered strong financial performance, despite
pandemic-related restrictions persisting throughout the year.
Under the leadership of my predecessor, Caroline Connellan,
the business has emerged stronger from a period of change
followed by the rigours of lockdown. I am excited to take over
a business primed for growth with exceptional opportunities
and I am grateful to Caroline for the work she has done in her
four years as CEO. While this was a turbulent time for both the
economy and wider society, with the impact of Brexit and the
pandemic, the Group has been able to trade largely as normal,
deliver robust financial results and support our clients and
intermediaries.
Nonetheless, it has been a challenging year in many ways and
I would like to thank several groups of people without whom
this performance would not have been possible. Our first
priority is our clients and I am pleased that we have been able
to continue to protect and enhance their wealth with strong
investment performance and high levels of service, and I thank
them for their confidence in our business and our people.
Likewise, I thank the intermediaries we work with for their
continuing support, which is critical to our continued success.
However, most of all, I want to thank all the people who work
for Brooks Macdonald. Their hard work and commitment to
our clients and intermediaries has been unwavering despite
the challenging context, and I am enormously grateful to them.
Delivering our strategy
Brooks Macdonald has been through a period of change,
building the foundations for our future success. Our strategy
is clear, founded on the three value drivers of organic growth,
service and operational excellence, and selective high-quality
acquisitions.
Our vision for Brooks Macdonald is as the leading investment
manager for intermediaries and we are working with our
intermediary network – present and future – to ensure we
understand what they need from us. We continue to look
to deliver further improvements in returns, delivering
consistently top quartile underlying profit margins, through
building on the sustainable and scalable business model we
are putting in place. We are making substantial progress, ready
to capitalise on the growth opportunities we see ahead.
A core element of our strategy, alongside our robust
Centralised Investment Process and our compelling
investment proposition, is to transform our intermediary
experience and client service levels to be best-in-class.
Our digital experience for intermediaries and clients –
complementing our face-to-face relationships – will be market-
leading, including automated onboarding, full intermediary
and client portal functionality, and bespoke reporting. We
are partnering with SS&C Technologies (“SS&C”), the leading
wealth management technology and services company, to
deliver this transformation. We expect SS&C to complete the
current phase of the transformation, transition of all client- and
intermediary-facing processes on to their platform, by the end
of this calendar year.
Financial performance
Brooks Macdonald had another year of strong financial
performance in FY21, delivering on our medium-term
commitment to improve profit margins with underlying
profit margin up 4.7 points to 25.9%. We also delivered record
revenue and underlying profit levels of £118.2 million and
£30.6 million respectively.
Our year-end closing FUM also increased sharply to
£16.5 billion, up 20.3% on the FY20 figure of £13.7 billion. The
biggest contributor was strong investment performance,
delivering £2.2 billion of growth, supported by £0.9 billion from
the acquisition of the Lloyds Channel Islands business (which
completed in November 2020), partially offset by £0.3 billion of
net outflows over the year. Net flows improved every quarter
over the year, with positive flows of £0.1 billion in H2 overall,
and we have a strong pipeline going into FY22.
15
Most of all, I want to thank all
the people who work for Brooks
Macdonald for their unwavering
commitment.
Andrew Shepherd
CEO designate
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
CEO’s review continued
Investment performance and
market conditions
Our investment performance through FY21 was strong at 15.8%,
well ahead of the 12.9% recorded by the MSCI PIMFA Private
Investor Balanced Index. We were also ahead of the ARC
benchmark for all our risk profiles over the year, as well as, over
the last 5 and 10 years.
Investment markets in FY21 were complicated by the
significant sector rotation at the start of calendar 2021, as
cyclical and value sectors recovered after the growth and
defensive dominance of 2020. Despite the challenging
conditions, we navigated this market well, outperforming in
the first-half of the financial year and bringing more balance to
client portfolios in the second half.
Looking ahead, we expect equities to continue to outperform
bonds due to the strong relative valuation preference for
equity markets. We also expect higher inflation levels in 2021 to
encourage investors still in cash to deploy these funds into risk
assets to seek an above inflation return. This scenario would
support our overweight equity portfolio positioning, as well as,
improving flows into asset management in general.
Review of business performance
Robin Eggar, our Head of UK Investment Management
(“UKIM”), and his team have continued to serve clients and
intermediaries across the UK, providing outstanding levels
of service. We have seen a steady improvement in flows
throughout the year, with particularly strong performance
from Brooks Macdonald Investment Solutions, Platform
Managed Portfolio Service (“PMPS”), and our specialist
Bespoke Portfolio Service (“BPS”) offerings. Investment
Solutions is a more business-to-business offering, where we
work with an adviser firm to provide a tailored investment
proposition, in either model portfolio or fund format, to meet
the needs of their clients. This has been highly successful in
the past year with several material deals agreed. PMPS is the
platform version of our traditional custody Managed Portfolio
Service (“MPS”) and we have continued to increase the number
of platforms where it is available, now up to 20 of the most
popular platforms, and this has helped drive strong growth in
the year.
In our flagship BPS product, we have continued to see good
growth in our specialist offerings – the AIM Portfolio Service,
the Responsible Investment Service, our Decumulation
Service, and our Court of Protection service. The success of
these more specialised offerings underlines the importance of
our focus on client needs.
The Funds business has experienced net outflows in each
quarter, particularly in our Defensive Capital Fund (“DCF”)
which has been affected by a downturn in sentiment in the
Investment Association’s Targeted Absolute Return sector.
DCF did have strong investment performance for the year at
14.4% for the main institutional share class, well ahead of the
sector. For Funds overall, the quarterly trend showed declining
outflows so we are optimistic for FY22.
We have integrated our Financial Planning business with our
existing UKIM direct client activities, which were boosted by
the Cornelian acquisition, into a new Private Clients arm within
UKIM designed to ensure our direct clients receive the best
possible service.
We have continued to take action to position the business for
future success. As examples, during the year we opened offices
in Exeter and Cheltenham, replacing our office in Taunton, and
moved premises in Edinburgh, Manchester, Leeds and Jersey,
to improve facilities for clients and staff, and to access a larger
group of intermediaries and greater pools of wealth.
In International, Richard Hughes took over from me as
CEO International when I took the Group role, and I am
delighted to leave the business in such capable hands, having
worked closely with him as my deputy for the past two
years. We continued to improve International’s commercial
performance, with the underlying profit margin before tax
up six points, now just short of 25% and materially closing the
gap to UKIM. International was reinforced by the completion
in November of the acquisition of the Lloyds Channel
Islands business and we are delighted with the quality of
people we brought in, all allowing us to accelerate the margin
improvement. We will also shortly be opening an Isle of Man
office, subject to regulatory approval. Over the year, solid
investment performance was largely outweighed by net
outflows, driven in particular by a number of larger, low margin
mandates, with overall FUM growth in International being
mainly driven by the Lloyds addition.
Client need and demand for the benefits provided by
the combination of high-quality financial planning and
investment management remain strong, driven by underlying
demographics and increasing policy onus on the individual to
save for retirement. We continue to see a strong opportunity
both to build relationships with more intermediaries and to
extend our relationships with our current intermediaries, as
well as, building our new Private Clients unit.
People
People and culture are high priorities for me and I am pleased
to report that we have continued to invest in our people
throughout the year, supporting the talent we have in the
business, as well as, bringing in new, high-quality hires. I am
particularly pleased that we have been able to promote two
more of our most talented internal leaders to the Executive
Committee: Richard Hughes, who replaced me in International,
and Edward Park, who took over as Chief Investment Officer
last October when co-founder Richard Spencer decided to step
down from the role.
16
Richard Spencer’s decision was made all the easier by having
a strong deputy in place to take up the reins, and Richard
remains very much a presence in the business, looking after
his clients and acting as senior adviser to the Investment
Committee.
We communicate frequently with our people and also gather
their feedback through town halls, more informal sessions
and Group-wide employee engagement surveys. We continue
to see strong engagement metrics as we emerge from
lockdown and we continue to explore ways to improve Brooks
Macdonald’s proposition to our people.
Outlook
I am hugely excited by our ambitious vision for the Group as
the leading investment manager for intermediaries. We will
build on our success to date:
• Driving organic growth, both through intermediaries
and among private clients, with strong investment
performance;
• Ensuring service and operational excellence, particularly
through our partnership with SS&C to transform the
intermediary experience and client service levels; and
•
Seeking selective high-quality acquisitions.
We will also continue to strive to deliver strong financial
performance with improving returns, targeting consistent top
quartile profit margins.
The fundamental potential for Brooks Macdonald remains
strong. The disruption caused by COVID-19 has reinforced
the importance of high-quality financial planning and
investment management and we are well positioned to
help clients and intermediaries realise their ambitions
and secure their futures.
I would like to finish by reiterating my thanks to the
intermediaries we work with and our clients for their
continuing support, as well as – most importantly –
to our people. I am delighted to have been invited
to take on the role of CEO for many reasons
but, above all else, for the opportunity to lead
these people at a time of great excitement and
opportunity for the Group.
Andrew Shepherd
CEO designate
15 September 2021
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Business model
Over the 30 years of Brooks Macdonald’s existence, our business model has successfully supported our mission to protect and
enhance our clients’ wealth through the provision of investment management and financial planning, alongside exceptional client
service. We are proud of our consistent delivery of robust investment performance through our Centralised Investment Process
and exceptional client service through the client-centric, “can-do” attitude of the people we recruit.
Our key resources
We work with
financial advisers...
How we do it
What this means for our stakeholders
Expertise
We have deep expertise in investment management and
financial planning. We apply that expertise through our
investment process, whether working through intermediaries
or directly with private clients, to ensure that each portfolio is
managed to meet the client’s risk profile and requirements, and
ultimately to meet their long-term needs.
People
Our people are our greatest strength and we focus on attracting
and retaining the best talent in the industry. Over recent years,
we have increased the capability of our people across all levels
of the organisation through a combination of developing our
internal talent and making selective key hires, and we now have
a powerful mix of Brooks Macdonald experience and fresh
ideas from elsewhere.
Culture
Our client-centric culture is driven by our Guiding Principles,
defined by our people in 2018: we do the right thing, we are
connected, we care and we make a difference. These principles
underpin everything that we do.
Centralised Investment Process
Our Centralised Investment Process is core to delivering our
best ideas consistently to all our clients through collective asset
allocation and asset selection processes, supported by a set of
investment rules – on, for example, liquidity – that guide our
decision making.
Financial resources
Brooks Macdonald has a strong balance sheet and supportive
shareholders. The business is highly cash-generative and has
zero debt.
Advisers select Brooks Macdonald because of the resources
we bring to bear on protecting and enhancing their clients’
wealth
The adviser determines which of the firm’s services is most
suitable for the client, based on their risk profile and their
financial objectives
We implement the service selected and work with the adviser
to ensure the client’s portfolio is managed appropriately
In some cases, we provide a white-labelled service for the
adviser, typically based on model portfolios or unitised
solutions
We also work directly with
private clients…
Some clients approach us directly for financial planning, or
they are introduced by a professional other than a financial
adviser – e.g. a solicitor or an accountant. We are able to work
with the client directly to understand whether they need
one-off advice or more regular financial planning, and can
provide either
If the client is seeking independent advice or has complex
needs, we provide independent “whole of market” advice,
and we help them choose the best solution. Equally, for
less complex needs, we provide advice on a restricted basis
including the provision of our investment management
services if they are suitable for the client
If the client has minimal financial planning requirements but
has come to us directly seeking investment management
services, we determine whether any of the firm’s services are
suitable for the client and, if so, we will provide investment
advice including the provision of one or more of our
investment management services
In all cases where we provide the investment management
service, we manage the client’s portfolio with the same
investment rigour
We have delivered consistent robust investment
performance through our Centralised Investment Process
and exceptional client service through the client-centric, “can-
do” attitude of the people we recruit
Clients
We help our clients realise their ambitions and secure their
futures by protecting and enhancing their wealth through our
investment management and financial planning services.
Advisers
The professional advisers we work with receive a range of
services to support their client relationships, and peace of mind
that investment management is being conducted consistently,
with deep market insight and in a robustly compliant manner.
Employees
We have developed a strong people proposition, that continues
to improve, and is aimed at attracting and retaining the best
people in the industry.
Shareholders
Shareholders benefit from the performance of the Group
through both capital growth and progressive dividends.
We have a robust product development and governance process
to determine what solutions are appropriate to our clients and the
broader market, and our Centralised Investment Process defines
how we deliver them, through a network of 13 offices across the
UK and the Channel Islands.
Our Centralised Investment Process helps ensure both
consistency of outcome for clients with similar requirements and
economies of scale for the business.
We use our knowledge of our clients and intermediaries to
drive innovation, delivering products and services that meet
their evolving needs
Our investment management businesses work closely with
professional advisers both internally and externally
Our network of offices puts us close to our clients, with the
geographic reach to build strong relationships with clients
and advisers alike
Our competitive advantages
Robust Centralised Investment Process
Consistent strong performance, ahead of benchmarks across
all risk profiles for 1, 5 and 10 years. Rigorous process giving
consistency of outcomes to clients with similar needs
Compelling investment proposition
Comprehensive range of investment products and services,
addressing full scope of clients’ and intermediaries needs.
Core and specialist bespoke services complemented by
model-based and unitised services, plus the more business-
to-business Investment Solutions offering
Best-in-class client and adviser service
Quality and commitment of our people delivering
consistently outstanding service and now supported by
market-leading digital offering, delivered with our world-
class technology partner SS&C
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Marketplace
Short-term trends
Long-term trends
Impact of COVID-19
Market conditions
The pandemic has continued to
affect the economy throughout the
financial year but there are now
encouraging signs of a sustainable
recovery. The long-term impact of
the pandemic and the associated
lockdown restrictions is less clear
but we are seeing strong signs
of improving client and adviser
sentiment.
Our response
The firm was able to move
seamlessly into remote working
during lockdown with a strong
focus on the wellbeing of our staff
who were then able to respond
to support advisers and clients in
the volatile markets caused by the
pandemic. As restrictions ease,
while many existing clients have got
used to more remote interaction,
we are once again seeing more
face-to-face meetings, particularly
with prospective and new clients. At
a strategic level, we believe that the
disruption caused by the pandemic
will create opportunities for players
willing to be bold in their actions.
Demographic changes
Market conditions
The UK population continues to age
with the proportion of people over
65 growing steadily. In parallel, the
policy framework around retirement
is increasingly favourable for the
wealth management industry with
people increasingly encouraged
to make their own provision for
retirement and pension freedoms
adding to the need for advice. The
total wealth of the UK population is
projected to continue to grow, and
over 70% of that wealth is held by
those aged 55 and over.
Our response
Brooks Macdonald continues to
work with clients to support them in
their retirement planning, reflecting
the fact that retirement is the biggest
trigger for people to seek financial
advice. Our decumulation service
is aimed at people in the early years
of retirement balancing the need
for income with the need to stay
invested to protect their future
wealth. We are also improving
our support to clients around
intergenerational wealth transfer, as
well as, encouraging people to think
about their retirement earlier.
Age distribution of the UK population
24.0%
18.3%
Proportion of the UK
population aged 65 and over,
2018 vs. 2043 (projected)
Advisers increasingly outsourcing
Market conditions
IFAs continue to look to outsource
investment management to
allow them to focus on advising
their clients and to reduce their
regulatory and administrative
burden. GlobalData and Platforum
research shows advisers who have
not outsourced before are now
looking to outsource and those
who do already outsource are
looking to outsource more. Within
that, there is a move from classic
bespoke portfolio outsourcing to
more specialist services and model-
based and unitised products.
Our response
We continue to help advisers
serve their clients in ways that
work for both parties, applying
our investment management
expertise to protect and enhance
clients’ wealth. We are flexible in
our approach, offering bespoke
portfolios, more specialist variants
(e.g., Responsible Investment
Service, Decumulation, Court of
Protection), model-based and
unitised solutions, and Investment
Solutions options, more tailored
to the needs and requirements of
the IFA.
Adviser use of outsourced DFMs
42%
43%
37%
14%
12%
11%
Expected change
in client assets
allocated to
outsourced DFM
services over next
2 years
Increase
Decrease
UK economy
Growth of responsible investing
Regulatory
Digital technology
2018
2043F
Source: Office of National Statistics
Bespoke
DFM
Model
portfolios
Multi-asset
funds
Source: GlobalData
Market conditions
The UK economy is now firmly in
recovery mode, supported by the
successful vaccine roll-out strategy
and ongoing co-ordinated fiscal and
monetary support continuing to
outweigh the residual effects of the
pandemic and global supply chain
issues, exacerbated in the UK by
Brexit. This broad-based recovery
is now feeding through into client
sentiment.
Our response
Within our asset allocation, we
continue to regard the UK as a
core pillar of the cyclical and value
stocks part of the allocation. More
broadly, we continue to work closely
with intermediaries and current
and prospective private clients
to leverage the improvement in
sentiment into positive net flows.
Market conditions
Advisers and clients alike are
increasingly looking for investment
managers to provide products and
services meeting their environmental,
social and governance (“ESG”) criteria.
Providers are bringing products
to market but there is widespread
confusion about what standards
these products observe and what
certification regimes clients and
advisers can trust. Advisers forecast
rapid growth in the proportion of
client assets allocated to sustainable
and ESG-based products and services.
Our response
We launched our Responsible
Investment Service (“RIS”) in October
2018 within our Bespoke Portfolio
Service. We have Advance and Avoid
strategies available and investment
performance has been strong since
launch. We have now rolled out
RIS in our International business
and included it in our Managed
Portfolio Service and Investment
Solutions offering. As a company, we
have signed up to the UN Principles
for Responsible Investing and are
increasingly applying a sustainability
lens to our core investment process.
ESG funds as a proportion
of total European mutual
funds
57%
41%
15%
11%
2015
2019
2025
base
case
2025
base
case
Actual
PwC forecast
Source: PwC Financial times
Definition
The Financial Conduct Authority
supervises the investment
management and financial planning
activities of Brooks Macdonald in
the UK. Over time, the regulator has
increased their focus on ensuring
advice and investment management
is conducted appropriately and
professionally, and on giving
transparency to clients on fees and
charges.
Our response
We welcome the general
direction of regulation. We are
committed to ensure we are
serving advisers and clients
appropriately and professionally,
and actively contribute to regulatory
consultations directly, and through
our membership of the trade body,
the Investment Association.
Definition
Digital technology is increasingly
a “must have” enabler of financial
services, with clients expecting
digital to complement face-to-
face relationships. The wealth
management sector has been slow
to adapt.
Our response
We are upgrading our technology
delivery with our partnership
arrangement with SS&C, the leading
wealth management technology
and services provider, which we
believe will take us to the leading
edge of the wealth management
industry, delivering the automation
and information access that clients
have come to expect.
What this means for Brooks Macdonald
• The fundamental opportunity for Brooks Macdonald
remains strong.
• Our core investment management and financial
planning offering is well positioned to capture the
opportunity.
• We are adapting our offering both to meet short-term
challenges in the marketplace and to cater to advisers’
and clients’ changing needs, with a strong set of
specialised BPS products, further development of funds
and unitised solutions tailored to the adviser,
and consistent business-to-business investment
solutions delivery.
• Technological change will continue to raise clients’
expectations of how we interact with them and our
technology and services partnership with SS&C is
designed to ensure that Brooks Macdonald is easy to
do business with, and that we provide market-leading
adviser experience and client service levels.
Competitive landscape
The investment management competitive landscape
is complex with numerous types of player with varying
business models addressing different, but overlapping,
segments of the market. Types of player include integrated
wealth managers, Independent Financial Advisers
(“IFAs”) who conduct some, or all, of their own investment
management, platform providers who serve advisers,
players focused on providing model portfolios and fund
solutions, as well as, the wealth arms of the major high street
banks and the high-end private banks.
The industry is highly fragmented and we have seen
considerable consolidation in recent years, among both
IFAs and investment managers, for example, Rathbone’s
acquisition of Adam & Co Investment Management. We
expect to see consolidation continue and even potentially
accelerate, and selective, high-quality acquisitions remain
part of our strategy.
Within that competitive landscape, we believe that our
approach, with our vision of being the leading investment
manager for intermediaries, gives us a strong competitive
position allowing us to create value for advisers, clients,
shareholders and staff.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Our services
Group Centralised Investment Process
We are an independent investment management firm, providing a wide range of investment and wealth management
services to private clients, pension funds, professional intermediaries and trustees; financial planning advice to high net
worth individuals and families; and multi-asset and specialist funds to the retail sector.
To make sure we deliver the best possible investment options
for clients, our Centralised Investment Process aims to:
• Generate the best ideas and then use them as widely as
possible
• Deliver strong risk adjusted returns for clients
• Have an explainable process and explainable results
We have an industry-leading investment process which
powers the services and products we provide to our clients.
This process creates a robust framework for our investment
professionals to work together, sharing ideas and challenging
each other’s views.
Inputs
• House View
• External Research
• Investment Data Systems
People
• Head of Research
• Research Team
• 85 Investment Managers /
Portfolio Managers
Governance
Asset Selection Committee
Buylist
Centralised
Investment
Process
In
vestm
ules
R
ent
w
e V i e
s
u
o
H
Inputs
•
Investment Views from
our Research Providers
• External Research
• In-House Investment Strategist
Governance
Investment
Committee
Governance
Asset Allocation
Committee
People
• Nine Senior Investment Leaders
• External Research Analysts
People
• Chief Investment
Office
• Risk Department
Inputs
• Regulatory Backdrop
• Industry Best Practice
• Brooks Macdonald
Thought Leadership
Our Centralised Investment Process is built on a model where decision-making responsibility and authority
is shared equally by colleagues. This approach produces the best possible outcomes by encouraging the best
thinking from everyone involved. We recognise that no individual investment manager, research analyst or
member of our Chief Investment Office team has a monopoly on good ideas. Once we have concluded that
an idea is a great one, we will use it as widely as possible for all suitable strategies.
1
Asset allocation
To help diversify and manage risk, we use asset
allocation guidance to allocate portfolios between
various geographies and asset classes. Depending
on the study you read, asset allocation can
determine up to 80% of client returns over a longer
time horizon so it is vital to get this right.
Our Asset Allocation Committee meets monthly to
determine our house view. We use external parties
– both independent macro research providers
and the research teams of investment banks – to
challenge us and help us construct our house view.
We encourage external scrutiny of our views and
pay the most attention to the group that disagrees
with our house view the most, inviting them to our
monthly investment forum to tell us what, in their
view, we are missing. External research is vital as it
means our Asset Allocation Committee is powered
by the ideas of hundreds of macro economists and
strategists. We also use the systems of most major
data providers to test our views against history,
and flag opportunities in markets. This is a major
investment for us both in terms of time and Brooks
Macdonald’s financial investment.
2 Asset selection
Once the Asset Allocation Committee has
set the house view, it is passed to our sector
research teams. All our investment managers
and research analysts have the opportunity
to involve themselves in sector research and
they form the core of the sector research teams.
With oversight and peer review from our Asset
Selection Committee, the ideas generated by the
sector teams drive the buylist. The end result
is a substantial buylist of researched assets for
investment managers to use when constructing
portfolios.
3 Investment rules
Our investment rules have been designed to
operate within the harshest of conditions and,
whilst all market crises are different, there is
never a reason not to stick to our established
investment rules.
We apply central investment rules to all our
investment products. For our bespoke and
managed portfolio services, these are the key
inputs into our risk management system which
assesses portfolios daily for deviations from
expected volatility, asset allocation, buylist
and concentration limits. The executive-level
Investment Committee is responsible for
setting these rules, as well as, driving the overall
investment philosophy of the firm. Rigorous
application of these rules, such as maintaining
high levels of liquidity, have put us in a good
position to weather any foreseeable investment
storm that may occur.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Our services continued
We provide our services through two core businesses:
1
UK investment management
Providing discretionary fund management services to clients introduced to us by intermediaries and to
direct private clients, to whom we also provide wealth management advice.
2 International
Providing discretionary fund management services to clients and their introducers across the UAE, South
Africa and Europe from offices in Jersey, Guernsey and soon the Isle of Man (subject to regulatory approval).
1
UK investment management
(FUM at 30 June 2021: £14.0bn)
Within UK Investment Management (“UKIM”), there are eight
distinct service lines:
Bespoke Portfolio Service
The Bespoke Portfolio Service (“BPS”) is the Group’s flagship
offering, designed for clients who want an individual
investment portfolio constructed to meet their specific
requirements. The investment manager maintains a detailed
knowledge of the client’s investment requirements, allowing
the manager to construct focused portfolios supporting the
delivery of risk-adjusted investment returns appropriate to
the client’s investment objectives. The range of investments
includes unit trusts, open-ended investment companies,
exchange-traded funds, investment trusts and cash, as well as,
individual equity and bond securities. Investment managers
for BPS follow the core asset allocation and asset selection
recommendations of the Group-wide Centralised Investment
Process (“CIP”).
Within BPS, in addition to our core BPS, we offer three
specialised services aimed at clients with distinct sets of needs:
• Responsible Investment Service, designed for clients
with the dual objective of responsible investment and
return generation in line with defined risk profiles. We
offer two distinct Responsible Investment strategies: Avoid
and Advance. The values-based objective of the Avoid
strategy is to prevent exposure to companies involved in
the production of armaments, tobacco, alcohol, gambling
and pornography, while for the Advance strategy the
objective is to invest in, and advance, businesses that either
specifically seek to provide solutions to sustainability
issues, or businesses that have strong corporate policies
and outputs relating to environmental, social and
governance (“ESG”) criteria.
• Decumulation service, a bespoke approach, designed
to help meet clients’ income requirements by aiming to
shield the portfolio from downturns in the early years of
withdrawals. Its structure is specifically adapted to address
short-term sequencing risk, while retaining the ability for
longer-term assets to contend with inflation risk.
• Court of Protection service, aimed at clients in that
particular sub-segment and vulnerable clients more
broadly.
AIM Portfolio Service
The Group’s AIM Portfolio Service (“APS”) provides clients
with access to a carefully selected portfolio of AIM-listed
companies, with preference given to companies that are
judged to have attractive long-term investment potential.
The investment universe is restricted to companies that are
understood to qualify for Business Property Relief (“BPR”),
allowing investors to benefit from Inheritance Tax (“IHT”)
exemptions.
Managed Portfolio Service
The Managed Portfolio Service (“MPS”) provides a choice of
investment into a range of risk-managed model portfolios, each
investing across a different mix of asset classes. Each model
portfolio is designed to achieve specific investment objectives
within a specific risk profile. MPS portfolios are managed by a
dedicated team of investment managers in accordance with
the CIP. We also offer Responsible Investment Service model
portfolios using the Advance strategy as outlined in the BPS
section above.
Fund Portfolio Service
When the client’s needs and risk profiling are not complex
and/or the portfolio is small, the adviser may select our Fund
Portfolio Service (“FPS”), where the investment manager
invests the client’s portfolio in one of our multi-asset funds.
This is a discretionary service where the investment manager
retains control of the investment decisions, in this case the
fund selection, and maintains a detailed knowledge of the
client’s investment requirements. Advisers and clients can also
select to invest in our multi-asset funds directly without an
investment manager, as described below.
Multi-Asset Funds
The Multi-Asset Funds (“MAF”) range allows investors to
gain access to the Group’s investment management expertise
and CIP through a pooled fund solution. The Group offers
two ranges:
• The IFSL Brooks Macdonald Fund – a range of four risk-
managed multi-asset funds: Defensive Income, Cautious
Growth, Balanced and Strategic Growth.
• The SVS Cornelian Investment Funds – a range of six
multi-asset funds: Defensive, Cautious, Managed Income,
Managed Growth, Growth, and Progressive. All but the
Managed Income fund are also available in a version that
invests in predominantly passive funds for the more cost-
conscious investor who is prepared to compromise some
of the richness of the asset allocation.
By differing their levels of equity exposure, the ranges cater
for both investors seeking capital growth and more cautious
investors looking to generate income while preserving their
capital.
Brooks Macdonald Investment Solutions
The Group designs investment propositions for advisers and
intermediaries who are looking for investment solutions
meeting specific investment objectives for their clients.
These are delivered via an open-ended fund solution or an
investment platform, in fund or model portfolio form.
Defensive Capital Fund
The Group also provides investment management services
to the Defensive Capital Fund (“DCF”), a long-only multi-asset
fund sitting in the IA Targeted Absolute Return sector, which
had FUM of £478 million at 30 June 2021.
Financial Planning
Within UKIM, our Private Clients business provides financial
planning and wealth management advice services to
high-net-worth individuals and families, enabling clients to
build, manage and protect their wealth. For non-investment
products, the advice is independent “whole of market”; for
investment products and services, the advice can be either
independent, where the client requests it or they have
complex requirements, or restricted, whereby the investment
service will – if suitable – be one provided by the Group. The
service is advice rather than product-driven, providing clients
with a coherent, affordable strategy aimed at achieving their
long-term goals. In addition to the financial planning service,
the Group works in collaboration with other professional
advisers such as solicitors, accountants and wealth managers,
to help them provide a comprehensive service to their clients.
2
International
(FUM at 30 June 2021: £2.5bn)
International is based in the Channel Islands (soon to add the
Isle of Man, subject to regulatory approval) and offers a range
of investment management and financial planning services.
The services are designed to meet the particular requirements
of offshore and international clients and the investment
management process follows the CIP. A comprehensive range
of investment services is provided to private clients, trusts and
advisers, available in Sterling, Euros or US Dollars:
•
•
International Bespoke Portfolio Service, including the
International Responsible Investment Service
International Managed Portfolio Service
(International BPS, International RIS and International MPS
all offer the same services as the UK equivalents described
above, adjusted to meet the requirements of offshore and
international clients).
•
Single-strategy solutions, which invest directly in the
traditional asset classes of equities and bonds for ultra-
high-net-worth clients with higher entry thresholds.
The Direct Equity Strategy is structured to provide
capital appreciation and income growth through direct
investment in high-quality stocks, while the Corporate
Bond Strategy invests in a diversified portfolio of
investment-grade bonds to provide a balance of income,
security and liquidity
• Funds, including a comprehensive range of international
investment funds and international multi-strategy funds.
The International business also has a financial planning arm,
Brooks Macdonald Retirement Services, which provides a
comprehensive service for private clients who require wider
planning around their investments, also focusing on financial
protection and pensions.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Supporting our clients and advisers
While these case studies are based on real people and events, names and some other details have been changed to protect
confidentiality and are dependent upon each individual’s circumstances. This information does not constitute advice or a
recommendation and investment decisions should not be made on the basis of it.
The value of your investments and the income from them may go down as well as up. You may get back less than you invested.
Past performance is not a reliable indicator of future results. Please be aware that the decumulation service utilises structured
products as part of the portfolio construction/strategy which comes with specific risks. Should the counterparty fail, you may
not have access to the Financial Services Compensation Scheme (“FSCS”). Investors should speak to their advisers for further
information and to ensure they understand the risk and return factors applicable in their case.
How we helped John and James realise
their ambition of building a modern
local financial advice business
We first worked with John and
James 16 years ago, when they
were looking to grow their
small East Anglia independent
financial advice business.
We managed portfolios for
many of their clients and built
a great working relationship.
We provided co-branded
materials and even from
time-to-time helped them
think through all the issues
that affect a growing business.
As John and James come
towards retirement, they are
looking to pass their now, quite
large business on to the next
generation, and we’re helping
them, and their successors
with the transition.
How our Decumulation Service helped
Mr and Mrs Adams secure their future
with a flexible retirement income
Mr and Mrs Adams had
decided to retire in 2–3 years’
time and, while they had a
clear view of what income
they needed over the first
five years, they wanted to
retain some flexibility for the
future years. Their financial
adviser recommended our
decumulation service as
suitable and we constructed a
portfolio with two elements –
a short-term piece, principally
invested in structured
products to safeguard their
income in the early years of
retirement and a long-term
one invested in growth assets,
giving them the flexibility
they’re looking for and
protection from the effects of
inflation. Happy retirement!
How our Platform Managed Portfolio
Service gave Rishi a cost-effective way
to secure his future
Rishi and his financial adviser
had identified that he did
not, at this stage of his life,
have significant bespoke
investment requirements.
The adviser recommended
our Managed Portfolio Service
(“MPS”), which provides a
range of ten portfolios, each
with its own risk profile and
objective, one of which was
suitable for Rishi’s risk appetite
and investment objectives.
They were specifically looking
for a low-cost version of MPS,
so chose our Platform MPS
which targets low ongoing
charges while maintaining
the rigour of the investment
process.
How our partnership approach to
investment solutions helped Nadia
realise her ambitions for her business
Nadia came to us because she
wanted more time to focus on
growing her business, while
retaining some control over
branding and the investment
approach. Our specialist
team worked with her to
design a tailored solution
using a blended fund-of-fund
solution with ten risk profiled
portfolios based on blending
two underlying core portfolios
in different combinations. We
provide active investment
management, co-branded
factsheets and regular
reporting for all the portfolios,
giving Nadia the solution she
was looking for – and the time
to grow her business!
How we helped Jennifer realise her
ambition of aligning her investments
with her principles
Jennifer had a successful
professional career and had
built up substantial savings,
which she wanted to invest
in ways that aligned with
her principles. On a friend’s
recommendation, she
approached us directly and
met with an adviser from our
Private Clients team, who
explained our Responsible
Investment Service. She was
attracted by the Advance
strategy, which proactively
supports positive thinking and
forward-looking companies
aiming to make the world
a better place, without
compromising on returns.
Jennifer is delighted that her
investments are working for a
sustainable future.
How our Bespoke Portfolio Service met
Steve and Anne’s requirements and
helped secure their future
Steve and Anne had built a
flourishing business and had
no immediate thoughts of
retirement. However, they
had built up quite a complex
range of investments over
time, resulting in some tax
complications. They also had
specific investment objectives
with a clear view of their
desired mix of growth and
income over the coming years.
Our investment manager
worked closely with them
and their financial adviser to
design a suitable portfolio that
would meet their objectives,
allow them to manage their
tax liabilities efficiently,
and secure their future. She
continues to meet regularly
with Steve and Anne.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Our strategy
Brooks Macdonald has emerged a stronger business after a period of change,
building the foundations for our future success, followed by the rigours of
lockdown. Our strategy is clear and we are making substantial progress, ready to
capitalise on the growth opportunities we see ahead.
Looking forward
Our vision for Brooks Macdonald is as the leading investment manager for intermediaries, both in the UK and internationally.
Our strategy also includes a strong and growing Private Clients business providing financial planning and investment
management – an integrated wealth management offering.
Our Purpose
Realising ambitions and
securing futures
Our Purpose
Our Mission
To protect and enhance
our clients’ wealth
through the provision of
investment management
and advice underpinned
by excellent client service
Our Mission
Our Vision
Our Vision
To be the leading
investment manager for
intermediaries
Our strategy
1
2
3
Market-leading
organic growth
Best-in-class adviser
experience and excellent
client service, rigorous
Centralised Investment
Process, compelling
investment proposition
Service and operational
excellence
Easy to do business with,
digital enhancement, margin
growth through efficiency
and scalability resilience
Agile, high-quality M&A
Strict criteria, delivery of
benefits
Committed to top quartile underlying profit margin over the medium-term
Value drivers
Our strategy is based on the three value drivers of strong organic growth, service and operational excellence, and selective high-
quality acquisitions. We will deliver further improvements in returns, committing to top quartile margins over the medium term,
by building on the sustainable and scalable business model we are putting in place.
Organic growth
• Maintain and enhance our Centralised Investment
Process, delivering consistent robust investment returns
for clients
• Continue to add to our compelling investment proposition
in specialised bespoke portfolios, model portfolios and
fund/unitised solutions, and in business-to-business
solutions for advisers, all supported by a high-impact
strategy for how we take these products and services to
market
• Deliver market-leading adviser experience and client
service levels, through our partnership with SS&C,
the world-class wealth management technology and
service company
Service and operational excellence
•
Continue high levels of cost discipline, freeing up
investment into service differentiators
• Benefit from efficiencies of new technology and
services partnership
Selective high-quality acquisitions
• Continue to observe our published criteria for acquisition
targets – high-quality businesses that are a good strategic
and cultural fit and who bring compelling economics
• Leverage the scalability of the digital solutions we are
putting in place
This is all underpinned by our investment in people and
culture with the objective of attracting, engaging and retaining
the best talent in the industry.
Delivering our strategy
We announced our new strategy in our annual results presentation last year, since then we have made material progress on all
three value drivers.
Value driver
Progress in FY21
Organic
growth
•
Secured a series of strong business-to-business mandates through Brooks Macdonald
Investment Solutions
• Grew our Platform MPS further, making it available on a wider range of leading platforms
• Continued to grow our specialist products – Responsible Investment Service, Decumulation,
Court of Protection, and the AIM Portfolio Service
• Returned to positive net flows of client assets in the second half of the financial year, as forecast
to the market a year ago
Service and
operational
excellence
• Transferred administrative processes to our partner SS&C
• Moved funds administration and portfolio management to SS&C platform
• Digital onboarding live with internal IFA, to be rolled out to intermediaries soon. Expecting SS&C
to complete the current phase this calendar year, including the transition on to their platform
of all client- and intermediary-facing processes, featuring an adviser and client portal with
comprehensive functionality
Agile, high-
quality M&A
• Completed acquisition of Lloyds Banking Group’s Channel Islands funds and wealth
management business
• Completed integration of Lloyds business and Cornelian Asset Managers
• Continued to review a range of potential targets
28
29
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Key performance indicators
The following financial and strategic measures have been identified as the key performance indicators (“KPIs”) of the Group's
overall performance for the financial year. The comparative figures for FY19 have been restated to reflect the correct recognition
of the Authorised Corporate Director fees and associated costs in respect of one of the Group’s managed OEICs and the correct
VAT treatment on the fees recognised on the Managed Portfolio Service offered through third-party platforms as detailed in the
FY20 Annual Report and Accounts.
1) FUM and revenue
2) Underlying performance
3) Shareholder return and Balance Sheet strength
Funds under management (£bn)
Underlying profit before tax (£m)
Statutory profit from continuing
operations before tax (£m)
Statutory diluted earnings per share
from continuing operations (p)
20.4%
16.5
Definition
Total funds under management
at the end of the year.
13.1
13.7
30.6
33.0%
Definition
Revenue less underlying costs
before tax.
23.0
20.7
Relevance
The value of funds under
management has a direct impact
on the Group’s revenue.
Relevance
This measures the Group’s
performance excluding the
impact of certain one-off costs
or credits so as to provide a
more appropriate year-on-year
comparison.
FY19
FY20
FY21
FY19
FY20
FY21
Organic net fund flows (£bn)
Underlying profit margin before tax (%)
£0.5bn
Definition
Value of net organic discretionary
flows.
25.9
21.2
19.6
FY20
FY21
0.3
Relevance
Net organic growth measures the
new business generated by the
Group excluding the impact of
acquired assets and after allowing
for lost business.
0.4
FY19
4.7pts
Definition
Underlying profit before tax as a
percentage of revenue.
Relevance
This is a key measure of the
Group’s underlying performance
reflecting key drivers of long-term
profitability.
25.1
151.0%
Definition
Revenue less total costs from
continuing operations before tax.
10.0
8.3
Relevance
This measures the Group’s
profitability from continuing
operations calculated in
accordance with International
Financial Reporting Standards.
42.6
43.1
124.9
189.8%
Definition
Total statutory profit after tax
divided by the weighted average
number of ordinary shares.
Relevance
This is a key metric of measuring
the Group’s profitability and takes
into account new shares issued
during the year.
FY19
FY20
FY21
FY19
FY20
FY21
Total dividend per share (p)
Total capital ratio (%)
18.9%
63.0
Definition
Total dividend per share paid out
to shareholders.
51.0
53.0
20.7
21.6
18.1
Relevance
Distributions by the Group in the
form of dividends represent an
important part of the returns to
shareholders.
0.9pts
Definition
The Group’s total regulatory
capital resources relative to its
Pillar 1 risk exposure requirement.
Relevance
The Group must hold a minimum
amount of regulatory capital.
This ratio measures the amount
of capital in relation to the risk
exposure of the Group as an
indication of resilience.
0.8
Revenue (£m)
FY19
FY20
FY21
Underlying diluted earnings per share (p)
FY19
FY20
FY21
FY19
FY20
FY21
8% minimum requirement
105.7
108.6
118.2
8.8%
Definition
Fee and non-fee income
generated during the year.
25.4%
155.1
Definition
Total underlying profit after tax
divided by the weighted average
number of ordinary shares.
123.5
123.7
Relevance
The amount of fee and non-fee
income generated by the Group is
one of the key growth indicators.
Relevance
This is another key metric
of measuring the Group’s
profitability and takes into
account new shares issued during
the year.
FY19
FY20
FY21
FY19
FY20
FY21
30
31
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Financial review
In FY21, the Group reported strong strategic and financial progress, delivering record
underlying profit and margin, returning to positive organic net flows and successfully
integrated the Lloyds Channel Islands business.
£118.2m
£30.6m
£25.1m
Total revenue for the Group increased
by 8.8% to £118.2 million mainly
driven by the two recent acquisitions
and investment performance.
Underlying profit before tax
increased by 33.0% driven by
growth in FUM, revenue and
continued cost discipline.
Statutory profit before tax increased
by 151.0% driven by higher underlying
earnings and a gain arising on the
Lloyds Channel Islands business.
Review of results for the year
The Group delivered a strong set of results for FY21 as we entered the next phase of our strategy announced in September 2020.
Despite the year under review still being characterised by periods of national lockdown, economic uncertainly and market
volatility arising from the COVID-19 pandemic, the Group continued to operate resiliently and emerged as a stronger business.
The acquisition of the Lloyds Channel Islands business was completed at the end of November 2020 with the business and our
new colleagues successfully integrated within our International division, now led by Richard Hughes. We have also seen growing
momentum in our organic business, particularly within our discretionary specialised products and Investment Solutions
offering. In addition, our disciplined management of the Group’s financial resources and focus on operational efficiency
contributed to a record underlying profit and underlying profit margin, which increased from 21.2% to 25.9%.
The table below shows the Group’s financial performance for the year ended 30 June 2021 with the comparative period and
provides a reconciliation between the underlying results, which the Board considers to be an appropriate reflection of the Group’s
performance, and the statutory results. A breakdown of the underlying adjustments is shown on page 38.
Group financial results summary
Revenue
Fixed staff costs
Variable staff costs
Total staff costs
FSCS levy
Non-staff costs
Total non-staff costs
Total underlying costs
Underlying profit before tax
Underlying adjustments
Statutory profit before tax
Taxation
Statutory profit after tax
Underlying profit margin before tax
Underlying diluted earnings per share
Statutory profit margin before tax
Statutory diluted earnings per share
Dividends per share
FY21
£m
118.2
(40.0)
(13.2)
(53.2)
(2.2)
(32.2)
(34.4)
(87.6)
30.6
(5.5)
25.1
(5.5)
19.6
25.9%
155.1p
21.2%
124.9p
63.0p
FY20
£m
108.6
(39.8)
(10.8)
(50.6)
(2.2)
(32.8)
(35.0)
(85.6)
23.0
(13.0)
10.0
(3.6)
6.4
21.2%
123.7p
9.2%
43.1p
53.0p
Change
%
8.8
0.5
22.2
5.1
–
(1.8)
(1.7)
2.3
33.0
(57.7)
151.0
52.8
206.3
4.7ppt
31.4p
12.0ppt
81.8p
10.0p
33
The Group reported record
financial performance in FY21 as
we deliver on our strategy.
Ben Thorpe
Chief Financial Officer
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Financial review continued
Revenue
The Group’s total revenue for FY21 increased by 8.8% to £118.2 million (FY20: £108.6 million). This was due to higher average
FUM levels driven by strong investment performance, particularly in H2, and the contribution from the two recent acquisitions.
The Cornelian business contributed an additional £6.5 million compared to the prior year, given completion part way through
FY20, and the Lloyds Channel Islands business boosted revenue by £5.3 million during the latter seven months of the financial
year. FUM-related revenue overall increased by 10.1%, whilst non-FUM-related revenue dropped by 10.4% to £6.0 million
(FY20: £6.7 million). The rise in fee income during the year, was offset by a reduction in interest turn of £4.3 million or 72.9% driven
by the fall in the Bank of England base rate. The reduction in non-FUM-related revenue was principally due to a decline in other
income including the termination of the third-party administration business at the start of the year, as the focus is directed on
the core offering.
Revenue, yields and average FUM
Revenue
Yield
Average FUM
FY21
£m
FY20
£m
Change
%
FY21
bps
FY20
bps
Change
bps
FY21
£m
FY20
£m
Change
%
BPS fees
BPS non-fees (transactional)
BPS non-fees (interest turn)
Total BPS
MPS
UKIM discretionary
Funds
Total UKIM
International fees
International non-fees
Lloyds Channel Islands1
Total International
Total FUM-related revenue
Financial Planning – UK
Financial Planning – International
Other income
Total non-FUM-related revenue
Total Group revenue
58.7
14.5
1.4
74.6
8.3
82.9
12.2
95.1
8.9
2.9
5.3
17.1
112.2
3.7
1.0
1.3
6.0
53.8
14.6
4.4
72.8
8.0
80.8
8.7
89.5
8.5
3.9
–
12.4
101.9
3.8
1.0
1.9
6.7
118.2
108.6
9.1
(0.7)
(68.2)
2.5
3.8
2.6
40.2
6.3
4.7
(25.6)
N/A
37.9
10.1
(2.6)
–
(31.6)
(10.4)
8.8
67.3
16.6
1.6
85.5
40.1
76.8
55.3
73.2
54.4
17.7
98.1
78.6
73.9
67.8
18.4
5.5
91.8
46.8
83.8
52.4
79.2
54.2
24.9
–
79.0
79.2
(0.5)
(1.8)
(3.9)
(6.3)
(6.7)
(7.0)
2.9
(6.0)
0.2
(7.2)
N/A
(0.4)
(5.3)
8,722
2,069
10,791
2,207
12,998
1,636
–
540
2,176
15,174
7,932
1,709
9,641
1,659
11,300
1,569
–
–
1,569
12,869
10.0
21.1
11.9
33.0
15.0
4.3
–
N/A
38.7
17.9
1. Average FUM for Lloyds Channel Islands time weighted to seven months for the purposes of the yield calculation.
The yield on BPS fees for UKIM decreased marginally by 0.5bps to 67.3bps (FY20: 67.8bps) driven by the attrition seen in H1 and
phasing of inflows in H2. The BPS non-fee income yield also declined, primarily due to the decrease in interest turn revenue
noted above, resulting in a yield of 1.6bps compared to 5.5bps reported for FY20.
MPS recorded a decline in fee yield of 6.7bps to 40.1bps compared to the prior year. This was principally driven by a change in mix
with Platform MPS growing more rapidly than custody MPS. The Platform MPS service includes our BM Investment Solutions,
business-to-business offering that generates a relatively lower yield. Moreover, as announced to the market on 7 January 2021, the
standard fee rate for MPS fees has reduced in view of the removal of the application of VAT to this service.
The Funds fee yields rose by 2.9bps to 55.3bps in FY21 due to a change in mix reflecting the outflows seen during the period in the
Defensive Capital Fund and other BM funds relative to the higher yielding Cornelian Risk Managed Funds range.
International fee-income yields were up marginally by 0.2bps to 54.4bps whilst non-fee income yield declined by 7.2bps driven by
a decrease in interest and FX income during the period. The acquired Lloyds Channel Islands assets generated a yield of 98.1bps
based on time weighted FUM for seven months of the year.
Underlying costs
Total underlying costs have increased by 2.3% to £87.6 million (FY20: £85.6 million) mainly due to the incremental costs arising
from the two recent acquisitions of £4.2 million and higher variable staff costs.
Staff costs
Total staff costs increased by 5.1% to £53.2 million. Fixed staff costs increased marginally by 0.5% from £39.8 million to
£40.0 million. The incremental cost from the two acquired businesses amounted to £1.7 million whilst the Group’s core
operations recorded a net decrease of £1.5 million in the year. This comprised additional payroll costs of £2.0 million from net
new hires, primarily within the front office areas, and inflationary pay rises, offset by savings of £1.5 million arising from the
transfer of a number of roles from the Investment Services and Technology Services departments to SS&C during the year
under the partnership arrangement, and reductions in temporary staff costs and recruitment fees of £2.0 million.
Variable staff costs increased by 22.2% to £13.2 million in FY21. Of this, £0.7 million was attributable to the two acquired businesses.
The higher bonus pool accrual for the year reflects the Group’s resilient performance against a challenging macroeconomic
background and our focus on retaining key talent.
Non-staff costs
Non-staff costs amounted to £34.4 million representing a decrease of 1.7% on the prior year. Excluding the additional acquired
costs of £1.8 million, non-staff costs for the core business fell by £2.4 million or 7.1%. The bulk of this cost reduction was seen
within Change costs, down £2.4 million, as the Group completed business remediation in FY20 and is now focused on growth
and ongoing client and adviser focused technology enhancements. Property and office costs decreased by £1.0 million, partly
driven by the saving achieved from the Group moving to a single office in London in March 2020 and travel and entertainment
spend was down £0.9 million as a result of reduced travel and client facing activities caused by the COVID-19 pandemic. These
reductions were offset by an increase in operational costs as part of the transformation of our operating platform, in partnership
with SS&C, amounting to £1.5 million and legal and professional fees of £0.4 million.
Combined, the above gave rise to an underlying profit before tax of £30.6 million, representing an increase of 33.0% on the
previous year and resulting in a profit margin of 25.9% up 4.7 points on last year (FY20: 21.2%).
On a statutory basis, the profit before tax more than doubled on the prior year to £25.1 million (FY20: £10.0 million) partly due to a
£5.0 million gain recognised on the Lloyds Channel Islands acquisition. The other one-off underlying adjustments for the period
are broadly similar in quantum to the prior year, however, the amortisation of client-relationship intangible assets has increased
from £2.9 million to £4.9 million due to the recognition of intangible assets arising on the Cornelian and Lloyds Channel Islands
acquisitions. A breakdown of the underling adjustments, together with an explanation of each, is included on page 38. The
statutory profit margin before tax is of 21.2% compared to 9.2% reported in FY20.
34
35
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Financial review continued
FUM movement in the year
Opening FUM
Organic net new business
FUM acquired in the year1
Investment performance
Total FUM growth
Closing FUM
Organic net new business
Total FUM growth
Investment performance in the year
MSCI PIMFA Private Investor Balanced Index2
1. Closing value of the acquired Lloyds Channel Islands FUM at the completion date, 30 November 2020.
2. Capital-only index.
FY21
£m
13,685
(275)
882
2,167
2,774
16,459
(2.0%)
20.3%
15.8%
12.9%
FY20
£m
13,147
(774)
1,181
131
538
13,685
(5.9%)
4.1%
1.0%
(3.5%)
During FY21, FUM increased by £2.8 billion or 20.3%. This reflects the assets acquired from Lloyds Channel Islands in November
2020 of £0.9 billion and positive investment performance of £2.2 billion, partly offset by organic net outflows of £0.3 billion.
The net outflows were predominantly seen in the first half of the financial year, which was impacted by the macroeconomic
uncertainty and market volatility caused by the COVID-19 pandemic. The Group returned to positive net flows in H2 with growing
momentum seen in the last quarter driven by its strong client and intermediary relationships.
Overall investment performance for the year to June was 15.8%, well ahead of the MSCI PIMFA Private Investor Balanced Index
which rose by 12.9% over the same period.
Closing FUM by service and segment
The table below shows the closing FUM broken down by segment and by our key services within UKIM at 30 June 2021 and the
comparative period.
BPS
MPS
Funds
UKIM total
International
Total FUM
FY21
£m
9,460
2,411
2,076
13,947
2,512
16,459
FY20
£m
8,247
1,809
2,051
12,107
1,578
13,685
Change
%
14.7
33.3
1.2
15.2
59.2
20.3
Within UKIM, the BPS core offering made good progress closing the year at £9.5 billion. We continue to see good growth in our
specialist products – the AIM Portfolio Service, the Responsible Investment Service, the Decumulation Service, and the Court of
Protection Service – all focused on meeting client needs.
Within MPS, we continue to see good momentum on Platform MPS and particularly in Brooks Macdonald Investment Solutions,
our business-to-business offering, with several material deals agreed during the year.
The Funds business has experienced net outflows during the year, particularly in our Defensive Capital Fund which has been
affected by a downturn in sentiment in the Absolute Return sector. However, outflows have slowed down during H2.
In addition to the solid investment performance, the FUM growth in International during the year was principally driven by
the acquisition of the Lloyds Channel Islands business. This was partly off-set by net outflows in the core business, driven in
particular by a number of larger, low margin mandates. With the acquired business, now fully integrated, International is best
positioned to continue to grow and attract new business.
Segmental analysis
As previously announced in January 2021, the Financial Planning division was integrated with the UK Investment Management
business in a move to ensure the Group is best placed to deliver quality service to both private clients and intermediaries.
Accordingly, going forward, the Group has two distinct business segments; UKIM and International. The results of Cornelian since
acquisition are included in the UKIM segment, whilst the results of the Lloyds Channel Islands business since acquisition have
been included in the International segment.
The tables below provide a breakdown of the annual performance broken down by these segments. Comparative figures have
been presented on the same basis to ensure a like-for-like comparison.
FY21 (£m)
Revenue
Direct costs
Operating contribution
Indirect cost recharges and net finance costs
Underlying profit before tax
Underlying profit before tax margin
FY20 (£m)
Revenue
Direct costs
Operating contribution
Indirect cost recharges and net finance costs
Underlying profit before tax
Underlying profit before tax margin
UK Investment
Management
International
Group and
consolidation
adjustments
100.0
(45.7)
54.3
(25.3)
29.0
29.0%
18.2
(10.8)
7.4
(2.9)
4.5
24.7%
–
(30.9)
(30.9)
28.0
(2.9)
N/A
UK
Investment
Management
Group and
consolidation
adjustments
International
95.2
(45.2)
50.0
(26.1)
23.9
25.1%
13.4
(8.0)
5.4
(2.9)
2.5
18.7%
–
(32.4)
(32.4)
29.0
(3.4)
N/A
Total
118.2
(87.4)
30.8
(0.2)
30.6
25.9%
Total
108.6
(85.6)
23.0
–
23.0
21.2%
Both business segments delivered an improvement in performance during the year with increases registered across revenues,
contribution, underlying profit and underlying profit margin.
UKIM reported a 4.8% increase in revenue, driven by a full year contribution of the Cornelian business and an improvement in
flows seen during the year, particularly within the specialist BPS products, Platform MPS and Brooks Macdonald Investment
Solutions offerings. The increase in revenue, combined with disciplined cost management, resulted in a 21.3% rise in underlying
profit and an improvement in underlying profit margin of 3.9 points.
International reported an increase in revenues of 35.8% driven primarily by the acquisition of the Lloyds Channel business
adding £0.9 billion in FUM and £5.3 million in revenues during the year since November 2020. The division’s profits almost
doubled, and its underlying profit margin was up by six percentage points on the prior year.
36
37
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Financial review continued
Reconciliation between underlying and statutory profits
Underlying profit before tax is considered by the Board to be an accurate reflection of the Group’s performance when compared
to the statutory results, as this excludes income and expense categories which are deemed of a non-recurring nature or a non-
cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage and peer
group benchmarking. A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2021 with
comparatives is shown in the table below:
Underlying profit before tax
Acquisitions related items:
— Gain arising on acquisition
— Deal structuring and legal costs
— Integration and staff retention costs
Amortisation of client relationships and contracts acquired with fund managers
Client relationship contracts impairment
Dual running operating platform costs
Changes in fair value and finance cost of deferred consideration
Goodwill impairment
Head office relocation costs
Total underlying adjustments
Statutory profit before tax
FY21
£m
30.6
FY20
£m
23.0
5.0
–
(2.7)
(4.9)
(1.5)
(1.0)
(0.4)
–
–
(5.5)
25.1
–
(2.8)
(1.4)
(2.9)
–
–
(0.2)
(4.5)
(1.2)
(13.0)
10.0
Acquisition related costs (£2.3 million credit)
i. Gain arising on acquisition (£5.0 million credit)
A gain on purchase was recognised in respect of the Lloyds Channel Islands acquisition as the net identifiable assets acquired
were greater than the total purchase consideration paid. Refer to Note 10 of the Consolidated financial statements for details
on the acquisition accounting.
ii. FY20 – Deal structuring and legal costs (£2.8 million charge)
These represent costs incurred in relation to the acquisition of Cornelian Asset Managers Group Limited announced on
22 November 2019 and the acquisition of the Lloyds Channel Islands business announced on 24 June 2020. The costs
incurred included corporate finance services, legal fees and due diligence fees.
iii. Integration and staff retention costs (£2.7 million charge)
These comprise the costs incurred in integrating the Cornelian business (acquisition completed on 28 February 2020) and the
Lloyds Channel Islands business (acquisition completed on 30 November 2020). They also include payments made to key
employees who were retained by the Group for a short period of time to assist with the integration of the businesses.
The above costs are being excluded from the Group’s underlying performance as they were one-off in nature.
Amortisation of client relationship contracts and contracts acquired with fund managers
(£4.9 million charge)
These intangible assets are created in the course of acquiring funds under management and are amortised over their useful life,
which have been assessed to range between 5 and 20 years. The charge for the year includes the newly acquired investment
management contracts arising on the Lloyds Channel Islands transaction. This amortisation charge has been excluded from the
underlying profit since it is a significant non-cash item. Refer to Note 13 to the Consolidated financial statements for more details.
Client relationship contracts impairment (£1.5 million charge)
Client relationship contracts are reviewed annually for impairment. In view of accelerated withdrawals from the previously
acquired business, DPZ Limited, seen during the year, the estimated useful economic life of the intangible assets associated with
this business is reduced. Accordingly, an impairment charge of £1.5 million has been recognised in the year. Refer to Note 13 to the
Consolidated financial statements for more details.
Dual running operating platform costs (£1.0 million charge)
As announced in October 2020, the Group has entered into a partnership agreement with SS&C to transform our adviser and
client service including the onboarding process and digital experience, as well enhancing our operating platform. As part of the
transition process, during FY21, the Group incurred incremental costs in running two operating platforms concurrently. The dual
running costs have been excluded from underlying profit in view of their non-recurring nature.
Changes in fair value and finance cost of deferred consideration (£0.4 million charge)
This comprises the fair value measurement arising on deferred consideration payments from acquisitions carried out by the
Group, together with their associated net finance costs where applicable. The increase is due to the recognition of deferred
consideration on the Cornelian and Lloyds Channel Islands acquisitions.
FY20 – Goodwill impairment (£4.5 million charge)
Goodwill is reviewed annually for impairment based on the carrying value of the asset compared to its expected recoverable
amount. The impairment charge recognised in the prior year related to the Levitas transaction. In 2019, the Group entered into
a new five-year partnership with the distributor of the Levitas fund that carried a lower fund sponsorship fee, the aim of this
reduction was to enhance FUM flows and deepen the relationship. Unfortunately, for reasons beyond our control, the anticipated
inflows were not forthcoming and we reassessed the carrying value of this intangible asset. As a result, the associated goodwill
carrying value was no longer supported and triggered an impairment charge in the prior year.
FY20 – Head office relocation costs (£1.2 million charge)
The Group’s previous London offices based in Welbeck Street and Bevis Marks were relocated to a single site at 21 Lombard Street
in the City of London. As a result of the move, dual running costs were incurred on the three locations until the office leases for
Bevis Marks and Welbeck Street came to an end in March 2020. The dual running costs and other costs associated with the move
have been excluded from underlying profit in view of their one-off nature.
Taxation
The Group’s total tax charge for the year of £5.5 million is up by 52.8% on the prior year. This is in part attributable to higher
statutory profits, and a higher proportion of disallowable expenses added back for tax purposes, such as those arising on
amortisation of intangible assets and share-based payments, compared to deductible tax allowances. The increase is also
attributable to the deferred tax debit recognised as a result of remeasuring our deferred tax assets and liabilities for the
substantively enacted corporation tax rate to 25% from 1 April 2023. Details on taxation are provided in Note 9 of the Consolidated
financial statements.
Earnings per share
The Group’s basic statutory earnings per share for the year ended 30 June 2021 was 125.3p (FY20: 43.2p). On an underlying basis,
diluted earnings per share was of 155.1p representing an increase of 25.4% on the prior year (FY20: 123.7p) largely driven by the
contribution from the two acquired businesses. Details on the basic and diluted earnings per share are provided in Note 11 of the
Consolidated financial statements.
Dividend
The Board recognises the importance of dividends to shareholders and the benefit of providing sustainable shareholder returns.
In determining the level of dividend in any year, the Board considers a number of factors, such as, the level of retained earnings,
future cash commitments, statutory profit cover, capital and liquidity requirements and the level of profit retention required to
sustain the growth of the Group. The Board has proposed a final dividend of 40.0p per share (FY20: 32.0p). Taking into account
the interim dividend of 23.0p per share (FY20: 21.0p), this results in a total dividend for the year of 63.0p per share (FY20: 53.0p),
an overall increase of 10p or 18.9%. Refer to Note 12 to the Consolidated financial statements for more details. The recommended
dividend is subject to shareholders’ approval, which will be sought at the Company’s Annual General Meeting on 28 October 2021.
38
39
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Financial outlook
The economic uncertainty and market disruption caused
by the COVID-19 pandemic has reinforced the importance of
high-quality financial planning and investment management.
The past year has proven the resilience of the Group’s business
model and gives us a high degree of confidence in our ability to
deliver for shareholders, advisers and clients. The continued
growth in our core business, combined with the successful
integration of the Cornelian and the Lloyds Channel Islands
businesses, together with the enhancements we are putting
in place to our operating platform, position the Group well
for further success. As we implement the next phase of
our strategy, we remain focused on positive momentum in
organic growth, delivery of a scalable operating platform and
progression in operating margin.
The Strategic report in its entirety has been approved by the
Board of Directors and is being signed on its behalf by:
Ben Thorpe
Chief Financial Officer
15 September 2021
Financial review continued
Financial position and regulatory capital
The Group’s financial position is strong with net assets increasing by 8.5% to £134.0 million at 30 June 2021 (FY20: £123.5 million)
and tangible net assets (net assets excluding intangibles) up to £44.1 million (FY20: £39.7 million). As at 30 June 2021, the Group
had regulatory capital resources of £52.6 million (FY20: £46.6 million). The own funds calculation takes into account the
respective years’ profit after tax as these are deemed to be verified at the date of publication of the annual results. The Group
continues to be well capitalised with a total capital ratio of 21.6% over the Pillar I risk exposure requirement (FY20: 20.7%).
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Intangible assets (net book value)
Deferred tax liabilities associated with intangible assets
Tier 1 Capital
Own funds
FY21
£m
0.1
78.7
8.5
46.7
134.0
(89.9)
8.5
52.6
52.6
FY20
£m
0.1
78.0
6.4
39.0
123.5
(83.8)
6.9
46.6
46.6
Brooks Macdonald Asset Management Limited, the Group’s main operating subsidiary, is an IFPRU EUR125k Limited Licence
Firm regulated by the Financial Conduct Authority (“FCA”). In view of this, the Group is classified as a regulated group and subject
to the same regime. As required under FCA rules, and those of both the Jersey and Guernsey Financial Services Commission,
the Group assesses its regulatory capital and liquidity on an ongoing basis through the Internal Capital Adequacy Assessment
Process (“ICAAP”) and Adjusted Net Liquid Asset (“ANLA”) assessments, which include performing a range of stress tests and
scenario analyses to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. Surplus
levels of capital and liquidity are forecast, taking into account known outflows and proposed dividends to ensure that the Group
maintains sufficient capital and liquidity at all times.
The FY20 ICAAP review was conducted for the year ended 30 June 2020 and signed off by the Board in December 2020.
Regulatory capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions
and disposals, as well as, budgeted and forecast trading results. The Group’s Pillar III disclosures are published annually on the
Group’s website (www.brooksmacdonald.com) and provide further details about the Group’s regulatory capital resources and
requirements. The Group monitors a range of capital and liquidity statistics on a daily and monthly basis.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation from operations. Total cash resources at the end of the year were
£54.9 million (FY20: £50.2 million). During the year, the Group financed the Lloyds Channel Islands acquisition resulting in a net
cash outflow of £5.3m from own funds. The Group had no borrowings at 30 June 2021 (FY20: £nil).
During the year ended 30 June 2021, the Group incurred capital expenditure of £3.7 million. This comprised technology-related
development of £3.1 million, property-related costs of £0.4 million and IT and office equipment of £0.2 million. The technology-
related spend was incurred in connection with the partnership arrangement with SS&C to enhance our operating platform and
transform the Group’s adviser and client service. The capital expenditure incurred during the year includes legal fees in relation
to the master agreement, planning and scoping the implementation programme and software costs to re-platform. These will be
amortised over a ten-year period from the point the new platform goes live in FY22.
40
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report Risks
Taking a dynamic approach to risk management to accelerate digital transformation
and positive client outcomes
Over the past year, the Group has continued in its commitment to promote a positive compliance and risk culture across the
organisation. Furthermore, it has sustained its focus on embedding and enhancing the risk management framework, through its
focus on harm, third parties and resilience. The Group has also continued its drive towards efficient, data-driven and evidenced-
based risk management, which has facilitated the transition to an agile and dynamic approach to identifying, assessing,
managing and monitoring risks. Not only has this proven valuable with the acquisition of Cornelian and the Lloyds Channel
Islands acquisition, but also during the COVID-19 pandemic and the concurrent change management initiatives, including the
new partnership with SS&C. Overall, the Group remains well capitalised and liquid with significant buffers above all regulatory
requirements.
Oversight
(Governance)
g
o rti n
R e p
Risk identific
ati
o
n
R
i
s
k
a
p
p
e
t
i
t
e
Risk
Management
Methodology
Insight
(Management
information)
Past
Errors, breaches,
near misses and
complaints
Present
Risk profiles and
qualification
Future
Predictor
events
s
n
o
i
t
c
a
l
a
n
o
i
t
i
d
d
A
C
o
n
tr
ols assesSment
a l y sis
n
k a
s
R i
Systems and controls
Communication, education, training and guidance
Culture
Boards and
Committees
Rules and
delegated
authorities
Policies
42
How we manage risk
The Group Risk Management Framework (“RMF”)
Risk management starts with oversight through an appropriate governance
structure using a board and committee structure, with individual and
collective roles and delegated authorities and a set of core policies to provide
guidance to staff.
Effective risk management relies on insight through robust and timely
management information. We manage our risks by learning lessons from
past events, such as, errors, breaches, near misses and complaints, by
conducting point-in-time risk assessments in the present and attempting
to predict what the future risk landscape might look like through our
suite of key indicators.
The risk management methodology within the Group’s risk
management framework consists of the following six interlinked steps:
Risk identification. This takes place through regular business
monitoring and periodic reviews, including risk mapping exercises
and the risks arising from change or new products and services.
Risk appetite. Once we have identified risks, we set an appetite for
each material risk. This defines the amount of risk that the Board
is prepared to accept in order to deliver its business objectives.
Risk appetite reflects culture, strategic goals and the existing
operating and control environment.
Risk analysis. Having set the risk appetite, we can assess
the impact and probability of each material risk against the
agreed risk appetite. This can include the quantification
of capital risk as part of the Internal Capital Adequacy
Assessment Process (“ICAAP”).
Controls assessment. We also assess the effectiveness of
controls in reducing the probability of a risk occurring
or, should it materialise, in mitigating its impact.
Additional actions. Where differences exist between
our risk appetite and the current residual risk profile,
we take action either: to accept, avoid or transfer
part or all of those risks which are outside our risk
appetite; or to reconsider the risk appetite.
Reporting. Ongoing reporting of risks to senior
management provides insight to inform
decision-making and allocation of resources to
achieve business objectives.
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Risks continued
Overarching risk appetite statement
•
The Group’s Overarching risk appetite statement (“ORAS”),
as defined by the Board, sets out the acceptable level of
current and emerging risk we are willing to take to achieve
our strategic business objectives. It provides a framework
to allow the Group to effectively balance the risk and
reward relationship in decision making.
• Clients, both existing and prospective, are at the heart of
everything we do. As such, we will operate a sustainable
business that conducts itself in a reputable and prudent
manner, taking into account the interests of our clients
through providing products and services suited to their
needs and risk profile, which demonstrate value for money.
• As the business continues to grow through sustainable
organic growth and strategic value-adding acquisitions,
the ORAS will help ensure our key stakeholder obligations
are met, supported by internal policies and regulatory
requirements. We commit to using this framework to
ensure we make strategic and business decisions that do
not exceed our overarching risk appetite.
•
In all of the Group’s decisions and operations, we balance
risk versus reward and we consider the following three
dimensions.
Client
outcome
Control
environment
Financial
performance
and resources
Client outcome
• We will put client interests at the heart of everything we do
Financial performance and resources
• We will optimise profitability and use resources efficiently
to ensure appropriate client outcomes.
to drive financial performance.
Control environment
• We will, at all times, operate within our risk appetite,
operational risk parameters and regulatory framework,
ensuring a robust control and oversight environment.
• We will, at all times, maintain adequate capital and liquid
assets to meet financial and funding obligations as they
fall due.
• We will invest in the development and wellbeing of our
employees.
Key risks
We have identified our risks at Group and business line levels to help manage our key risks in a consistent and uniform way with
oversight from relevant Committees and Boards.
Definition
1. Credit risk
The risk of loss arising from a client
or counterparty failing to meet their
financial obligations to a Brooks
Macdonald entity as and when they
fall due.
2. Liquidity risk
The risk that assets are insufficiently
liquid and/or Brooks Macdonald does
not have sufficient financial resources
available to meet liabilities as they fall
due, or can secure such resources only
at excessive cost. Liquidity risk also
includes the risk that the Group is
unable to meet regulatory prudential
liquidity ratios.
Change since
last year
Rationale
for change
Unchanged
The risk remains
unchanged given the
strong credit risk control
environment including
ongoing monitoring
and due diligence on all
counterparties.
The Group has sufficient
liquid resources
significantly above its
Minimum Liquidity
Requirement. The Group
has a robust Liquidity Risk
Management Framework,
including adequate
contingency funding
arrangements which are
tested on a periodic basis.
Group level risks
Key risks identified
by risk management
framework
• Cash deposits with
external banks
• Client credit risk
• Counterparty credit risk
• Custodian-related credit
risk
•
Indirect counterparty risk
in respect of referrals
• Corporate cash deposited
with external banks
Decreasing
• Client cash deposited
with external banks
(CASS rules)
• Failed trades
•
•
•
•
Indirect liquidity risk
associated with client
portfolios
Indirect liquidity risks
associated with dealing
Indirect risk in respect of
the liquidity of individual
holdings in a fund
Indirect risk in respect
of the overall liquidity of
our funds
3. Market risk
The risk that arises from fluctuations
in the value of, or income arising from,
movements in equity, bonds, or other
traded markets, interest rates or foreign
exchange rates that has a financial impact.
• Failed trades
Decreasing
•
•
•
Indirect market risk
associated with advising
on client portfolios
Indirect market risks
associated with dealing
Indirect market risk
associated with managing
client portfolios
Given the COVID-19
pandemic, markets,
and most asset classes
exhibited significant
volatility. However, with a
successful vaccine rollout
and gradual reopening of
economies, it is expected
that the worst of the
COVID-19 induced market
volatility is over.
44
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Risks continued
Business level risks
Emerging risks
Definition
Context
9. Change management risk
(Emerging)
The potential financial, reputational,
operational and client-related risks
arising from the poor implementation of
material projects or change initiatives.
10. Operational resilience
(Emerging)
The potential financial, reputational,
operational and client-related risks
arising from the inability to prevent,
adapt, respond to, recover and learn from
operational disruptions.
11. Third-party supplier risk
(Emerging)
The potential financial, reputational,
operational and client-related risks
arising from using third-party suppliers.
In line with our growth agenda, the Group is undergoing a strategic
transformation project of the end-to-end operating model and client journey, to
cater for shifting client demand and sectoral changes.
Given our agile operating model, strong capital and liquidity position, the Group
has continued to provide a high level of service to our clients and advisers,
whilst introducing a new connected way of working as staff begin to return to
our offices.
Given our announcement to partner with SS&C and outsource back office
services, the Group has focused on enhancing its third-party supplier
framework and continuing to invest in oversight capabilities.
Definition
Key risks identified by
risk management
framework
Change
since last
year
Rationale
for change
4. Business and
strategic risk
The risk of having an inadequate
business model or making strategic
decisions that may result in lower than
anticipated profit or losses or exposes
the Group to unforeseen risks.
• Adviser concentration
Unchanged
• Business growth
• Extreme market events
•
Investment
performance
• Product governance
• UK political risk
This risk remains unchanged, given
strong investment performance and a
progressive improvement in net flows
over the last year.
5. Conduct risk
The risk of causing detriment to
clients, stakeholders or the integrity
of the wider market because of
inappropriate execution of Brooks
Macdonald’s business activities.
• Client service
•
•
Investment
performance
Suitability and
conduct risk
• Data quality
• Cyber
•
IT infrastructure and
capability
• Key suppliers and
outsourcing
• Operational maturity
• People
• Resilience
6. Operational risk
The risk of loss arising from
inadequate or failed internal
processes, people and systems, or
from external events. It includes
legal and fraud risk but not strategic,
reputational and business risks.
7. Prudential risk
The risk of adverse business and/
or client impact resulting from
breaching regulatory capital/liquidity
requirements, or market/credit risk
internal limits.
8. Legal and regulatory risk
Legal and regulatory risk is defined
as the risk of exposure to legal or
regulatory penalties, financial
forfeiture and material loss due to
failure to act in accordance with
industry laws and regulations.
Unchanged
Unchanged
Over the past year, the Group has
been working on several initiatives
to promote good risk culture and
awareness. Furthermore, the Group
has developed enhanced management
information to measure conduct risk,
as well as, promoting good conduct
culture through policy compliance,
online training, and virtual classrooms/
webinars.
The Group has enhanced its processes,
including improved documentation
of all key processes. Incident
management has been enhanced
throughout the year. Furthermore, a
change risk management framework is
in place.
• Prudential requirements
Decreasing
The Group has capital resources
significantly above its Minimum Capital
Requirement.
• Reputational risk
• Financial crime
• Governance
• Legacy issues
• Regulatory, tax and legal
compliance
Unchanged
This risk remains unchanged given that
the regulatory landscape and focus on
the wealth management industry has
not changed.
46
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
The Group’s resilient operating
model enabled it to react
effectively to the pandemic and
emerge as a stronger business.
Ben Thorpe
Chief Financial Officer
Viability statement
In accordance with the UK Corporate Governance Code, the
Board has assessed the Group’s viability over a five-year period
from FY22 through to FY26. The decision to do so over this
period is aligned with the Group’s strategy, its budgeting and
forecasting process and the scenarios set out in the Internal
Capital Adequacy Assessment Process (“ICAAP”).
The Board has carried out a robust assessment of the principal
risks facing the Group along with the stress tests and scenarios
that would threaten the sustainability of its business model,
future performance, solvency or liquidity. This assessment is
based on the Group’s Medium-Term Plan (“MTP”), the ICAAP
and an evaluation of the Group’s emerging and principal
risks, as set out in the Risks section of this Strategic report and
outlined in the Risk and Compliance Committee report.
In assessing the future viability of the overall business, the
Board has considered the current and future strategy, as well as
any significant business restructuring and legacy issues. The
Board has also considered the business environment of the
Group and the potential threats to its business model arising
from regulatory, demographic, political and technological
changes. Moreover, the Board’s assessment considered the
widespread economic impact arising from the outbreak of the
COVID-19 pandemic on the Group’s profitability, regulatory
capital and liquidity forecasts. The Board’s assessment of
the Group’s capital and liquidity position also considers the
implications of maintaining the Group’s proposed interim and
final dividend pay-outs.
The five-year MTP forms part of the Group’s annual business
planning process. The model translates the Group’s current
and future strategy into a detailed year-one budget, followed
by higher level forecasts for years two through to five. The
combination of this detailed budgeting, longer-term forecasting
and various stress tests provides a transparent and holistic
view of the forward-looking financial prospects of the Group.
The Board reviews and challenges the Group’s MTP annually.
The MTP covering the five-year period from FY22 to FY26 was
reviewed, challenged and approved by the Board in June 2021.
In addition to the annual MTP preparation process, a re-
forecast is carried out by Management and reviewed by the
Board on a quarterly basis. These reflect updates for prevailing
trading conditions and other changes required to the budget
assumptions set at the start of the year.
As part of the ICAAP, the Group models a range of downside
scenarios and a severe but plausible stress scenario designed to
assess the Group’s ability to withstand a market-wide shock such
as a sharp market decline triggered by a global recession; Group-
specific stresses, such as the loss of an investment management
team or key introducer; and a combination of both.
The Group modelled a multi-layered scenario involving a
significant decline in financial markets over a five-year period
(a drop of 42.5% and 19.0% in years one and two respectively,
followed by a gradual recovery), combined with the loss of a
key investment management team. This scenario would have
a material impact on the Group’s profitability compared to the
MTP base case.
Management identified a number of mitigating actions that
could be implemented in the event of such severe stresses.
These include a reduction in staff variable pay and Group
dividends as well as a reduction in discretionary expenditure
(T&E, marketing and similar) and a recruitment freeze or
headcount reduction. Over the longer term, mitigating actions
could include a broader and more significant reduction in the
Group’s cost base (IT, property, change initiatives and others).
The implementation of the above actions depends on the
nature of the specific stress events and the time frames over
which they occur.
These scenarios are refreshed on a regular basis to ensure they
remain relevant and continue to be a suitable tool for developing
our controls and mitigating actions. Management also considers
a reverse stress case and carries out an assessment of the cost
to the Group of a wind-down in the event of a non-recoverable
shock to the operating model. Moreover, Management has
identified a number of actions that could be implemented in
the event of severe stresses. The implementation of the above
actions depends on the nature of the specific stress events and
the time frames over which they occur.
The Group’s business continuity planning enabled it to react
effectively to the COVID-19 crisis and move seamlessly to
remote working during the various lockdown periods with a
strong focus on staff well-being and maintaining high-quality
service to clients and intermediaries. The Group was also
able to transition to a hybrid operating model as Government
restrictions eased.
The COVID-19 outbreak last year caused economic uncertainty
and market volatility and whilst the markets have since
recovered, the pandemic is still present and its full scale
and duration are still not known. However, taking into
consideration the assessment of the above factors, including
the results of the latest ICAAP, the Group’s risk management
framework and the mitigating actions that can be put in
place, together with the Group’s successful navigation of the
pandemic thus far, the Board has reasonable expectations
the Group will be able to continue in operation and meet its
liabilities as they fall due over the period under assessment.
48
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
How we engage with our stakeholders
Section 172, employee and other
stakeholder engagement
This part of the Annual Report serves as our statement
regarding Section 172 of the Companies Act 2006. This piece of
legislation states that a director of a company must act in the
way it considers, in good faith, would be most likely to promote
the success of the company for the benefit of its members as a
whole. In doing so, a director of a company must have regard
(amongst other matters) to:
a. The likely consequences of any decision in the long term;
b. The interests of the company’s employees;
c. The need to foster the company’s business relationships
with suppliers, customers and others;
d. The impact of the company’s operations on the
community and the environment;
e. The desirability of the company maintaining a reputation
for high standards of business conduct; and
f. The need to act fairly as between members of the company.
The following summarises how the Company’s Board fulfils its
duties under Section 172 and how we balance the interests of
our stakeholders and consider the long-term consequences of
its decisions.
Guiding Principles
Our Guiding Principles are at the core of the culture at Brooks
Macdonald and set the standards for the decisions we make
and the way we treat our clients, partners, and each other. For
more information on our culture and Guiding Principles, see
the Chairman’s statement on pages 10 to 13, the CEO’s review on
pages 14 to 17, and the Corporate responsibility report on pages
54 to 69.
Stakeholder engagement
Engaging with stakeholders is fundamental to our
business success. By listening to and collaborating with our
stakeholders, we can grow our business and deliver for our
customers and society over the long term.
Principal decisions
The Board engages with a variety of stakeholders, including
clients, regulators, and suppliers, to inform and enable
balanced decisions that incorporate multiple viewpoints,
whilst following the Company’s strategy. In making decisions
the Board considers outcomes from engagements with
stakeholders, as well as, the importance of maintaining the
Company’s integrity, brand and reputation and the long term
consequences of any decisions. For an example of how this
happens in practice, see the case study on page 53 on the
partnership with SS&C.
Consideration of stakeholders and outcomes
When considering their decisions and in setting the policies and strategy for Brooks Macdonald, the Directors are aware there are
a number of other stakeholders, in addition to shareholders, who will be affected by the actions of the Group. These include, for
example, our clients and advisers along with our employees. The below table outlines how we consider these stakeholders and
how we engage with them to continue driving our growth.
How we engage with our stakeholders and make informed decisions
Why we engage
How we engage
Outcomes
Clients
Our clients are the main focus of
the business. By engaging with
them, we are able to gain a better
understanding of their needs,
develop long-term relationships
with them and ensure that we can
provide them with the products
and services that best suit their
individual circumstances.
Our clients’ desire to have better
access to information about
their investments resulted in the
Board supporting the continued
development of the myBM
platform. ESG continues to be an
important topic for our clients
and is reflected in the Group’s ESG
strategy, objectives and initiatives.
We engage with our clients in a
variety of ways, driven by their
requirements and preferences.
With all our clients, across
investment management and
financial planning, we hold face-to-
face meetings, provide investment
updates and quarterly statements,
and provide market commentary.
During the COVID-19 pandemic,
online interaction has replaced
face-to-face meetings and we have
increased the content available to
clients on our website, including
providing regular COVID-19
commentary.
How we engage with our stakeholders and make informed decisions
Why we engage
How we engage
Outcomes
Intermediaries
Our focus is on working with
intermediaries to support their
clients and our vision for Brooks
Macdonald is as the leading
investment management firm for
intermediaries. By deepening our
focus on advisers, we can both
achieve our aim and also help
advisers make their businesses
successful.
Shareholders
We value our shareholders’
support and want to give them
a better understanding of our
business. In addition, we have
obligations as an AIM-listed
company to provide information
to our shareholders.
Employees
Our employees are central to
the delivery of our offering for
advisers and clients and we strive
to attract and retain the best
people. Developing an engaged
and motivated workforce is key to
our desire to be a great employer
and to the success of the business.
We have built long-standing
relationships with mutual
benefits with many advisers. The
services we provide to them have
grown to include business-to-
business Investment Solutions
offerings, explicitly tailored to
the adviser’s requirements and
preferences.
This ongoing engagement has
helped us preserve the Group’s
reputation for integrity and
earned the trust and confidence
of our large, long-term, committed
shareholders in the business.
Throughout the COVID-19
pandemic, our focus has centred
firmly on the wellbeing of our staff.
Regular employee engagement
surveys have been undertaken,
the results of which are closely
monitored by the Executive
Committee and demonstrate
the support and care our people
have been offered through these
challenging times.
We work closely with our advisers,
offering them a range of services
to make Brooks Macdonald easy
to do business with and to help
them serve their, and our, clients’
needs. Again, our engagement is
driven by the individual adviser’s
requirements and preferences,
from high-touch ongoing strategic
relationships with a small number
of larger firms, through to more
arm’s length provision of our
consistent high-quality investment
management to others. Since
the outbreak of the COVID-19
pandemic, we have stepped up the
frequency of adviser engagement
in the form of investment bulletins,
webinars and online academies.
This is done through face-to-face
or virtual meetings and by the
provision of detailed financial
reports and presentations on
the business at the half-year
and full-year points. We engage
with shareholders frequently to
discuss delivery of our strategy,
current performance and our
plans for the business through our
Executive Directors, Chairman
and Committee Chairs.
We have a comprehensive internal
communication programme to
keep employees fully aware of
developments in the business’s
strategy and performance. The
CEO and other members of senior
management frequently engage
with staff in forums ranging
from formal communications,
including all staff “town hall”
video conferences, to more
informal small group discussions.
In accordance with the 2018
Corporate Governance Code,
John Linwood was appointed as
the designated Non-Executive
Director with responsibility for
engagement with the workforce. He
and other Non-Executive Directors
have made office visits and held
meetings with groups of staff to
better understand their views.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report How we engage with our stakeholders continued
How we engage with our stakeholders and make informed decisions
Why we engage
How we engage
Outcomes
Regulators
We focus on having positive and
interactive relationships with our
regulators, who provide oversight
and guidance in how we run our
business. Working constructively
with our regulators helps us to best
service the needs and interests of
our clients.
Community
and the
environment
We are a responsible Group
and seek both to support our
community and to reduce our
impact on the environment as
much as possible.
Regulated entities within the
Group corresponded with
relevant regulators during the
financial year in respect of their
supervision activity.
We provided timely submission
of all relevant regulatory
reporting and responded on a
timely basis to any regulatory
requests.
We also sent proactive
correspondence to our regulators
throughout the year with respect
to any changes and developments
in our business.
The BM Foundation was set up in
2010 with the aim of supporting
charities that staff are enthusiastic
about. It acts as a conduit for
donations to be made to charity,
and staff members are able to
request donations to a registered
charity of their choice. Staff are
also encouraged to do voluntary
work and are able to use a paid
volunteering day each year.
We seek to reduce our carbon
footprint through the better use
of technology and an associated
reduction in energy use. We also
look to partner with suppliers who
promote sustainability.
We had a constructive
relationship to ensure alignment
with the relevant regulatory
frameworks and have met the
regulators’ expectations on the
topics of discussion.
We regularly attended meetings
with, and provided input to, the
industry bodies and associations
we are affiliated with to ensure
we were engaged with the latest
issues impacting our industry
and clients.
The Foundation made donations
of over £51,000 during the year.
With homelessness increasing
in the wake of the COVID-19
pandemic, the Foundation chose
to support the Salvation Army as
its Christmas 2020 charity and
its donation was matched by
the Company. During the year,
our total energy consumption
reduced by 34% and our net
greenhouse gas emissions
reduced by 84%.
Engagement in action: partnership with SS&C
In 2020, we entered into a partnership with SS&C that will deliver an innovative and professional new operating
platform that will transform the way business is done with Brooks Macdonald. When making their decision to embark
on this journey, the Directors had to consider and weigh up the interests of each of the stakeholders who will be
affected by this change.
Clients
A key reason for entering into the
partnership with SS&C is that it will make
Brooks Macdonald easier to do business
with and make administration more
efficient resulting in fewer client queries
and issues.
Community and
the environment
The Board noted that the
more efficient and effective
processes envisaged by the
partnership would greatly
reduce paper usage and
ultimately support Brooks
Macdonald’s ambition to be
carbon neutral by 2030.
Regulators
We will keep the regulator informed
of the ongoing progress of our
partnership with SS&C. Where certain
regulatory responsibilities shift to
SS&C over time, we will seek to vary
our regulatory permissions and focus
on the need for enhanced third-party
oversight and supervision in these
relevant areas.
Partnership
with SS&C
Advisers
The partnership will have an immediate
positive impact on each adviser’s
experience with Brooks Macdonald,
in particular making the onboarding
process hugely more efficient.
Shareholders
The Board expect the
project to produce a strong
return on investment
through an increased
delivery of operating
leverage. The likely gains
mostly outweighed
the execution risk of
implementing the project.
Employees
Our employees’ wellbeing and
interests featured heavily in the
Board’s many discussions. The more
efficient and effective processes
will free up resources and allow
employees to focus on client service
and value-adding activities. Some
employees would transfer to SS&C.
Joining a large technology business
such as SS&C should be beneficial
to their careers, although it was
recognised that not all of those
affected may see it that way.
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Brooks Macdonald’s corporate responsibility strategy aims to ensure that
social, environmental and ethical considerations are central to the way that we
run our business. We are focused on protecting the environment, supporting
communities, and ensuring the wellbeing of our employees. The pandemic has
made it even more important for the Group to actively seek opportunities to
play its part as a good employer and contribute to the communities in which our
clients and employees live and work.
Our sustainability strategy
Our objectives
Our progress in the year
• Fulfil our promise to provide an
• Continued to effectively
inclusive culture, fulfilling careers
and great recognition
• Develop leaders who prioritise
engagement, diversity and
wellbeing
•
Increase employee engagement
• Have fun and celebrate our
achievements
support our people through the
COVID-19 pandemic, focussing on
communication and wellbeing
• Rolled out our new client facing
development programme,
Accelerating Growth
• Maintained our strong employee
engagement scores
• Developed our connected working
approach to be effective in the
post-pandemic world
• Develop the Brooks Macdonald
• The BM Foundation made
Foundation
•
Support community causes and
events
• Encourage staff to complete
voluntary work
• Operate as a firm in ways that are
environmentally sustainable
• Reduce carbon footprint through
investing in technology
• Develop partnerships with
suppliers that drive sustainable
improvements through the
value chain
donations of over £51,000 during
the year, including to the Black
Cultural Archives, the Lotus
Chidren’s Trust, and the Salvation
Army
• The Company matches all
donations made by the Foundation
• All staff are able to use a paid
volunteering day
• Reduced carbon footprint
by giving furniture and office
supplies to charity, and purchasing
renewable energy
•
Invested in spaces and technology
to support our carbon reduction
strategy
• Curated workplaces to ensure our
people have everything they need
to work comfortably, safely and
productively
Pillars
Our people
Our people are our greatest strength,
we care about every employee and
focus on their development and
wellbeing.
Our community
We support our
communities
through the BM
Foundation and
encourage staff
volunteering and
fundraising.
Our environment
We are a responsible Group and seek to
reduce our impact on the environment
as far as possible.
54
June 2021 ‘Speak Up’ employee
engagement score
66
(FY20: 67 points)
Number of employees by length of service
(30 June 2021):
66
88
164
120
Under 2
2–4 years
5–9 years
10+ years
Total: 438
Number of employees by age (years)
(30 June 2021):
80
94
116
148
18–29
30–39
40–49
50+
Total: 438
Foundation charitable donations of over
£51,000
Our focus on nurturing a culture that
is inclusive and values wellbeing has kept
our people engaged and supported through
the challenging times brought on by the
COVID-19 pandemic.
Tom Emery
HR Director
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Corporate responsibility report continued
Our people
At Brooks Macdonald we have an inclusive culture that
inspires people to do their best work, build strong and valuable
relationships, and enjoy themselves. We know that having a
motivated and engaged workforce will lead to better outcomes
for our clients.
The aim of our people agenda is simple; to enable our strategy
by attracting, engaging and retaining the best talent in the
industry. We welcome talented people from all backgrounds
who live and breathe our guiding principles and are focused
on making a difference for clients and advisers. At Brooks
Macdonald, Our Promise is to offer an inclusive culture,
fulfilling careers, and great recognition.
COVID-19
Like all businesses, we have had to deal with the exceptional
circumstances brought on by the pandemic, but have taken
the opportunity to show the strength of our culture and how
we live and breathe Our Guiding Principles.
Throughout the pandemic, we have been focussed on doing
the right thing for our people, staying connected with them
and providing them with care and support, so that we emerge
confidently and are ready to face the future. We adapted
quickly to remote working, ensuring that everyone was able
to do their roles effectively and increased our formal and
informal communications to make sure our people felt well
looked after. We also evolved our approach to work and
meetings to be as effective as we could. We did not furlough
anyone and did not make any redundancies in connection
with the pandemic.
Maintaining and strengthening our culture through this
difficult period was a key priority, and we took the opportunity
to bring our people together virtually where we could. This
included online home workouts, mindfulness sessions, quiz
nights, and virtual drinks and coffees.
Recognising the effort and commitment our people were
giving through the third lockdown, we allowed everyone a
number of ‘recharge days’; days which they could use in any
way they liked to rest, do hobbies, and spend time with family.
We also introduced our daily ‘digital detox’, which sets an hour
aside in the middle of the day when meetings are discouraged.
This gives everyone the opportunity to take a break from their
laptop and start the afternoon refreshed and productive.
We also heavily publicised our employee assistance
programme provided by Health Assured. This offers a 24-
hour helpline, and, online support, allowing our people and
their families access to confidential counselling, wellbeing
information, and a host of other services.
Our Guiding Principles
We do the
right thing
We are
connected
We care
We make a
difference
Our Guiding Principles are at the core of our culture and set the
standards for the decisions we make and the way we treat our
clients, partners, and each other.
In November each year we celebrate our annual guiding
principles awards, which are nominated and voted for by
our people. We give out an award for each guiding principle,
with our diamond award presented to the person who has
shown outstanding and unwavering commitment to all four
throughout the year.
“We set up ‘Chatting with Tom’ as an informal way of engaging
with our people through the pandemic. Hosted by our HR
Director, Tom Emery, these short, podcast-style interviews,
were introduced during lockdown to showcase stories about
some of the fascinating and talented people we have working
at Brooks Macdonald. A wide range of subjects have been
covered, including managing dyslexia, nutrition and fitness,
building a successful professional networking group, dealing
with domestic violence, and even the life of a professional
football player.
One of our most popular sessions showcased Jonty Warneken,
Head of our North region. Following a serious car accident
when he was in his early twenties, Jonty had his left leg
amputated at the knee and his skull rebuilt using titanium
plates. Despite this, not only has Jonty gone on to have a
successful career in the wealth management industry, but
he became the first disabled person to swim an ice mile. Tom
interviewed Jonty and talked about how he dealt with the
trauma of his injuries and, overcame adversity to become
a record-breaking ice swimmer, and how he uses what he
learned from the experiences in his everyday life.”
Engagement with our people
We believe that engaging with our people in a two-way
dialogue is critical to our success. We have several channels
through which we communicate and engage with our people:
• Regular all staff town halls
• Team meetings
• A daily investment update to key groups of staff
• Leadership conferences for senior managers
• The Speak Up survey
• T@3
• Chatting with Tom, our HR Director
• A Board engagement with the workforce programme
We have been running our employee engagement survey –
‘Speak Up’ for three years. We run the Speak Up survey twice
over the year, but given the COVID-19 pandemic, we felt it even
more important to stay connected with our people and ran
additional pulse surveys to check in on wellbeing. These pulse
surveys showed a high level of wellbeing and appreciation for
the support and care our people have been offered through
these challenging times.
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Speak Up highlights
79% of our people completed our most recent Speak Up survey
in June 2021 and 77% completed the survey in January 2021.
This high level of engagement with the survey shows it is a
trusted feedback channel that our people are keen to use.
Our survey asks questions across a broad range of areas
important to our people, including strategy, diversity and
inclusion (“D&I”), leadership, wellbeing, autonomy and
communication. It gives us insights into the overall engagement
levels of our workforce, and the opportunity to obtain both
quantitative and qualitative data.
The results show continued strong engagement across the
Group. Particularly pleasing is the level of advocacy across the
Group, with a large number of employees reporting that they
are saying great things about working at Brooks Macdonald
to their friends and family. There are some variances
between individual business and functional scores but no
pronounced differences when analysed by gender, age or
employment status.
Each Executive Committee member receives an individual
report showing their anonymised detailed scores. This helps
them to have a conversation with their teams about the scores,
gain further insight, and put in place robust action plans at a
team level to improve engagement in their areas.
Alongside the Speak Up survey, in 2021 we partnered with
an external consultancy to conduct several focus groups
with employees across different levels of the Group to give
a further opportunity to discuss engagement. Using an
objective, external facilitator enabled an even more insightful
conversation, especially around the areas of belonging, culture,
and leadership. The findings of the focus groups have been
used alongside the Speak Up results to formulate our people
strategy for FY22, with a strong focus on culture, recognition,
and career and capability development.
Speak Up highlights
June 2021 Speak Up score – 66 (-1 from May 2020)
1. Overall engagement
14%
24%
62%
Overall score based on answers to all questions
2. Advocacy
11%
19%
70%
I am happy to recommend Brooks Macdonald to others
as a great place to work
3. Wellbeing
8%
17%
75%
The Group has taken positive steps to support my wellbeing
4. Diversity and inclusion
4%
8%
88%
Brooks Macdonald enables me to be myself at work
Key
Positive
Neutral
Negative
We have also been working in partnership with the
#10000blackinterns initiative to provide paid summer
internship opportunities to young black university students
and graduates, who are typically underrepresented in the
wealth management industry, particularly in client facing
roles. At Brooks Macdonald, we are committed to supporting
#10000blackinterns and the ongoing internship opportunities.
Through our partnership with LGBT Great we are supporting
the LGBTQ+ community and are proud to have our HR Director
named in their Global Top 100 Executive Allies list for the
second consecutive year in recognition of his work to support
LGBTQ+ people in the industry. We supported the development
of LGBT Great’s mentoring programme, providing both mentors
and mentees to the scheme, and have committed to supporting
their flagship Project 1000 campaign. This is a five-year drive
to spotlight 1000 LGBTQ+ and supportive allies working in or
with the sector industry across all levels. We are proud to have
several LGBT Great role models across the business.
Diversity and inclusion
At Brooks Macdonald, Our Promise is to nurture an inclusive
culture that values and supports our people regardless of their
background. We serve a diverse client group and understand
that being diverse ourselves helps us to anticipate their needs
and provide superior service. For most of the financial year, our
Executive Committee included three women out of nine, and
our Group Board two women out of seven.
Throughout the year, we have introduced several initiatives
to support our diversity agenda, focusing on breaking down
barriers to welcoming new, diverse talent not only to BM but the
wider industry as well.
We continue to focus on ensuring our recruitment principles
of hiring for attitude and fit, providing equal opportunities for
all are consistently applied. This includes appropriate support,
retraining and facilities for employees who are disabled or
who become disabled whilst in our employment. We have
taken steps to improve the monitoring of diversity data and
will continue to build on this both at recruitment stages and
throughout the employment lifecycle.
Women, as well as other minority groups, have long been
underrepresented in our industry and we are taking several
steps to address this. As part of our commitment to gender
diversity, we are signatories to the Women in Finance Charter
and partner with City Hive, which encourages better female
representation in the Investment Management industry. We are
not where we want to be but have a clear D&I strategy in place
to make positive steps forward in achieving our ambition.
We’re focused on bringing in diverse talent in our entry-level
roles. To support this aim, we hired five Investment 2020
trainees across the Group. This is the third year we have hired
trainees through Investment 2020, who provide opportunities
to school and college leavers from diverse socio-economic
backgrounds and give organisations like Brooks Macdonald
the opportunity to hire emerging talent to bring new
perspectives and ideas.
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Corporate responsibility report continued
Paternity leave
The birth of my first daughter Olivia in 2017 was life changing
and particularly challenging, especially as the first few months
of her life were spent in hospital. Thankfully, when my wife
gave birth to our second daughter Evie in August 2020, things
were a little more straightforward and we got to enjoy family
life together almost immediately.
Perhaps due to my first experience of parenthood I was
particularly eager to enjoy my parental leave with Evie. I found
the extended paternity leave provided by Brooks Macdonald
allowed me the headspace and physical time to focus solely on
my family, adjust to the change, be present for developmental
milestones and to provide additional support to my wife,
making her maternity experience even better.
These lifetime milestones are so important and I’m extremely
pleased to see Brooks Macdonald prioritise these and the
mental and physical benefits they bring.
We have a well-established and passionate D&I working
group which frequently meets to collaborate and support
implementation of D&I initiatives. This has included events
to discuss the value of allyship, and importance of language and
terminology when addressing LGBTQ+ friends, family
and colleagues.
We are committed to supporting working parents and have
enhanced into our family leave policy so that any parent going
on long-term parental leave has access to coaching to best
support their transition from work to leave, and back to work
again. We recently enhanced our paternity leave provision to
ensure that all new fathers benefit from six weeks’ full pay when
their baby is born.
We also worked with an external consultancy to conduct
an audit across the Group around how successful we are in
building an inclusive culture and where we can do more.
The findings of this report are supporting the build of our
FY22 D&I strategy.
All employees
Senior management
37%
63%
30%
70%
Executive Committee
33%
67%
Female
Male
Gender pay gap reporting
In April 2021, we were pleased to report an improvement
in most of our gender pay gap measures. We acknowledge,
however, that despite our progress, our gender pay gap
remains too wide. Actions to narrow the gap remain high on
our agenda and we are committed to taking the steps required.
We regularly review fixed and variable pay to ensure there is
no inequality between genders in the same or similar roles.
The full report is available on our website.
Talent and development
Our people are our greatest strength, and only through
investing in their development, rewarding them competitively
and motivating and engaging them to be at their best, can
we deliver a highly professional and superior service to our
clients and stakeholders. At Brooks Macdonald we believe
everyone should have the opportunity to have a great career
and we make sure that we help all employees to meet their
full potential by creating innovative, effective and engaging
learning experiences. We know there is no better place to learn
and develop than through hands-on experience and everyday
challenges, and all employees to take ownership of their
personal development.
The Group regularly identifies its key roles and develops
succession plans to enable the development of talent and
to reduce potential risk should those in critical roles leave
the Group. Succession planning allows the Group to focus
its investment in capability development in the right places
and provides insight into where we need to build an external
pipeline of talent.
Our learning management system, Learning Curve, holds a
wide range of online programmes across several technical
areas of expertise, as well as, leadership skills, managing
change, teamwork, wellbeing, stress management and many
more. These programmes are open to all employees across
the Group.
Nurturing our employees to reach their full potential is central
to our success as a business and a clear focus in Our Promise
to employees. On an annual basis we assess the potential of
our senior employees and ensure development plans are in
place for all. We invest in our talent in several ways, including
apprenticeships, large scale development programmes,
external professional programmes, coaching and various
industry events. We foster a culture of on the job learning and
empower people managers to support their team’s personal
development.
In 2019, we launched our two flagship leadership development
programmes – Elevate for senior managers and Evolve
for high-potential people managers. During 2020, despite
the challenges of the pandemic, we continued to deliver
both Elevate and Evolve, with great engagement across the
programmes and saw positive feedback from participants.
In 2020, we made a significant investment in our client and
adviser facing teams through the launch of our Accelerating
Growth programme. This brought together 28 of our talented
Investment Managers, Private Client Managers and Business
Development Managers. Having motivated, capable people
speaking to our clients and advisers is central to ensuring
our clients get the best outcomes and experience, as well as,
contributing to our growth agenda.
We recognise the value in taking talented people on at the
beginning of their careers and our emerging talent programs
are central to Our Promise of supporting people to have
fulfilling careers. Graduates and trainee programmes have
long been recognised as a great way of bringing in diverse,
high-potential talent that can contribute to the commercial
performance of a firm and both will support the development
of our emerging talent pipeline.
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Our remuneration approach rewards our people meaningfully
for their performance and contribution to the success of
the Group and is continually evolving as we recognise
the changing needs and motivations of our people. We
offer a flexible benefits package offering a wide range of
benefits including:
• Pension
• Minimum 27 days’ holiday, with the option to purchase
additional days
• Private medical cover
•
Income protection insurance
• Critical illness cover
• Life assurance
• Discounts on products and services
• Personal development budget to learn a new skill not
related to work
• Cycle to work scheme
•
Sharesave scheme
Alongside remuneration, we also foster an environment
where both individual and team successes are celebrated, and
achievements are recognised.
On a monthly basis, the Executive Committee recognise
individuals who have gone above and beyond to bring our
guiding principles to life. This helps to support and
encourage a ‘thank you’ culture.
Corporate responsibility report continued
A day in the life of. . .
George Montgomery – I2020 trainee
“I found out about the Brooks Macdonald I2020 trainee
scheme when Investment 2020 came to my college. I’d been
studying accounting and finance and was interested in
working in financial services, so it looked ideal. The interview
process was great, it focussed less on my experience and
qualifications and more about me as a person – making the
decision to join was easy. It’s been an amazing experience!
In Risk, we work with every team and department, from the
Board to the most junior person. It’s allowed me to learn fast
and a definite highlight of my first year was submitting a piece
to Executive Committee members surrounding the impact
of a Labour Government (during the 2019 general elections).
I’d only been with Brooks Macdonald for two months. Above
all, it’s a great team to work with, it makes the job fun and
interesting and people are always willing to help you out.”
Inclusive futures
Investment 2020
One of the ways we develop our emerging talent is through our
successful partnership with Investment 2020 (“I2020”) where
to date we have successfully recruited 14 trainees since 2019
(including five from our 2020 cohort) and retained five into
permanent roles. A further 10 more trainees will join Brooks
Macdonald in October.
We recognise the importance of cognitive diversity for
innovation and change and as a firm want to improve both
demographic and cognitive diversity of future recruits and
seek to breakdown barriers of the Wealth Management
industry by recruiting from a cross section of universities.
The assessment process will be fully aligned to Our Guiding
Principles and leadership capabilities; allowing us to recruit for
cultural fit and potential.
Wellbeing
Flexible working
We are developing our ongoing approach to flexible working
through our connected working programme. Through
connected working, we are evolving our ways of working
to ensure that both our business and our people succeed in
the post-pandemic world. We are clear that as a relationship
business that values the benefits and enjoyment we take from
being together, the office is the primary location for most of our
workforce, but also understand that many people have seen
a benefit to their productivity and wellbeing from working
at home. We are focussed on ensuring that our leaders and
employees are empowered to work in the way that suits them
and their teams best, taking into account the demands of their
roles and their personal preferences and ensuring that there is
enough opportunity for learning, collaboration and creativity.
Trainees join Brooks Macdonald on an initial 12-month fixed
term contract. During this time, they are assigned to a specific
business area and gain the key skills required to carry out
their role. They also attend a number of events hosted by
Investment 2020 designed to help build and develop wider
industry knowledge.
The premise of the scheme is to encourage people from
wider socio-economic backgrounds to consider a career in
Investment Management. For school leavers, a traineeship
presents an opportunity to learn about an industry that might
not be widely promoted in their school or homelife, as well as,
the opportunity to explore an alternative route to university.
For Brooks Macdonald, the benefits of taking trainees allows for
greater diversity at entry level roles, as well as the opportunity
to develop young people with no prior experience whilst also
making a positive contribution to our greater social purpose.
Investment Management graduate trainee programme
This year, we launched our Investment Management
graduate trainee programme and will continue to partner
with Investment 2020 to ensure we continue to recruit from
diverse, socio-economic backgrounds. Graduates will be taken
on primarily into our client and advisers-facing teams and
supported to complete a professional qualification via the
apprenticeship route.
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Our community
The Group places a high importance on supporting the
communities that our clients and people live and work
in. Support for our communities is central to Our Guiding
Principles of ‘we care’ and ‘we make a difference’, and by
supporting not-for-profit organisations, the donations we make
address social and material needs to support the vital work of
charities in the UK and abroad.
We do this primarily through the BM Foundation. This was
established in 2010 with the aim of supporting charities that
our staff members feel passionate and enthusiastic about, and
since then, has made circa 250 donations totalling £282,000. It
is funded by an annual donation from the Group and regular
contributions from a large number of staff members via the
payroll. This year, we have seen an increase in the number of
staff members making regular contributions.
The Foundation makes it possible for our people to request
donations to charities that they are involved in or feel are
particularly relevant or deserving, with requests approved
by a committee made up of staff members. The Foundation
has also taken the opportunity to use its funds to recognise
charities that are connected to specific events or celebrations,
such as a donation made to the Black Cultural Archives during
Black History Month.
As well as making an annual contribution to the Foundation,
the Group also matches the awards that it makes on a pound-
for-pound basis.
The last 12 months saw requests to a variety of charities
important to our staff. During the pandemic we received an
increase in requests to mental health and homeless charities,
we chose to support the Salvation Army as our Christmas
2020 charity.
Each year, the Foundation aims to fund a small number of
specific projects and in July 2020 we donated £6,600 to The
Lotus Children’s Trust. The Trust is dedicated to providing
care, accommodation, support and education to abused,
abandoned and orphaned children in Mongolia. They raise
awareness of the plight of the street children and help to fund
The Lotus Children’s Centre which looks after more than 70
children. The Centre also provides vocational training for
young adults and funds were used to build new basketball and
volleyball courts. Participation in sport has many physical,
psychological and social benefits for the children, and we were
delighted to receive confirmation the courts were complete in
September 2020 with the following note from the Trust;
“The children and staff are all absolutely delighted with the new
facilities and do please give our most sincere thanks to all your
staff who contributed through the BM Foundation. This has been
such a worthwhile project and will make a real difference to the
very special children in our care.”
All staff are able to take a paid day off to volunteer in the
community. Our people have used this day to support several
charities and initiatives, including Macmillan Cancer Support,
Good Gym, and Cancer Research UK.
In the coming financial year, the Group will be celebrating its
30th birthday, and is planning a number of events to celebrate,
including fundraising for charity.
You make a difference
Our environment
Environment
Corporate Social Responsibility (“CSR”) has always been an
important value at Brooks Macdonald. We take very seriously
our responsibility to our clients, advisers, employees and
shareholders to build a strong, profitable and sustainable
business. We also believe that we hold a wider responsibility
towards each other and towards the natural environment.
Our CSR vision
We have made a great start and put in place strong foundations
towards our sustainability aspirations, but we know we have
more to do to which is why we have created our CSR vision:
“We want to make a positive difference through the services
we provide, the way we provide them and the way we run
the Group as a whole. We aspire to go above and beyond to
create a sustainable future that will benefit employees, clients,
shareholders and the wider environment for current and
future generations.”
CSR is about making a positive impact with everything we do,
from how we act as a Group to the investments we make on
behalf of our clients.
Procurement
Whether it is the location we work from, energy sources we
use, or even the paper and pens we buy, we work with many
different suppliers. It is impossible to run a successful business
alone, but we do have a choice about the businesses we
partner with. We will only work with suppliers who
have ethical business practices that align with our own, like
paying the living wage to their employees, sustainability and/
or CSR policies.
We want to do business with companies that care and do
the right thing. We have added social value questions to
benchmark all new and existing suppliers, this weighting being
the differentiator during selection.
Sustainability
We believe that businesses are accountable for achieving
good environmental practice and for working in a sustainable
manner. We are, therefore, committed to reducing our
environmental impact and constantly improving our
environmental performance as an essential and important
part of our business strategy and operating methods.
Although we are in the early stages of our own sustainability
journey, we have already made meaningful steps by:
• Putting recycling points in all of our offices
• Keeping single use products to a minimum
• Reducing our paper usage and encouraging our people to
‘go digital’
• Actively sourcing products that are Fairtrade or locally
produced
• Upcycling furniture when moving offices
• Working with suppliers focussed on sustainability
• Providing a cycle to work scheme for those who wish to
travel to work by bike
• Purchasing only renewable energy
Our workplaces
We have 13 offices across the UK and Channel Islands. Our
office spaces are designed with flexibility, diversity, and
different working styles at the forefront of our minds. We
consider the wellbeing of everyone who enters our offices
which is why each office includes contemplation rooms,
collaboration spaces, biophilia and places to relax.
Despite the challenges brought on by the pandemic, we have
made positive changes across our property portfolio. We
have consciously sought out office spaces that successfully
safeguard the health, safety and welfare of employees, whilst
considering the bigger picture and the future in terms of
environmental credentials.
We have partnered with charities and specialist companies
to reuse as much of our old furniture as possible with an
emphasis on maximum efficient sustainability and reduction
of waste output, carbon footprint and financial cost. We also
work with companies who take used and unwanted office
furniture destined for landfill and divert this resource to
community interest companies, social enterprises and other
interested parties.
Waste reduction charity WRAP (“Waste & Resources Action
Plan”) estimates that £9 million per year is spent sending
unwanted desks to landfill. Our ongoing focus on sustainability
ensured that 80% of our redundant office furniture was reused.
64
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Energy
As a business, we continue to assess our impact on the
environment with a view to mitigation or reduction where
possible. Our main environmental impacts are energy-
related emissions from our network of offices in the UK and
Channel Islands, and from employee travel – although this was
somewhat lessened as the pandemic reduced employee travel
during the financial year.
We have continued to reduce the amount of energy we use in
our buildings. Last year, we reported performance using the
Streamlined Energy and Carbon Reporting (“SECR”). This is a
relatively new energy efficiency reporting scheme that first
came into force in April 2019.
Every company must report their Scope 1 and 2 emissions.
These are listed below, along with Scope 3 emissions.
•
•
•
Scope 1 – includes emissions from activities owned or
controlled by a company that directly release emissions
into the atmosphere, e.g. the gas used to heat your building.
Scope 2 – covers the indirect emissions from the generation
of purchased electricity.
Scope 3 – includes emissions which the company does
not have direct control over, but that it can influence, for
instance through its supply chain or the stakeholders it
works with. An example of Scope 3 would be the emissions
associated with its employees commuting to work.
A sustainable workplace does not only impact the
environment, but also the people in it. We believe that a
sustainable and healthy workplace promotes a more fulfilled
and motivated workforce. This, in turn, boosts productivity
and reduces work-related hazards and illnesses. All of this
is fundamental to enhancing the overall reputation and
profitability of our business.
We have chosen office spaces in serviced offices that can
be classed as sustainable, typically incorporating wellbeing
measures that boost productivity, health and satisfaction,
including:
• Natural light
• Renewable energy waste management
• Recycling
• Bike and shower facilities
• Fairtrade products
• Living walls with thriving plants
• Automated low-energy LED lighting systems
• Water conservation strategies
• Our Manchester office now operates from the city’s first
BREEAM outstanding building with a WiredScore Platinum
status. It has also been dubbed Manchester’s most cycle-
friendly building by CycleScore and has a rooftop terrace
with two active beehives
Property strategy
Following our employee’s feedback we have committed to
providing great places to work with the best possible resources
supporting our new ways of working. We have created a
workplace strategy that provides the character and principles
of our offices to boost engagement, trust, energy, commitment
and productivity. We select properties and solutions that
enable commercial advantage providing for a more flexible
workforce enabling a hybrid approach.
Our movers and shakers in the last year include:
• Acquired larger premises in Jersey to support the
consolidation of the Lloyds Channel Islands acquisition
• We have doubled our space in Scotland, creating a fantastic
new office that provides flexible working as we integrated
the team from Cornelian
• Our Manchester team moved to the BREEAM outstanding
building as outlined above
• We relocated our Taunton team to new vibrant offices in
the heart of Exeter providing flexible work space
In line with the SECR legislation, Brooks Macdonald is required to report its energy consumption and greenhouse gas emissions
arising in the UK. All Scope 1 and 2 sources of energy and emissions have been disclosed as well as mandatory Scope 3 sources.
Source of energy & emissions
Combustion of Natural Gas
Scope 1 total
Purchased Electricity
Scope 2 total
Combustion of Fuel in Staff Vehicles
Scope 3 total
Gross total
Carbon-Neutral Utility Contracts
Net total
Energy consumption
(MWh)
GHG emissions
(tCO2e)
2021
99.26
99.26
526.37
526.37
52.23
52.23
2020
36.89
36.89
754.60
754.60
236.05
236.05
2021
18.25
18.25
122.39
122.39
13.08
13.08
2020
7.52
7.52
175.93
175.93
58.52
58.52
677.86
1,027.54
153.72
241.97
N/A
N/A
N/A
N/A
(114.84)
38.88
(3.46)
238.51
Intensity per 1000 m2 Gross Floor Area
124.33
188.25
7.13
43.70
Energy efficiency
Compared to last year, our total energy consumption has
reduced by 350 MWh or 34% and our net greenhouse gas
emissions have reduced by 200 tonnes of CO2e or 84%.
The average gross floor area of our sites is relatively
unchanged, however, per thousand square meters we are
consuming 64 MWh less energy and emitting 36.6 tonnes less
greenhouse gasses.
The process of changing our utility suppliers is ongoing as
contracts come due, with 82% of our electricity consumption
now being generated from renewable sources. The natural gas
consumption at our new Edinburgh site, which accounts for
34% of our total consumption, has carbon offsetting included
in the price. Switching to green suppliers has saved 114.8 tonnes
of CO2e this year, or 75% of our total gross emissions.
The last twelve months have presented unique challenges
which have changed many aspects of how we do business.
Desktop computers have been replaced by more energy
efficient laptops, and making use of video conferencing
software has enabled staff to work from home, and reduce
business mileage by conducting meetings remotely. For times
when business travel is unavoidable, we are trialling a package
which provides transport facilities with included carbon
offsetting and data management. With less staff working in
the offices, we have made several changes to our portfolio
of sites, with some closing and others consolidating into
combined sites. In the interest of sustainability all furniture
from vacated sites has been re-used, recycled or donated to
charity, and minimal structural changes have been carried
out during renovations.
Other environmental initiatives include removing single use
plastic products from our procurement, ensuring catering is
sourced locally, and using chemical free cleaning at our sites.
As well as considering the environment as a factor in every
decision that we make, we believe it is important to improve
the social and economic impacts of our activity. We are
proud to subscribe to the “Period Dignity at Work” scheme
which, in addition to supporting our own staff, provide
environmentally-friendly period products and education
around the world. We have also selected a water supplier
which builds wells in developing nations.
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Distribution of annual
energy consumption
by usage
7.7%
Distribution of
annual emissions
by usage
33.6%
92.3%
66.4%
Buildings
Transport-staff
Buildings
Transport-staff
Distribution of annual
energy consumption
by fuel
Distribution of
annual emissions
by fuel
14.7%
36.1%
5.5%
1.9%
0.1%
31.2%
77.8%
Electricity
Natural gas
Diesel
Petrol
Transport fuels
0.6%
8.0%
24.1%
Electricity
Natural gas
Diesel
Petrol
Transport fuels
Distribution of annual
energy consumption
by scope
Distribution of
annual emissions
by scope
7.7%
14.7%
33.6%
31.1%
Utilities
Where possible, energy consumption expressed in kilowatt-
hours has been taken from suppliers’ invoices. At the
Edinburgh site the landlord was unable to provide electricity
consumption data, therefore, this has been estimated by
comparison to the Manchester site which is comparable in
function. The annual consumption of the Manchester site has
been divided by the floor area to give a benchmark of 90.54
kWh/m2, which has been multiplied by the floor area
of the Edinburgh site. Two months of gas consumption data
at the Edinburgh site and the final quarterly electricity invoice
for the Guernsey site were unavailable at the time that this
disclosure was prepared, therefore, these have been estimated
by pro-rata of the available data for each site respectively.
All other sites have a full year of invoiced electricity and
natural gas consumption data. These estimations equate to
52.2MWh or 8.4% of the Group’s total utility consumption. The
supplies which include estimations are all from carbon neutral
supplies and so have no effect on the net carbon footprint
of the Group. The energy consumption from electricity and
natural gas consumption has been multiplied by the
kgCO2 e/kWh conversion factors for the average UK grid
supply to calculate the gross location-based greenhouse gas
emissions. 75% of energy supplied is from carbon neutral
contracts. The emissions from these supplies have been
deducted to show the net market-based emissions.
Transport
Certain members of staff use their personal vehicles for work-
related purposes and are reimbursed through mileage claims.
The fuel type and size of the vehicles’ engines are recorded
with mileage claims.
Other fuels and emissions
No other fuels are used by the Group. Air conditioning
maintenance records did not contain any instances of
refrigerant leaks during the reference period. No other sources
of fugitive emissions have been identified.
77.6%
1
2
3
68
35.3%
1
2
3
Responsible investing
In 2020 we became a signatory of the UN
Principles for Responsible Investment (“PRI”). We
are committed to implementing the PRI principles,
including enhancing our active ownership
practices and further integrating Environmental,
Social and Governance (“ESG”) analysis into our
investment decision making. We have recently
published a new Responsible Investment
Policy and improved how we integrate ESG
considerations into our investment decisions
across our Centralised Investment Process. Funds
managed by third-party managers make up the
majority of our clients’ investment portfolios.
We have developed a structured framework for
ESG research which incorporates quantitative
and qualitative inputs from questionnaires,
Morningstar ESG data and fund manager
meetings. We have also enhanced our processes
for how we integrate ESG considerations into
our direct stock selection incorporating both
quantitative data sets and qualitative assessments.
Whilst ESG assessments are considered across
all our services, we also offer a Responsible
Investment Service which has two investment
mandates with specific investment objectives.
‘Avoid’ is based on a formal exclusion policy on
five product areas, and ‘Advance’ is focussed
on positively contributing to addressing eight
sustainability challenges, either through the
products and services that a company provides
or through the evolving operational management
and footprint of a company.
Climate change
We recognise the serious risk climate change
presents to the world and we view it as a critical
investment issue that creates both risks and
opportunities for the companies in which we invest
and can materially impact the long-term value of
investments.
We seek to address and mitigate climate
investment risks by:
• Assessing material risk and opportunities
related to climate change when making
investment decisions. We use data to analyse
exposure to carbon risk in the third-party funds
we invest in, looking at the risks companies face
from the transition to a low-carbon economy.
Where we identify material climate-related
risks, we will engage with fund managers to
understand how these are being addressed.
• Encouraging proactive management of
climate risks by both our investee companies
and third-party fund managers. We are
supportive of better quality climate-related
disclosures and we expect fund managers
and relevant companies to report in line with
the Task Force on Climate-related Financial
Disclosures (“TCFD”) recommendations.
Going forward, we will focus on enhancing the
carbon-related metrics and data we use in our
investment process whilst acknowledging that the
quality and consistency of the data is still improving.
We are also committed to producing our own
TCFD disclosures in line with the upcoming
regulatory requirements.
Brooks Macdonald Group plc / Annual Report and Accounts 2021Corporate governanceFinancial statementsIntroductionStrategic report
Corporate
governance
Presents a clear view
of our governance
Contents
Introduction to Corporate governance
Board overview
Board and Committee structure
Board of Directors
Executive Committee
Audit Committee report
Nominations Committee report
Remuneration Committee report
Risk and Compliance Committee report
Report of the Directors
Statement of Directors’ responsibilities
Independent Auditors’ report
72
73
74
77
82
84
88
90
106
110
112
114
Introduction to Corporate governance
Board overview
The Brooks Macdonald Board is committed to maintaining
a strong governance framework to support our mission to
protect and enhance our clients’ wealth.
As such, the Board has responsibility for promoting the
long-term strategy and success of the Group by providing
leadership, shaping the Group’s culture, and agreeing the
risk appetite and the appropriate systems of control for risk
management. The Board is also focused on ensuring that the
risk and compliance framework is appropriately embedded
within the Group’s day-to-day activities. The Board delegates
the day-to-day management of the Group to the CEO, who is
supported by an Executive Committee. Refer to page 82 for the
composition of the Executive Committee.
As well as having operational oversight of the Group’s day-
to-day activities, the Executive Committee focuses on the
formation and implementation of the Group’s strategy and
makes decisions that are not otherwise reserved for the
Board. The Executive Committee meets regularly, with a
mixture of formal and informal scheduled meetings, together
with ad hoc meetings as required, such as, in response to the
COVID-19 pandemic.
The Group’s Board and Committee structure is detailed on
page 74 together with the biographies of Board and Committee
members on pages 80 and 81.
The roles and responsibilities of each of the Committees, and
the activities carried out during the year, are set out in the
reports of the respective Committee Chairs. The Company
Secretary also plays a role in ensuring that Board procedures
are complied with and applicable rules are followed.
The Board, on the recommendation of the Nominations
Committee, considers that all of the Non-Executive Directors
are independent. While it can vary through the year, typically,
the Company would expect each Non-Executive Director to
devote around two days per month to the Group’s business. All
Board members are required to disclose any external positions
or interests which might conflict with their directorship of
Brooks Macdonald prior to their appointment and thereafter
on a continuous basis so that any potential conflict can be
properly assessed. If any conflicts of interest do arise, then they
can generally be managed by due process.
UK Corporate Governance Code
Compliance Statement
The Group follows the 2018 UK Corporate Governance Code
(“the Code”). This report, together with the Report of the
Directors and the Strategic report, describes how the Group
has applied the principles and complied with the provisions
of the Code, or sets out explanations of where the Group is not
complying with the Code. A copy of the Code can be found on
the Financial Reporting Council’s website at www.frc.org.uk.
Implementation of the 2018 UK Corporate Governance Code
How Brooks Macdonald have applied the Code
Further information
The Board seeks to promote the long-term sustainable success of the Company,
setting out the Company’s purpose, values and strategy and ensuring that these
and the Company’s culture are aligned.
The Group Board, led by the Chairman, sits at the top of the Company’s
governance framework. The Board and its Committees have clearly defined
roles, with the list of matters reserved for the Board and the Committees’ terms of
reference being available on the Company’s website. A majority of the Board are
independent Non-Executive Directors.
The Nominations Committee oversees formal procedures both to evaluate the
Board and to ensure its composition provides an appropriate balance of skills
and experience. It also considers succession planning within the Group. The
Company seeks to promote diversity at both Board and senior management
level.
The Board and its Committees oversee procedures and processes by which
the Company manages the risks it is willing to take in order to achieve its long-
term objectives. This includes ensuring the independence and effectiveness
of the internal and external audit functions and monitoring the integrity of the
Company’s financial statements and formal announcements.
The Board and the Remuneration Committee develop and oversee policies and
practices which are designed to promote the Company’s strategy and its long-
term success and to align the interests of senior management with those of the
Company’s shareholders.
Read more in our Strategic and
Corporate responsibility report
on pages 54 to 69.
Read more in our Board
overview on page 73 and
Committee structure on
page 74, plus reports of the
Committees on pages 84 to 109.
Read more about our Board
composition on pages 76 and
Nominations Committee on
pages 88 to 89.
Read more about our Audit
Committee on pages 84 to 87
and our Risk and Compliance
Committee on pages 106 to 109.
Read more about our
Remuneration Committee on
pages 90 to 105.
Section of the
Code
Board leadership
and company
purpose
Division of
responsibilities
Composition,
succession
and evaluation
Audit, risk and
internal control
Remuneration
72
The Brooks Macdonald Board is responsible for the Group’s Corporate governance system and is committed to maintaining
a strong governance framework to support our mission to protect and enhance our clients’ wealth. In order to achieve this,
the Board meets on a regular basis. During the year to 30 June 2021, there were six scheduled Board meetings and details of
attendance at these is shown on page 76. In addition, further unscheduled meetings were convened where necessary to consider
matters which are time-sensitive in nature and cannot wait until the next scheduled meeting. Typically, these related to the
acquisitions made by the Group in the year and the Group’s response to the COVID-19 pandemic.
Matters discussed by the Board in the year
Regular
updates
• CEO’s report
including
business
performance
• Chief Financial
Officer’s report
• Chief Investment
Officer’s report
• HR Director’s
report
• Committee
Chairs’ updates
Financials
Projects
• Annual and
Interim Report and
Accounts
• Dividend
payments
recommendations
• Budget and
Medium-Term
Plan
• Acquisition of
Lloyds Bank
International’s
Channel
Islands wealth
management and
funds business
• Technology
partnership with
SS&C
• New flows
initiatives
• COVID-19 response
•
Isle of Man office
establishment
Read more about our
partnership with SS&C
on page 53
Governance
and regulatory
Strategy
• Reviews of
•
Strategy refresh
• Private client
strategy
• M&A
Committee terms
of reference
• AGM
arrangements
•
SM&CR regime
• Board
effectiveness
review
• Modern Slavery
statement
• PDMR list review
•
ICAAP review
Assessing and monitoring culture
The Board monitors the Group’s culture through regular reports from the CEO and the HR Director to ensure this is aligned with
the Group’s purpose and strategy. In addition, we have a designated Non-Executive Director who has responsibility for engaging
with the workforce and who regularly holds meetings with different members of staff. Other Non-Executive Directors have also
held ‘skip-level’ meetings with employees to help the Board better understand the views of the Group’s staff. The results of the
Group’s regular staff surveys are also reviewed and discussed at Board meetings. For further information on this see ‘How we
engage with our stakeholders on pages 50 to 53 and our Corporate responsibility report on pages 54 to 69, of the Strategic report.
Director training and induction
On appointment to the Board, new Directors are given a comprehensive induction programme. This allows them to familiarise
themselves with the Group’s business, policies and key issues. The induction programme is tailored to the individuals concerned
and involves meetings with key individuals within the Group, as well as, external advisers to the Company. Peel Hunt, the Group’s
NOMAD, also provide an overview of the Directors’ responsibilities as a Board member of an AIM-listed entity.
Training is provided for Directors on an ongoing basis. During the year, the Board received training on the AIM rules and
regulations amongst other matters .
External appointments
Directors are only permitted to take on external appointments with the approval of the Board. Such approval will only be given
where the appointment will not impact on the Director’s ability to devote sufficient time to their responsibilities with the Group.
The Board did not consider that any new appointments taken on during the year raised an issue in this respect.
Annual Board evaluation
The Board undergoes an annual evaluation of its performance. Further details of this are set out in the Nominations Committee
report on page 88.
73
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements
Board and Committee structure
The Board
Brooks Macdonald Group Board
The Board has responsibility for promoting the long-term strategy and success of the
Group by providing leadership, shaping the Group’s culture, and agreeing the risk appetite and
the appropriate systems of control for risk management. The Board delegates certain
of its responsibilities to the committees shown below.
Current
Alan Carruthers (Chairman)
Andrew Shepherd1
Ben Thorpe
Lynsey Cross1
Richard Price
John Linwood
Dagmar Kershaw2
Robert Burgess3
Non-current
David Stewart4
Diane Seymour-Williams5
Caroline Connellan6
Audit
Committee
Nominations
Committee
Remuneration
Committee
Risk and Compliance
Committee
Audit
Committee
Nominations
Committee
Remuneration
Committee
Risk and
Compliance
Committee
Disclosure
Committee
The Risk and Compliance
Committee assists the
Board in meeting its risk
management, regulatory,
compliance and internal
control responsibilities.
In discharging these
governance responsibilities,
the Committee Chair liaises
closely with the Chair of
the Audit Committee to
ensure a clear allocation of
responsibilities between the
two Committees, ensuring
governance completeness
across the risk landscape.
The Audit Committee
assists the Board in meeting
its responsibilities for the
integrity of the Group’s
internal financial controls
and its financial reporting.
In particular, this involves
reviewing and challenging
the Group’s accounting
policies and significant
judgement areas and the
integrity of its financial
reporting. It also provides
oversight and monitoring
of the internal and external
audit functions and works
in conjunction with the Risk
and Compliance Committee
to review the effectiveness
of the Group’s risk
management framework
and internal controls.
The Nominations
Committee is responsible
for recommending
Board and Committee
appointments and
reviewing the composition
of the Board and the Board
Committees to ensure they
are suitably constituted,
with an appropriate balance
of skills, experience,
knowledge and diversity.
This includes conducting
the annual Board
effectiveness review. The
Committee also monitors
succession planning at
the Group’s leadership
levels to ensure the
Group’s continued ability
to implement its strategy
and operate effectively.
The Committee is also
responsible for reviewing
and recommending to the
Board any material changes
to the structure, size and
composition of the Group’s
regulated subsidiary
company boards.
The Remuneration
Committee exercises
independent judgement
in the determination,
implementation and
operation of the overall
Remuneration Policy for
the Group. It provides
oversight of the design
and application of the
Remuneration Policy and
makes recommendation
to the Board of the
overarching principles
for all Group employees,
it ensures the policy is
consistent with the risk
appetite of the Group and
its strategic goals and it
reviews and approves the
remuneration policies
and remuneration for
the Executive Directors,
members of the Executive
Committee, Material Risk
Takers and any other
employees for whom
enhanced oversight is
either appropriate, or a
regulatory requirement.
Current
• Richard Price
(Chair)
Current
• Alan Carruthers
(Chair)
Current
• John Linwood
(Chair)
Current
• Robert Burgess
(Chair) 3, 7
Current
• Alan Carruthers
(Chair)
• John Linwood
• Richard Price
• Richard Price
• Richard Price
• Andrew Shepherd1
• Dagmar Kershaw2
• John Linwood
• Dagmar Kershaw2
• John Linwood
• Richard Price
• Robert Burgess3
• Dagmar Kershaw2
• Robert Burgess3
• Dagmar Kershaw2
• Ben Thorpe
• Robert Burgess3
Non-current
• David Stewart4
Non-current
• David Stewart4
Non-current
• David Stewart4
Non-current
• David Stewart4, 8
• Diane Seymour-
• Diane Seymour-
• Diane Seymour-
• Diane Seymour-
Williams5
Williams5
Williams5
Williams4
Non-current
• Caroline
Connellan6
1. Appointed 13 July 2021
3. Appointed 1 August 2020
5. Resigned 27 October 2020
7. Appointed as Chair 1 August 2020
2. Appointed 1 July 2020
4. Resigned 31 July 2020
6. Resigned 27 May 2021
8. Resigned as Chair 31 July 2020
Executive Committee
Andrew Shepherd (Chair)
Lynsey Cross
Robin Eggar
Tom Emery
Richard Hughes
Alick Mackay
Edward Park
Ben Thorpe
Priti Verma
74
75
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Board and Committee structure continued
Board of Directors
List of Board meetings and attendance
Chair of the Board
Senior Independent Director
Number of scheduled meetings held
during the year
Caroline Connellan1
Ben Thorpe
Alan Carruthers
John Linwood
Richard Price
Diane Seymour-Williams2
David Stewart3
Dagmar Kershaw4
Robert Burgess5
Attended
Meetings
Board
Audit Nominations Remuneration
Risk and
Compliance
Disclosure
6
5 5
6
6
6
6
2
6
6
6
6
2
1
1
6
5
6
5
6
–
–
–
6
6
3
5
6
2
0 0
6
6
6
6
3
–
–
3
3
3
3
3
3
0 0
0 0
3
3
3
3
6
–
–
–
6
6
2
6
5
2
0
1
6
5
6
5
5
–
–
–
5
5
2
5
5
2
0 0
5
5
5
5
0
–
–
–
–
–
–
–
–
–
1. Resigned 27 May 2021
3. Resigned 31 July 2020
5. Appointed 1 August 2020
2. Resigned 27 October 2020
4. Appointed 1 July 2020
John Linwood, Richard Price, Diane Seymour-Williams, David Stewart, Dagmar Kershaw and Robert Burgess were
independent Non-Executive Directors during the year.
Board composition statistics as at 15 September 2021
Gender diversity
Independence
Board tenure
1
3
4
1
1
2
4
Chairman
Executive Directors
Non-Executive
Directors
< 1 year
1-3 years
3-5 years
> 5 years
2
6
Male
Female
76
Role and responsibilities
• Leading and managing the Board
•
Setting the agenda, including discussion of issues of
strategy, performance, accountability and risk
• Providing and promoting constructive challenge
to management
•
Setting clear expectations on culture, values
and behaviours
• Performance evaluation of the Board and CEO
Role and responsibilities
• Acting as a sounding board for the Chairman
• Acting as an intermediary for the other Directors
• Providing an alternative channel of communication
for investors, primarily on Corporate governance
matters
• Leading the evaluation of the Chairman and leading
the search for a new Chairman when necessary
CEO
Role and responsibilities
• Leading the Group
Independent Non-Executive Directors
Role and responsibilities
• Contributing constructive, independent challenge
• Developing, recommending and executing strategies
and rigour
and strategic priorities
• Assisting in the development of the Company’s
• Maintaining relationships with shareholders and
strategy
other stakeholders
• Developing the Group’s executive management
• Ensuring the integrity of financial information,
controls and risk management processes
capability
• Monitoring the performance of the Executive Directors
• Overall development of Group policies and
communicating the Company’s values
against agreed goals and objectives
•
Serving on Board Committees
Chief Financial Officer
Chief Operating Officer
Role and responsibilities
•
Supporting the CEO in developing and implementing
strategy
Role and responsibilities
•
Supporting the CEO in developing and implementing
the operational strategy
• Providing strategic financial leadership and day-to-day
• Leading the transformation of the Group’s operating
management of the finance function
platform in partnership with SS&C
• With the CEO, explaining performance
• Responsibility for the Group’s Technology and
to shareholders
• Responsibility for the Group’s product and service
Operations, including the Business Continuity plans
during remote working
innovation agenda
• Oversight of the Group’s real estate and Corporate
social responsibility agenda
• Responsibility for the Group’s Marketing strategy and
public relations
Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements
Board of Directors continued
Read the Board biographies
on pages 80 to 81
In May, I was delighted to
announce the appointment of
Andrew Shepherd as our new
Group CEO.
Alan Carruthers
Chairman
IntroductionStrategic reportCorporate governanceFinancial statements
Board of Directors continued
Chairman
Executive Directors
Non-Executive Directors
Ben
Thorpe
Chief Financial Officer
Key skills and experience
•
Brings strong commercial
perspective to leadership
of the business
•
Extensive experience of
senior finance roles in
wealth management and
banking
Ben joined Brooks
Macdonald in August 2018 as
Group Finance Director and
an Executive Director on the
Group Board and a member
of the Disclosure Committee.
He has 19 years of financial
services experience, most
recently as Head of Finance
at Brewin Dolphin where he
was responsible for Group
Financial Planning and
Analysis, Financial Control,
Tax and Treasury. Prior to
Brewin, Ben spent 14 years
working in the financial
planning and analysis teams
at Morgan Stanley, RBS and
Barclays Capital with his last
role being Managing Director,
Strategy and Change at
Standard Bank South Africa
in Johannesburg.
Lynsey
Cross
Chief Operating Officer
Key skills and experience
•
•
Broad experience across
financial services
Track record in a variety
of C-suite roles
Lynsey joined Brooks
Macdonald in May 2020
as Chief Operating Officer
(“COO”). Lynsey is responsible
for advancing how the Group
serves their advisers and
clients and leads the Group’s
investment in technology,
systems and processes.
With over 25 years of
financial services experience,
Lynsey has worked in a
number of senior roles across
both asset management and
insurance. More recently she
was CEO of ANV Group until
she led the company through
its acquisition to AmTrust.
She was then appointed COO
of AmTrust International
to oversee their complex
integration program.
Additionally, Lynsey is Chair
of Diversity and Inclusion at
Insurance Institute London
and is a Non-Executive
Director of MSE NHS
Foundation Trust.
Alan
Carruthers
Non-Executive Chairman
Key skills and experience
•
•
Effective Chairman,
leading from the front
while also leveraging the
skills and experiences of
his Board colleagues
Experienced financial
services practitioner
Alan joined Brooks
Macdonald as the Chairman
in March 2019. He is Chair
of both the Nominations
Committee and the
Disclosure Committee. Alan
has over 27 years’ equity
markets experience working
for leading financial services
firms and held senior
positions as Head of Global
Sales Trading at Morgan
Stanley (1996 – 2003), Global
Head of Equities at Cazenove
(2003 – 2010) and Head of
Europe, Middle East and
Africa (EMEA) Cash Equities
at JP Morgan Cazenove
(2010 – 2011). Alan is currently
the Chairman of Numis
Corporation plc.
Andrew
Shepherd
CEO designate
Key skills and experience
• Distinctive people leader
• Unrivalled experience of
the industry
• Deep affinity with the
Brooks Macdonald
culture
Andrew was appointed
CEO designate of Brooks
Macdonald in 2021, having
been with the organisation
for almost twenty years.
Andrew began his career
at Brooks Macdonald as
an Investment Manager,
becoming Managing Director
and then Group Deputy CEO
in 2015. In 2019, Andrew
took on the role of CEO of
the International business,
focussing on building the
culture whilst reorganising
and preparing the business
for growth.
Andrew has unrivalled
experience and knowledge
of the industry with more
than 27 years’ experience
in financial services and
investment management.
Prior to joining Brooks
Macdonald, Andrew worked
at Shepherd Associates
Financial Management,
qualifying as a financial
planner prior to holding
the position of Investment
Director.
80
Dagmar
Kershaw
Independent
Non-Executive Director
Key skills and experience
•
Senior financial services
professional with broad
experience, particularly
in business development
•
Significant expertise
across the investment
management sector
Dagmar joined Brooks
Macdonald in July 2020 as
a Non-Executive Director.
She is a member of the
Nominations, Remuneration,
Audit and Risk and
Compliance Committees.
Currently a senior advisor
to Strategic Value Partners,
and a non-executive director
of both Aberdeen Smaller
Companies Income Trust
Plc and Volta Finance
limited, Dagmar has over
25 years’ experience in
debt and fixed income
markets, with a particular
focus on alternative and
structured investing. Dagmar
previously spent eight years
at Intermediate Capital
Group as Head of Credit Fund
Management, and ten years
in senior positions at M&G
Investments. Dagmar is a
Trustee of Laurus Trust.
Richard
Price
Independent
Non-Executive Director
Key skills and experience
• Appointment as Senior
Independent Director
reflects his deep
understanding of the
Group’s history and
strategy
•
Big Four accounting
experience underpins
leadership of the Audit
Committee
Richard joined Brooks
Macdonald in 2014 as a Non-
Executive Director. He is the
Senior Independent Director
(subject to FCA approval) and
Chair of the Audit Committee
and a member of the Risk and
Compliance, Remuneration,
Disclosure and Nominations
Committees. Prior to joining
Brooks Macdonald, Richard
was a partner at KPMG
for 17 years where he had
considerable exposure to
financial services clients,
and held a number of roles,
including the UK Head of
KPMG’s Financial Sector
Transaction Services practice.
Richard is a Non-Executive
Director of Hampshire Trust
Bank Plc and Alpha Bank
London Limited.
Robert
Burgess
Independent
Non-Executive Director
Key skills and experience
Brings significant
•
executive and non-
executive experience to
the Board and the role
of Risk and Compliance
Chair
•
Broad financial services
experience, particularly
in wealth management,
asset management,
banking and FinTech
•
Significant experience of
high-growth businesses
Robert joined Brooks
Macdonald as a Non-
Executive Director in August
2020 and is Chair of the Risk
and Compliance Committee
and a member of the
Audit, Remuneration and
Nominations Committees.
Currently a Non-Executive
Director at Oaknorth Bank,
Robert chairs both the Risk
and Compliance Committee
and the Credit Committee.
Robert is also the Chairman
of Invest & Fund, a specialist
FinTech business. Robert
has over 25 years Financial
Services experience across
leading Banking, Wealth,
Asset Management and
FinTech firms. He has held
senior executive positions
including at Lloyds Banking
Group and Scottish Widows,
and he was previously a
Board Director of Alliance
Trust plc and CEO of Alliance
Trust Savings.
John
Linwood
Independent
Non-Executive Director
Key skills and experience
• A deep understanding
of technology, cyber
security, AI and digital
transformation having
held senior roles at some
of the world’s largest
global organisations
in the technology and
media industries
•
•
Brings wide-ranging
business and leadership
experience to the
role of Remuneration
Committee Chair
Experienced Non-
Executive Director across
FTSE, AIM and private
companies as well as
Government institutions
John joined Brooks
Macdonald as a Non-
Executive Director in 2018.
He is Chairman of the
Remuneration Committee
and is a member of the Audit,
Nominations and Risk and
Compliance Committees.
Prior to joining Brooks
Macdonald, John was the
Executive Vice President and
Chief Technology Officer
of Wood Mackenzie, Chief
Technology Officer for
the BBC, and a Senior Vice
President of International
Engineering at Yahoo Inc. He
has also held a number of
senior positions at Microsoft
Corp. (1993 – 2004). John is
a Non-Executive Director of
National Grid ESO.
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Andrew
Shepherd
CEO designate
Ben
Thorpe
Chief Financial Officer
Lynsey
Cross
Chief Operating Officer
See Andrew’s biography
on page 80
See Ben’s biography
on page 80
See Lynsey’s biography
on page 80
Robin
Eggar
Managing Director, Head of UK
Investment Management
Robin is Managing Director, Head of
UK Investment Management at Brooks
Macdonald Group and a member of the
Executive Committee. In his role, Robin
has overall responsibility for running the
UK Investment Management and private
clients arm of the business and a focus to
deliver on the agreed strategy of the Group.
Robin joined Brooks Macdonald in
2001 as a Trainee Investment Manager
as part of the Group’s graduate training
programme. Before becoming MD,
Robin established his career in Brooks
Macdonald by building and growing his
own investment team before assuming
management of the wider London
Investment Teams.
Robin is a qualified Investment Manager,
holds a master’s degree in Economic
History from the University of Edinburgh
and is a chartered member of the CISI.
82
Tom
Emery
Human Resources Director
Richard
Hughes
CEO International
Tom is the HR Director of the Brooks
Macdonald Group and a member of the
Executive Committee. Joining Brooks
Macdonald in 2017, Tom owns all areas
of the HR and people strategy including
HR business partnering, performance
and reward, HR operations, talent and
development, and HR governance.
Tom has spent over 15 years working in
HR in industries such as finance, retail,
technology and local government. Prior to
joining Brooks Macdonald, Tom worked
at HSBC for seven years in various roles,
including leading HR for First Direct Bank
and running HR Operations.
Tom was one of LGBT Great’s #50For50
Executives, and since then has regularly
appeared in LGBT Great’s top 100
executive allies. Tom has a degree
in Linguistics from the University of
Manchester and a post-graduate diploma
in Human Resources Management from
the University of Salford.
Richard joined Brooks Macdonald in
2013 and oversaw the firm’s international
marketing, distribution and business
development strategy. In 2019, Richard
assumed the role of Deputy CEO,
International before taking over as
CEO International in 2021, sitting on the
Executive Committee.
Richard previously held the position
of Business Development Director at
Vistra Group. Prior to this, Richard was
a Relationship Manager at BNP Paribas
Securities Services where he advised
global asset manager clients around
the provision of fund administration,
custodian and depository services.
Richard is a Chartered Member of the
Chartered Institute for Securities &
Investment (“CISI”) and the Institute of
Directors (“IoD”).
Richard is Chairman of Cancer Research
UK Jersey, a voluntary position.
Alick
Mackay
Strategy and Corporate Development
Director
Alick Mackay is the Strategy and
Corporate Development Director of the
Brooks Macdonald Group, and a member
of the Executive Committee.
Joining Brooks Macdonald in 2017,
Alick owns all areas of the strategy and
corporate development agenda, including
the Group’s approach to potential
acquisitions and disposals.
Alick has spent over 30 years working in
financial services, principally in wealth
management and banking, in roles
covering strategy, consulting, COO and
technology. Immediately prior to joining
Brooks Macdonald, Alick worked at Royal
Bank of Scotland for 10 years, leading the
strategy team in the investment bank and
playing a COO role in the capital markets
business. He has also worked for ABN
AMRO and McKinsey.
Alick has a degree in Mathematics and
Natural Philosophy from the University of
Aberdeen, an MSc in Mathematics from
the Open University and an MBA from
Columbia Business School, New York.
Edward
Park
Chief Investment Officer
Priti
Verma
Chief Risk Officer
Edward joined Brooks Macdonald
in 2009 and is the Chief Investment
Officer sitting on the Executive
Committee. He is responsible for the
construction and implementation
of our investment process through
oversight of the investment buylist, our
investment rules and the firm’s asset
allocation positioning. Edward sits on the
Investment, Asset Selection and Asset
Allocation Committees and is a leading
spokesperson for Brooks Macdonald.
In addition to his role within the
Centralised Investment Proposition,
Edward retains private client relationships
to ensure he is involved throughout the
investment process.
Edward is a Chartered Financial Analyst
(“CFA”) Charterholder.
Priti is Chief Risk Officer (“CRO”) of
Brooks Macdonald Group and a
member of the Executive Committee.
Priti joined the Group in 2018 and led
a risk management transformational
project with responsibility for the Group
Risk, Investment Risk, Compliance and
Financial Crime functions and day-to-day
oversight of the outsourced internal
audit relationship.
Having started her career at one of the Big
4, Priti has over 20 years of experience
in financial services, predominantly
overseeing risk, compliance and internal
audit activities in asset and wealth
management firms.
Priti has a Master’s in Chemical
Engineering where she studied the
principles of risk management and
process optimisation and has delivered
multiple regulatory projects throughout
her career interacting with regulators in
multiple jurisdictions. Priti currently sits
on the Investment Association Strategic
Business and Risk Committee.
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Richard Price
Audit Committee Chair
Role and responsibilities
The Audit Committee assists the Board in meeting its
responsibilities for the integrity of the Group’s internal
financial controls and its financial reporting. The Committee’s
responsibilities can be grouped into the following aspects:
• To review and challenge the Group’s accounting policies
and significant judgement areas and the integrity of its
financial reporting
• To provide oversight and monitoring of the internal
and external audit functions, including appraising their
performance and approving their fees
• To work in conjunction with the Risk and Compliance
Committee to review the effectiveness on the Group’s risk
management framework and internal controls
The full responsibilities of the Audit Committee are set out in
its Terms of Reference, which are reviewed annually and are
available on the Group’s website.
Composition and meetings
For most of the year, the Audit Committee comprised Richard
Price (Chair), John Linwood, Dagmar Kershaw and Robert
Burgess, with Robert joining the Committee following his
appointment as a Non-Executive Director on 1 August 2020.
David Stewart and Diane Seymour-Williams were also
members of the Committee up until 31 July 2020 and
27 October 2020 respectively.
Membership of the Audit Committee is restricted to
independent Non-Executive Directors. The CEO, Chief
Financial Officer, Chief Risk Officer and representatives of
the internal and external auditors routinely attend meetings.
The Committee meets with representatives of the internal
and external auditors without management present at least
once a year. Richard Price has recent and relevant financial
experience and the Company believes that the Committee as
a whole has competence relevant to the sector in which the
Company operates.
The Audit Committee’s attendance during the year ended
30 June 2021 is set out in the summary table on page 76.
The Audit Committee’s areas of focus
Financial
reporting
• Reviewed the Interim and Annual
Report and Accounts, ensuring these are
fair, balanced and understandable for
shareholders and other end users;
• Reviewed the polices, key assumptions,
and judgements applied in the
preparation of the Interim and Annual
Report and Accounts, including the
external auditors’ feedback on financial
reporting changes and the Group’s
financial controls;
• Reviewed reports from management
on the preparation of the Interim and
Annual Report and Accounts, including
the accounting of the Lloyds Channel
Islands acquisition;
• Reviewed the key reporting
considerations for the Group’s Annual
Report and Accounts presented by
management with reference to the
Financial Reporting Council letter issued
in November 2020; and
• Reviewed the Group’s going concern
assumptions and the Viability statement.
External
audit
• Approved the annual external audit
plan, the terms of reappointment,
remuneration, and Terms of Engagement;
• Provided oversight of the external
auditors, including assessing their
independence, objectivity and
effectiveness;
• Reviewed audit findings, including key
issues, accounting and audit judgements
and recommendations, guidance and
observations around the Group’s internal
controls environment; and
• Reviewed management representation
letters and associated responses.
Internal
audit
• Developed an internal audit plan
alongside KPMG. Monitored and
reviewed the effectiveness of the plan
and its alignment to key risks;
• Provided oversight of the internal
auditors and considered and approved
the scope of each engagement;
• Reviewed the results of individual
internal audit reports and considered
the effectiveness of actions agreed with
management; and
• Received regular summary reports from
the internal auditors, including their
conclusions on the changes to controls
and processes made by management.
Control
oversight
•
In conjunction with the Risk and
Compliance Committee, reviewed
the adequacy and effectiveness of the
Group’s internal financial controls;
• Reviewed and approved the Group’s
policy on non-audit services (for both
external and internal audit); and
• Reviewed the adequacy and security
of the Group’s whistleblowing policy
and procedures, including ensuring
employees are able to raise concerns
confidentially and without repercussion.
Routine
matters
• Reviewed the Committee’s composition,
minutes of prior meetings and its Terms
of Reference.
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Audit Committee report continued
Internal audit
The Group has outsourced its internal audit function to KPMG
since September 2018. KPMG formally report to Richard Price,
Chair of the Audit Committee, with Priti Verma, Chief Risk
Officer, being the principal point of day-to-day contact.
A risk-based three-year audit plan was developed by the
Committee and KPMG, seeking to provide assurance in
areas of high-risk. It was created following discussions and
review with the Chairs of the Audit Committee and Risk and
Compliance Committee, the CEO and the Chief Risk Officer,
alongside KPMG’s input on the Group’s activities and the
overall industry. The plan is reviewed by the Committee at
regular intervals, taking into account any changes in areas
deemed high-risk.
External audit
The Group’s external auditors are PricewaterhouseCoopers
LLP (“PwC”). PwC are coming up to their tenth year as the
Group’s external auditors. During the year, Jeremy Jensen
took over from Natasha McMillan as the audit partner in
charge of the Group’s audit. As an AIM-listed company, Brooks
Macdonald is not required to rotate its audit firm after ten years
and, given the challenges posed by COVID-19 and following the
guidance given by the Financial Conduct Authority, Financial
Reporting Council and Prudential Regulation Authority, the
Group does not feel that this is a suitable time to change its
auditors. The Group will, however, consider undertaking a
tender process when it feels the time is appropriate.
During the year, the Audit Committee monitored the Group’s
policy on external audit and evaluated and reviewed the
independence and effectiveness of PwC in their role.
No material issues were raised during the course of the year.
The Committee agreed the external audit and assurance
fees and reviewed the audit engagement letter. Details
of the auditors’ remuneration is provided in Note 7 to the
Consolidated financial statements included within the
Annual Report and Accounts.
The Audit Committee is satisfied that PwC has conducted
an effective audit for the year ended 30 June 2021.
Independence and non-audit services
The Audit Committee recognises the fact that, given their
knowledge of the business, there are advantages in using PwC
and KPMG to provide certain non-audit services on particular
occasions. If there is a business case to use the auditors to
provide non-audit services, sign-off is required from the
Committee to ensure that there is no impact on the auditors’
objectivity and independence. Monetary sign-off limits are
provided within the framework of the Non-Audit Services
Policy which was updated and reviewed by the Committee
during the year.
Financial reporting
The Committee reviewed the significant issues set out below
in relation to the Group’s Annual Report and Accounts for
the year ended 30 June 2021. Discussions were held with
management throughout the year and the Committee is
comfortable the Consolidated financial statements included
within the Annual Report and Accounts address the
judgements and estimates applied, as well as, the disclosures
agreed. These significant issues were also reviewed with the
external auditors with the Committee’s conclusions being in
line with the auditors’.
Issue
Goodwill
(see Note 13)
Amortisation
of client
relationships
(see Note 13)
Key considerations and conclusions
The Committee reviewed the value-
in-use calculations presented by
management supporting the value of
goodwill held on the Group’s balance
sheet in respect of previously acquired
businesses. The Committee is satisfied
that the goodwill value is adequately
supported by the respective value-in-
use calculations.
In determining the useful economic
life of the Group’s client relationships,
the Committee reviewed relevant
analysis presented by management.
The Committee concluded that in
view of the accelerated withdrawals
from the previously acquired business,
DPZ Limited seen during the year,
the estimated useful economic life
of the intangible assets associated
with this business is reduced and
accordingly approved the recognition
of an impairment charge of £1.5 million.
The Committee concluded that the
assumptions and judgements used
in assessing the remaining client
relationship intangible assets were
reasonable and appropriate. The
Committee was also in agreement with
the useful economic life of the client
relationships arising from the Lloyds
Channel Islands acquisition during
the year.
Acquisition
accounting
(see Note 10)
Operating
platform
costs
The Committee reviewed management’s
accounting of the Lloyds Channel
Islands acquisition, including the
methodology for valuing the intangible
assets in arriving at the gain on bargain
purchase arising on acquisition and
concluded that it was appropriate.
The Committee also assessed the
reasonableness of the amount
recognised on the balance sheet at
30 June 2021 in respect of the
discounted deferred contingent
consideration for the business of up to
£0.3 million payable in November 2022
based on set FUM client attrition rates,
and concluded this was appropriate.
The Committee reviewed management’s
accounting of the Group’s spend in
connection with the new operating
platform under the strategic partnership
entered into during the year with SS&C
Technologies and is in agreement with
the treatment of the capitalised costs on
the balance sheet and the dual running
costs recognised during the year.
Whistleblowing
The Group’s whistleblowing policy was reviewed and agreed
by the Audit Committee during the year. Responsibility
for whistleblowing rests with Richard Price, Chair of the
Audit Committee, who has the role of the Group’s overall
“Whistleblowing champion”. There are also dedicated
“Whistleblowing champions” for the UK and Channel Island
businesses. The Group also provides an independent external
reporting portal provider, Safecall, which staff can contact
anonymously. Ultimate responsibility for whistleblowing rests
with the Board. No incidents of whistleblowing were reported
during the year.
Approval
This report in its entirety has been approved by the Audit
Committee and the Board of Directors on its behalf by:
Richard Price
Audit Committee Chair
15 September 2021
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Alan Carruthers
Nominations Committee Chair
Role and responsibilities
The Nominations Committee is responsible for reviewing
the composition of the Board and the Board Committees to
ensure they are suitably constituted, with an appropriate
balance of skills, experience, knowledge and diversity. This
includes conducting the annual Board effectiveness review.
The Committee also recommends Board and Board Committee
appointments, and monitors succession planning at the Group’s
leadership levels to ensure the Group’s continued ability to
implement its strategy and operate effectively. The Committee is
also responsible for reviewing and recommending to the Board
any material changes to the structure, size and composition of
the Group’s regulated subsidiary company boards.
The full responsibilities of the Committee are set out in the
Committee’s Terms of Reference, which are reviewed annually
and are available on the Group’s website.
Composition and meetings
The Committee comprises Alan Carruthers (Chair), Richard
Price, John Linwood, Dagmar Kershaw and Robert Burgess. Only
members of the Committee may vote on Committee business
but other members of the Board and the HR Director may attend
all, or part, of a meeting by invitation. The attendance of each
Committee member during the year is shown on page 76 of the
Annual Report.
Main activities during the year
The Nominations Committee has overseen a number of Board
changes during the last year, culminating in the announcement
of Andrew Shepherd as the Group’s new CEO designate
and his appointment to the Board, along with our Chief
Operating Officer, Lynsey Cross.
The year began with Dagmar Kershaw joining the Board on
1 July 2020 and Dagmar was closely followed by Robert Burgess
who was appointed on 1 August 2020. The Company arranged
a joint induction programme for them, involving a variety of
presentations and meetings with people from both inside and
from outside the Company. These included an overview of
the Group, its structure, strategy and performance, as well as,
sessions with those responsible for each individual business
area. External meetings included those around directors’
SM&CR and other regulatory responsibilities, together with a
briefing from the Company’s Nominated Adviser giving a market
overview and explaining AIM requirements.
The resignation of Caroline Connellan as CEO in May 2021
required the Committee to consider her successor. The
Company’s effective succession plan and the significant time
and resources devoted to developing our people meant that the
Committee was able to appoint the new CEO from within the
Company rather than having to go through an external process.
The Committee agreed unanimously that our then CEO
International and Group Deputy CEO, Andrew Shepherd, was
the right person to lead the Group and build on its successes to
date. His success in reinvigorating our International business,
combined with his deep knowledge of the Group and its culture,
having worked at Brooks Macdonald for almost 20 years,
made him the ideal candidate. Andrew has started his new role
strongly and we look forward to his leadership ensuring that
the Group continues to create shareholder value and deliver
outstanding service for our clients and intermediaries. At the
same time that Andrew was appointed to the Group Board, the
Committee also decided to appoint Lynsey Cross, our Chief
Operating Officer, as a Group Board Director.
The Chair undertook to discuss these matters with his colleagues
and agree an action plan to address them. The progress against
these actions will be reported on in next year’s Annual Report
and Accounts. The use of an externally facilitated Board
evaluation is also under consideration for a future year.
Last year, a small number of issues for consideration were
raised in the Board evaluation. Over the course of the year, the
Company took steps to address these matters in order to assist
the Board in improving its performance. Further details of the
actions involved are given below.
• The Board requested more benchmarking and to receive
additional information on the wider market – Board papers
have sought to provide more context about the wider market.
The results of this year’s evaluation suggest that the Board
feel they are being given good quality information and that it
continues to improve.
• More dedicated time in meetings for broader debate on the
implementation of the Group’s strategy and future priorities
– the Group’s strategy refresh was a large part of the agenda
in the early part of the year. This year’s Board evaluation
indicated the Board’s satisfaction with how strategy had been
covered in the year.
• While the quality of Board papers was generally good, the
Board would prefer papers to be shorter and more focused,
as well as delivered earlier – management have sought to
keep Board papers relatively concise, using appendices
where it was felt that more detail may be useful. In addition,
efforts have been made to improve timeliness of the
circulation of Board papers. As a result, the Board evaluation
produced lots of positive comments about the papers and
their distribution.
Corporate governance
The Company has chosen to follow the Corporate Governance
Code and this is the second year that the Company has reported
against the 2018 version of the Code.
Approval
This report in its entirety has been approved by the Committee
and the Board of Directors on its behalf by:
Alan Carruthers
Nominations Committee Chair
15 September 2021
This both strengthens the range of skills and knowledge of the
Board, as well as, recognising the outstanding work that Lynsey
has done since joining the Company.
Talent development and succession planning
The Committee is committed to maintaining an effective policy
for the orderly succession of Executive Directors, Executive
Committee members and other senior management roles across
the business. As well as our success in appointing internal talent
to the Group Board, Edward Park succeeded Richard Spencer
as Chief Investment Officer and Richard Hughes took over from
Andrew Shepherd as CEO of Brooks Macdonald International
following successful spells as deputies to these roles. The
Committee is also committed to maintaining an appropriate
balance of skills, experience, independence and diversity across
the Group. Further information on the Group’s approach to
succession planning can be found in the Corporate responsibility
report on page 61.
Diversity
The Committee takes an active role in setting and monitoring
diversity objectives and strategies undertaken by the Group
and embraces the benefits of having a diverse Board drawing
on the knowledge, skills, experience and expertise of directors
from a range of backgrounds and will take the opportunity to
improve the Board’s diversity where appropriate. Whenever
external search consultancies are used in the recruitment of
Board and senior members of management, they are asked to
provide diverse lists of candidates. Further details on the Group’s
approach to diversity are included in the Corporate responsibility
report on page 59 with details of the gender balance of the
Company’s senior management shown on page 61.
Board effectiveness
The Committee is responsible for overseeing an annual
evaluation of the Board, its Committees, the Chair and individual
Directors. This includes a review of the composition, diversity
and effectiveness of the Board and its Committees and the
contribution of each Director. Given the ongoing COVID-19
pandemic, it was agreed that the evaluation should again be
conducted internally. This was carried out in June 2021 and a
secure, online questionnaire was employed which ensured the
anonymity of responses received. This provided an opportunity
for each of the Directors to review the processes and procedures
of the Board and to scrutinise the performance of themselves
and their colleagues. The feedback received was very positive in
nature, both concerning the Board as a whole and its Committees.
A small number of points were raised for further consideration:
• The Board was very keen to return to having both in person
Board meetings and other gatherings where they could
discuss topics informally
• Directors would like to have broader debates on a range of
subjects, with customer views and succession planning given
as examples
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John Linwood
Remuneration Committee Chair
Introduction
On behalf of the Remuneration Committee and the Board, I
am pleased to present the Directors’ Remuneration report for
the financial year ended 30 June 2021 which comprises my
Annual Statement, the Annual Report on Remuneration and
the Directors’ Remuneration Policy. The Annual Report on
Remuneration provides a detailed account of each Director’s
individual total remuneration and sets out the variable pay
earned for each Director and how this relates to the Group’s
performance outcomes for the year and over the longer term.
The Directors’ Remuneration Policy sets out the framework
within which Executive Directors are paid.
Activities of the Committee
The Committee continued to ensure its overall approach to
remuneration was competitive, market aligned, and drove the
right commercial outcomes aligned to shareholder interests.
This has been particularly important and challenging given the
COVID-19 pandemic and its continued impact on our business
and people.
Key activities of the Committee during the year have included:
• Overseeing a change of Chief Executive and Board
leadership and engaging with all stakeholders to ensure a
smooth and seamless transition. This included the careful
consideration and determination of the remuneration
packages for the Executive Directors.
90
• Ben Thorpe, Chief Financial Officer, took on increased
responsibilities including the ownership of the Product
and Propositions for the Group following the departure of
the former CEO, Caroline Connellan. Ben has also stepped
up to lead the Group’s M&A activities. In recognition of
Ben’s wider duties and to ensure his continued retention,
motivation and engagement in the long-term success of the
Group, the Committee approved a one-off exceptional LTIP
award of 7,626 shares for Ben.
• Reviewing the appropriateness of the Long-Term
Incentive awards for Executive Directors and following
comprehensive consultation with all stakeholders,
designing a new performance-based LTIP award more
closely aligned to shareholder interests in order to help
deliver the Group’s ambitious strategic aims.
• Focussing on the integration of the Lloyds Banking Group’s
Channel Islands wealth management and funds business
following its acquisition in 2020, and the partnership with
SS&C announced in October 2020.
• Considering the appropriateness of a post-cessation
shareholding policy for Executive Directors. It was
determined the existing two-year post vesting holding
period applicable to all LTIP awards, in conjunction with
the Group’s malus and clawback policy, provide sufficient
protection to the business and consequently it was not
considered necessary to also introduce a post-cessation
shareholding policy at this present time. Whilst this is a
departure from the Corporate Governance Code, this will
remain under review by the Committee.
• Overseeing the details and publication of the Group’s third
annual gender pay gap report. The Group was pleased to
report a continued steady reduction in both mean gender
pay and bonus gaps.
• Reviewing individual remuneration for all employees in
Material Risk Taker and senior Risk and Compliance roles
as required under the FCA Remuneration Code.
• The Committee also received regular updates around
developments in the governance and regulation of
remuneration structures from both internal and external
sources, and has taken action to ensure the Group’s
remuneration approach reflects best practice in this regard
as well as rewarding high performance and conduct
aligned to our risk management framework and Guiding
Principles. At the invitation of the Committee Chair, the
CEO and HR Director attend some or all of each meeting.
The CRO also advises the Committee on matters relating
to remuneration as required. However, no Executive is
present when matters relating to their own remuneration
are being discussed.
Incentive outcomes for the year
The Group has maintained good performance with funds
under management increasing during the financial year from
£13.7 billion to £16.5 billion, an increase of 20.3%. This reflects
the FUM acquired as part of the Lloyds Channel Islands
acquisition in November 2020 of £0.9 billion and positive
investment performance of £2.2 billion, partly offset by organic
net outflows of £0.3 billion. Underlying profit before tax
increased by 33.0% to £30.6 million, ahead of the £23.0 million
reported in FY20. Underlying profit before tax margin rose
from 21.2% to 25.9% in line with our ongoing and continued
commitment to increase profit margins in the medium term.
Following Caroline Connellan’s resignation on 27 May 2021,
the only Board member to be awarded an annual bonus in
respect of Executive Director responsibilities in FY21 was the
Chief Financial Officer. In line with previous years, this was
awarded against three financial measures: net organic growth
in funds under management, underlying profit before tax, and
underlying profit before tax margin, and one non-financial
measure for strategic and personal objectives. The weightings
of the metrics remained the same as previous years with equal
weighting to the financial metrics (20% each) and 40% on
strategic and personal objectives.
The business has made excellent progress this year and has
significantly increased both underlying profit before tax and
underlying profit margin. In addition, excellent progress has
been made against non-financial targets and this has resulted
in a bonus outcome of 120% of base salary (out of a 150% of
base salary opportunity). One-third of the bonus earned will be
deferred into shares for up to three years. The Remuneration
Committee is satisfied that the bonus outcome reflects the
overall performance of the Group over the year.
The conditional awards granted in 2019 under the 2018 Long-
Term Incentive Plan will vest to Ben Thorpe on 1 November
2021. The conditional awards granted to Caroline Connellan
lapsed following her resignation. Such awards were subject to
the following performance underpins being met:
• Average Group FUM for the financial year immediately
prior to the vest date exceeding the average Group FUM
for the financial year ending immediately prior to the date
of grant.
• Total dividend for the financial year immediately prior to
the vest date exceeding the total dividend for the financial
year ending immediately prior to the date of grant.
•
Satisfactory risk, compliance, governance and internal
control environment across the vesting period.
An assessment against the performance conditions has been
made and the Remuneration Committee has confirmed that
these have been met. All LTIP awards are subject to a two-year
holding period post vest date .
After review, the Remuneration Committee has not applied
any discretion in amending the bonus or LTIP outcomes.
Long-term incentive awards granted
during the year
Awards of restricted shares were made to the Executive
Directors and other members of the Executive Committee
under the 2018 Long-Term Incentive Plan (“LTIP”) in October
2020. The LTIP awards are subject to continued service and
underpins relating to dividends, funds under management
and risk and compliance. These awards have a vesting date of
October 2023.
In addition, as previously mentioned, a one-off LTIP award
was made to Ben Thorpe in June 2021. This exceptional award
was made in the context of Caroline Connellan’s departure
and in recognition of Ben’s increased responsibilities in taking
ownership of the Group’s Product and Propositions, as well
as M&A activities. The intention of the award is to ensure
continued retention, motivation and engagement and to
ensure Ben continues to build a stake in the Group.
Workforce engagement
During FY21, John Linwood continued to be the designated
Non-Executive Director to lead the Board’s engagement with
our people. Various engagement activities, including staff
discussion groups, were undertaken to encourage dialogue, get
a sense of employee engagement and morale and to provide
an opportunity for employee feedback to be brought to the
attention of the Board. Whilst no explicit discussion regarding
how Executive remuneration aligns with the wider pay policy
was held, which is a departure from the Corporate Governance
Code, we plan to include this on the staff discussion agenda
next year. The Group also runs a regular staff survey which
elicits feedback from staff around a number of areas, including
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The metrics for the award to be granted in FY22 will be based
on underlying, diluted Earnings Per Share (“EPS”) as well as a
basket of ESG-based metrics. 90% of the award will be based on
the EPS target and 10% will be based on ESG targets. The grant
levels for the CEO and CFO will be 200% of base salary and
the COO’s award will be 100% of base salary. These awards will
only vest based on achieving significantly challenging targets.
While the restricted share structure served its purpose during
a period of strategic transition, the Remuneration Committee
believes a more geared, performance-based structure, more
closely aligned with shareholder interests, is appropriate at this
juncture as we seek to deliver on our ambitious growth aims.
As mentioned earlier, some of our leading shareholders have
recommended this switch and others consulted were broadly
supportive. We believe performance shares will not only
promote greater engagement from the Executive Directors but
will also fully align their long-term remuneration arrangements
with shareholder and broader stakeholder outcomes.
For FY22, the Executive Directors’ annual bonus structure will
remain unchanged from last year and will continue to be based
on performance against three financial measures: net organic
growth in funds under management, underlying profit before
tax, and underlying profit before tax margin; and strategic and
personal objectives. There is no change to the weighting of the
financial and non-financial elements in FY22.
The Committee believes the proposed approach to
remuneration is appropriate to retain and incentivise a
talented management team is in line with shareholder
interests and is appropriately benchmarked against market
data. We hope you will be supportive of the advisory
remuneration resolution which will be tabled at the Annual
General Meeting on 28 October 2021.
compensation and benefits. Executive Directors regularly meet
with employees through other mechanisms such as all-staff
town halls, focus groups, visiting regional offices and joining
team meetings. These activities have been continued remotely
through lockdown.
Approach to remuneration in FY22
The Committee undertook a review of the remuneration
arrangements of the newly appointed and existing Executive
Directors. The Committee approved a salary of £400,000 for
the newly appointed CEO, Andrew Shepherd and £290,000 for
Lynsey Cross, COO, following her appointment onto the Board.
Ben Thorpe was also awarded a salary increase to £350,000
from £331,000 in recognition of his change in role to Chief
Financial Officer and taking on key strategic responsibility for
Product and Propositions as well as leading M&A activity for
the Group. All salary increases were effective from 1 July 2021.
The Remuneration Committee considers the salary levels to
be reflective of the contribution, experience and calibre of the
Executive Directors and the salaries for all three Executive
Director roles were benchmarked against available market data.
In addition, the Committee consulted with the Company’s
largest investors with regards to the Executive Director
LTIP scheme.
In recent years, awards to Executive Directors have been in the
form of restricted shares, with a face value on grant of 50% of
salary. These awards vest after a three-year period subject to the
achievement of pre-grant underpin tests. Any vested awards are
subject to a further two-year post-vesting holding period.
However, with the appointment of the new CEO and in
response to shareholder feedback following a comprehensive
consultation exercise, the Committee has decided to no longer
award restricted shares to Executive Directors. Instead, a
performance-based LTIP will be awarded from the current
financial year (FY22) onwards. Performance share awards will
vest depending on the extent to which they meet stretching
performance targets measured over a three-year period.
Awards will vest on the third anniversary of grant and must be
held by the recipient for a further two years.
Annual report on remuneration
Total remuneration for the financial year to 30 June 2021 (audited)
£’000
Executives
Ben Thorpe
Caroline Connellan5
Non-Executives
Alan Carruthers
(Chairman)
Robert Burgess6
Dagmar Kershaw7
John Linwood
Richard Price
Diane Seymour–
Williams8
David Stewart9
Colin Harris10
Total remuneration
Salary
and
fees
Pension-
related
benefits
Taxable
benefits1
Annual
bonus2
Long-term
incentives3 Sharesave4
Other
payment
Total fixed
remuner-
ation
Total
variable
remuner-
ation
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
323
281
364
358
687
639
200
187
64
–
60
–
70
66
79
67
20
59
7
74
–
22
500
475
1,187
1,114
24
25
26
32
50
57
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50
57
2
2
4
3
6
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
5
397
270
-
343
397
613
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27
155
63
155
90
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
397
613
155
90
4
4
–
–
4
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
4
–
198
–
110
–
308
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
261
308
349
308
394
393
743
701
200
187
64
–
60
–
70
66
79
67
20
59
7
74
–
22
500
475
1,243
1,176
401
499
155
516
556
1,015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
556
1,015
Total
750
807
549
909
1,299
1,716
200
187
64
–
60
–
70
66
79
67
20
59
7
74
–
22
500
475
1,799
2,191
Notes to the total remuneration table
1. Taxable benefits relate to private medical insurance.
2. The amounts represent the total annual bonus value awarded in respect of the relevant financial year, comprising both cash and share awards. For FY21, the cash
payment comprised 66.7% of total annual bonus value and the deferred share award 33.3%.
3. Represents the market value on vest date of any long-term incentive awards vested during the relevant financial year. The share awards that vested during the year
for Caroline Connellan comprise 7,458 LTIS awards, and 1,525 LTIS awards, at a market value of £16.49 and £21.00 respectively.
4. Value of benefit associated with discount of the 2020 scheme.
5. Resigned 27 May 2021.
6. Appointed 1 August 2020.
7. Appointed 1 July 2020.
8. Resigned 27 October 2020.
9. Resigned 31 July 2020.
10. Resigned 31 October 2019.
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Annual variable pay outcomes for financial year ended 30 June 2021
The FY21 bonus was based on a balanced scorecard of metrics and targets designed to achieve a direct link between performance
against the Group’s strategic and commercial goals and the overall bonuses awarded. Under the FY21 structure, a maximum
bonus opportunity of 150% of base salary applied to the Executive Director. While the Committee has the discretion to adjust the
final outcome to take account of overall performance and exceptional events, no discretion will be applied this year despite the
COVID-19 backdrop; the Committee considers that the Remuneration Policy has operated as intended both in terms of Company
performance and quantum.
Annual bonus performance targets
For the financial year ended 30 June 2021, bonus was based on the following four metrics (percentage weighting within total
bonus opportunity indicated), all of which are aligned to the Group’s strategic targets.
• Underlying profit before tax compared to the budget (20%);
• Net organic growth in funds under management (“Net flows”) compared to the target (20%);
• Underlying profit before tax margin (20%); and
•
Strategic and personal objectives (40%).
For all three financial metrics, a sliding scale of targets were set around the budget for the year and account was taken of market
consensus and sector performance. Strategic, non-financial objectives were set with a focus on strategy, client, risk and people.
Overall outcome of annual bonus
The overall bonus outcome, including strong performance across all key strategic and personal non-financial measures, resulted
in an annual bonus award of 120% of base salary paid to the Chief Financial Officer. A third of the bonus payable is deferred into
shares which vest in equal tranches over three years to encourage further alignment with our shareholders’ priorities. Both cash
and share portions are subject to malus and clawback provisions.
Performance against financial criteria (audited)
Underlying PBT
Net flows
Underlying PBT margin (%)
Total
Weighting
20.0%
20.0%
20.0%
60.0%
30.0%
30.0%
30.0%
90.0%
£22.0m £24.0m
2.5%
20.2%
5.0%
21.9%
maximum Threshold1 Target1 Maximum1
Actual
for FY21
£26.0m £30.6m
8.4%
23.5%
(2.0%)
25.9%
% of
salary at
% of base
salary
awarded
for these
criteria
30.0%
0.0%
30.0%
60.0%
1. 33.3% of maximum is payable for Threshold performance, 66.7% of maximum for Target performance and 100% of maximum for Maximum performance.
Performance against non-financial criteria
Strategic
objective
Strategy
Objective
Continued delivery of
organic growth strategy,
successful integration of
acquired business
Performance in FY21
•
Significant progress made in delivering the Group’s strategy
including the integration of the Cornelian and Lloyds Channel
Islands, complementing organic growth actions which have
moved the Group back into net flows
Extent
to which
objective has
been met
Achieved
People
Client
Risk
• An excellent full year result, well ahead of last year’s in terms
of both underlying profit and underlying profit margin, despite
the market volatility and economic uncertainty caused by the
continued COVID-19 pandemic
•
•
•
Significant progress made towards delivering adviser and
client experience transformation, partnering with SS&C, with
project tracking to agreed deadlines and cost
Continued development of leaders through delivery of
executive and leadership (mid and senior levels) programmes,
and roll out of Group’s flagship development programme for
client and IFA facing staff, Accelerating Growth
Continued reduction in gender pay gap year-on-year, led
broader diversity and inclusion agenda including taking part
in #10000blackinterns and supporting the development of the
LGBT Great mentoring programme
• Ongoing focus on employee engagement, positively reflected
in consistently strong engagement scores and focus on
employee wellbeing, particularly in the context of the ongoing
requirement for remote working. Employee engagement and
wellbeing have remained high over the course of the year
•
Supported clients and advisers through the challenges of
COVID-19 by increasing the level of client and adviser support
and information, including webinars, tools and ongoing
communications to provide better macroeconomic oversight
• Ongoing enhancements of core offering and embedded
specialist Court of Protection, Responsible Investment Service
(“RIS”) and Decumulation services, as well as launching a new
Private Client offering
• Made significant progress in transforming client and adviser
experience through digital enhancements, as well as delivered
improvements in operations through centralisation and
simplification
Achieved
Achieved
•
Continued steps taken in the ongoing enhancement and
embedding of Group-wide risk management framework
Achieved
• Maintained active regulatory engagement in both the UK
and Channel Islands to support regulatory requirements and
business objectives
•
Successful implementation and embedding of SM&CR
Ongoing leadership,
capability and career
development as part of a
broader high-performing
culture, with continued
focus on employee
engagement and
diversity
Focus on consistent
delivery of high-
quality client and IFA
experience, leveraging
process improvement
and digital.
Maintain a positive and
proactive relationship
with regulators,
ensuring effective risk
management. Maintain
high standards in
managing regulatory
matters including
delivery of SM&CR.
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Overall outcome of the FY21 bonus
LTIP awards granted during the year (audited)
Strategic and personal objectives
Financial objectives (as above)
Total
Weighting
40.0%
% of
salary at
maximum
60.0%
% of base salary
awarded for
these criteria
60.0%
60.0%
100.0%
90.0%
150.0%
60.0%
120.0%
Following the calculation of bonus awards against the stated performance measures, additional risk adjustments were
considered by the Committee. No risk adjustments were made for the Executive Director. Final awards made are detailed in the
table below:
Name
Ben Thorpe
Role
Chief Financial Officer
1. Based on base salary of £331,000.
Cash
(2/3rd )
£264,800
Deferred
shares
(1/3rd )
£132,400
Total
£397,200
% of base
salary1
120.0%
Monetary value of awards made under LTIP and deferred element of annual bonus during
FY21 (audited)
Name
Ben Thorpe
Caroline Connellan
Total
FY20
deferred
bonus
£90,000
£114,000
£204,000
FY20
LTIPs
£141,000
£180,000
£321,000
One off
award
£175,000
–
£175,000
Total
£406,000
£294,000
£700,000
Deferred bonus share awards granted during the year (audited)
One third of the FY20 bonus was awarded to the Executive Director in the form of deferred nil cost share options. These awards
will vest over three years in three equal tranches after 12, 24 and 36 months.
Name
Ben Thorpe
Basis of award
1/3 of annual bonus
Date of
award
30 Oct 2020
No. of
awards
5,489
Face value
of awards1
£90,000
Vesting date
30 Sept 2021/2022/2023
Caroline Connellan
1/3 of annual bonus
30 Oct 2020
6,987
£114,000
30 Sept 2021/2022/2023
1. Based on a share price of £16.375 being the mid-market closing share price on 30 September 2020.
Note that Caroline Connellan’s unvested awards as at the date of her cessation of employment lapsed in accordance with the
Plan rules.
Name
Ben Thorpe
Caroline Connellan
Basis of
award
50% of salary
Date of
award
30 Sept 2020
One -off award
23 June 2021
50% of salary
30 Sept 2020
No. of
awards
7,870
7,626
10,019
Face value
of awards
£141,000
Vesting
date
30 Sept 2023
End of
holding
period
30 Sept 2025
£175,000 09 June 2024 09 June 2026
£180,000
30 Sept 2023
30 Sept 2025
A restricted share award under the LTIP was granted to Executive Directors in September 2020 with a face value of 50% of base
salary-based on a share price of £17.917 being the three-day average post announcement of results. These awards will vest after
three years and a further two-year post-vesting holding period will apply. The LTIP awards are subject to continued service and:
•
•
the maintenance of a satisfactory risk, compliance, governance and internal control environment; and
a Remuneration Committee assessment that the value being delivered on vesting is commensurate with the underlying
financial performance of the Company over the three-year vesting period.
In addition, a one-off LTIP award over 7,626 shares was made to Ben Thorpe in June 2021 based on a share price of £22.95 being
the Mid-Market Closing Price (“MMCP”) at the date of approval. This exceptional award was made in the context of Caroline
Connellan’s departure and in recognition of his increased responsibilities around owning Product and Propositions for the Group.
The award ensures Ben remains motivated, retained, and continues to build a stake in the Group. Such awards have a three-year
cliff vesting profile and are subject to a further two-year post-vesting holding period. The LTIP awards are subject to continued
service and:
•
•
the maintenance of a satisfactory risk, compliance, governance and internal control environment; and
general good health of the Company as assessed by the Remuneration Committee.
All LTIP awards are subject to malus and clawback provisions in the event of circumstances including, but not limited to, material
misstatement of financial results, material adverse event (e.g. regulatory censure, regulator sanction, reputational damage) or
error in the calculation of the awards. The Committee is able to exercise discretion in circumstances where it considers the award
outcomes do not reflect the true performance of the business or individual over that period.
To the extent that they vest, these awards will be shown in the total remuneration table for the financial year ending
30 June 2024.
Note that in accordance with the Plan rules, Caroline Connellan will continue to receive any awards that vest prior to her
cessation of employment subject to their original terms. Her unvested deferred bonus share awards and LTIP awards that vest
after the date of her cessation of employment lapse in accordance with the Plan rules.
Dilution
All share awards are made in accordance with the Board’s dilution policy so that in any rolling period of 10 years, not more
than 10% of the issued ordinary share capital of the Company (adjusted for bonus and rights issues) will be issued for all share
incentive schemes operated by the Company. In addition, a further limit within this has been set of a 5% ten-year dilution level
with respect to Executive Long-Term Incentive Plan awards. The Company satisfies the various equity-based schemes it operates
using a combination of market purchased and newly issued shares. The dilutive effect of LTIP awards issued to date is nil, as
these awards are satisfied using market purchased shares.
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Directors’ share interests
At 30 June 2021, active Directors’ shareholdings were as set out below:
Number of shares
Executives
Ben Thorpe
Caroline Connellan (resigned 27 May 2021)
Non-Executives
Alan Carruthers (Chairman)
Richard Price (Senior Independent Director)
Robert Burgess
Dagmar Kershaw
John Linwood
Diane Seymour-Williams (resigned 27 October 2020)
David Stewart (resigned 31 July 2020)
Shares
vested
but not
exercised
net of tax
Beneficially
owned
shares
Value at
30 June
2021
Shareholding
as % of base
salary
18,071
10,408
£457,000
–
–
–
–
–
–
–
–
–
1,450
1,450
3,044
–
300
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
131%
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Total
18,071
16,652
Vesting profile of all share awards (audited)
The following tables set out details of the Directors’ share awards and their vesting profile.
Long-Term Incentive Scheme (“LTIS”)
The Long-Term Incentive Scheme was approved by shareholders at the 2010 Annual General Meeting. Awards made to Directors
under this scheme were for deferral of annual bonuses and to match awards forgone from previous employers. This scheme has
been replaced by the Long-Term Incentive Plan and no awards were made under the previous scheme during the year.
The Long-Term Incentive Scheme has no performance conditions attached but is subject to continued employment by the Group.
Exercise
price (p)
–
Options at
1 July 2020
6,498
Granted
during year
–
Exercised
during year
–
Lapsed
during year
–
–
–
7,079
2,526
16,103
–
–
–
–
–
–
–
–
–
Exercise
price (p)
–
Options at
1 July 2020
1,525
Granted
during year
–
Exercised
during year
(1,525)
Lapsed
during year
–
Options at
30 June
2021
6,498
7,079
2,526
16,103
Options at
30 June
2021
–
Vesting
date
30/11/2019
Expiry
date
21/12/2028
30/11/2020
21/12/2028
31/10/2021
21/12/2028
Vesting
date
03/11/2020
Expiry
date
03/11/2027
1,525
–
(1,525)
–
–
B Thorpe
Grant date
21/12/2018
21/12/2018
21/12/2018
Total
C Connellan
Grant date
03/11/2017
Total
98
Deferred Bonus Plan (“DBP”)
The Long-Term Incentive Plan was approved by shareholders at the 2018 Annual General Meeting and encompasses deferral of
both annual bonuses (DBP) and conditional awards (LTIP).
The Deferred Bonus Plan awards have no performance conditions attached but are subject to continued employment by the Group.
B Thorpe
Grant date
27/11/2018
27/11/2018
31/10/2019
31/10/2019
31/10/2019
30/09/2020
30/09/2020
30/09/2020
Total
Exercise
price (p)
–
Options at
1 July 2020
1,452
Granted
during
year
–
Exercised
during
year
–
Lapsed
during
year
–
Forfeited
during
year
–
Options at
30 June
2021
1,452
Vesting
date
31/08/2019
Expiry
date
27/11/2028
–
–
–
–
–
–
–
1,453
1,589
1,589
1,589
–
–
–
7,672
–
–
–
–
1,829
1,829
1,831
5,489
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,453
31/08/2020
27/11/2028
1,589
30/09/2020 30/09/2029
1,589
30/09/2021
30/09/2029
1,589
30/09/2022
30/09/2029
30/09/2021
30/09/2030
30/09/2022
30/09/2030
30/09/2023
30/09/2030
1,829
1,829
1,831
13,161
C Connellan
Grant date
27/11/2018
31/10/2019
31/10/2019
31/10/2019
30/09/2020
30/09/2020
30/09/2020
Total
Exercise
price (p)
–
Options at
1 July 2020
3,287
–
–
–
–
–
–
2,022
2,022
2,023
–
–
–
9,354
Granted
during
year
–
–
–
–
2,329
2,329
2,329
6,987
Exercised
during
year
(3,287)
(2,022)
–
–
–
–
–
(5,309)
Lapsed
during
year
–
Forfeited
during
year
–
Options at
30 June
2021
–
Vesting
date
31/08/2020
Expiry
date
27/11/2028
–
–
–
–
–
–
–
–
–
(2,023)
–
(2,329)
(2,329)
(6,681)
–
30/09/2020
31/10/2029
2,022
30/09/2021
31/10/2029
–
30/09/2022
31/10/2029
2,329
30/09/2021
30/09/2030
30/09/2022
30/09/2030
30/09/2023
30/09/2030
–
–
4,351
Long-Term Incentive Plan (“LTIP”) Conditional Awards
The Long-Term Incentive Plan conditional awards are discretionary awards subject to the performance underpins outlined
above and continued employment with the Group. All LTIP awards are subject to a two-year holding period post vest date.
B Thorpe
Grant date
31/10/2019
30/09/2020
09/06/2021
Total
C Connellan
Exercise
price (p)
–
Conditional
shares at
1 July 2020
7,001
Granted
during year
–
Exercised
during year
–
Lapsed
during year
–
Conditional
shares at
30 June 2021
7,001
Vesting
date
30/09/2022
Holding
period
24 months
–
–
–
–
7,001
7,870
7,626
15,496
–
–
–
–
–
–
7,870
30/09/2023
24 months
7,626 09/06/2024
24 months
22,497
Exercise
price (p)
–
Conditional
shares at
1 July 2020
9,682
Granted
during
year
–
Exercised
during
year
–
Lapsed
during
year
–
Forfeited
during
year
(9,682)
Conditional
shares at
30 June 2021
–
–
–
8,910
–
18,592
–
10,019
10,019
–
–
–
–
–
–
(8,910)
(10,019)
(28,611)
–
–
–
Grant date
04/04/2019
31/10/2019
30/09/2020
Total
Vesting
date
01/11/2021
Holding
period
24 months
30/09/2022
24 months
30/09/2023
24 months
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Remuneration Committee report continued
Company Share Option Plan (“CSOP”)
The CSOP was approved by shareholders at the Annual General Meeting on 17 October 2013 and by HMRC on 21 November 2013.
The 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 for an individual at any
one time is a total market value of £30,000. There are performance conditions attaching to the scheme whereby there must be an
increase in the underlying diluted EPS of the Company of at least 2% more than the increase in RPI over the three years starting
with the financial year in which the option is granted. No awards were made under the scheme during FY20.
C Connellan
Grant date
18/08/2017
Total
Exercise
price (p)
2,011.0
Options at
1 July 2020
1,491
Granted
during year
–
Exercised
during year
–
Lapsed
during year
–
Options at
30 June
2021
1,491
Vesting
date
18/08/2020
Expiry
date
18/08/2027
1,491
–
–
–
1,491
Save As You Earn (“Sharesave”)
All Directors are entitled to take part in the HMRC approved Brooks Macdonald Group Sharesave Scheme on the same terms as
all other employees. Annual invitations to participate in the scheme, which commences each year on 1 June, are sent to Directors
and option grants are made at 80% of the closing mid-market price on the day of the offer.
The benefit shown in the total remuneration table is the value of the discount on the Sharesave options granted in the year.
B Thorpe
Grant date
13/05/2020
Total
Exercise
price (p)
1,172.0
Options at
1 July 2020
1,535
1,535
Granted
during year
–
–
Exercised
during year
–
–
Lapsed
during year
–
–
Options at
30 June
2021
1,535
1,535
Vesting
date
01/06/2023
Expiry
date
01/12/2023
Departure of Executive Director
Caroline Connellan resigned on 27 May 2021 and is on gardening leave until her cessation of employment on 14 October 2021.
No payment for loss of office nor payment in lieu of notice is payable. The 4,351 Deferred Bonus Share awards that vest prior to
the date of cessation of employment will continue in accordance with the terms of the Share Plan Rules. The vested 1,491 CSOP
options will lapse on cessation of her employment. The balance of her Deferred Bonus Shares (6,681) and all LTIPs (28,611) have
been forfeited.
Service contracts for Executive Directors
The Group has service contracts with its Executive Directors with a notice period of 12 months and it is Group policy that such
contracts should not normally contain notice periods of more than 12 months.
Remuneration Committee
The current members of the Remuneration Committee comprise myself as Chair, Richard Price, Dagmar Kershaw (joined
1 July 2020) and Robert Burgess (joined 1 August 2020). During the year, David Stewart resigned from the Committee on
31 July 2020 and Diane Seymour-Williams stepped down on 27 October 2020.
The Committee met on six occasions during the year ended 30 June 2021 and members’ attendance is set out in the summary
table on page 76.
The Committee exercises independent judgement in the determination, implementation and operation of the overall
Remuneration Policy for the Group. The Committee also:
• provides oversight of the design and application of the Remuneration Policy and makes recommendation to the Board of the
overarching principles for all Group employees;
ensures the policy is consistent with the risk appetite of the Group and its strategic goals; and
reviews and approves the remuneration policies and remuneration for the Executive Directors, members of the Executive
Committee, Material Risk Takers (“MRTs”) and any other employees for whom enhanced oversight is either appropriate or a
regulatory requirement.
•
•
100
The full responsibilities of the Committee are set out in the Committee’s Terms of Reference, which are reviewed annually and are
available on the Group’s website.
During the year, the Committee continued to receive independent advice from FIT Remuneration Consultants LLP (“FIT”). Fees
were charged on a time and materials basis; the total fees paid to FIT in respect of its services to the Committee were £18,500 +
VAT. No other services were provided by FIT during the year, and the Committee is satisfied that the advice received is objective
and independent.
Non-Executive Directors’ fees
The Non-Executive Directors’ fees were reviewed and, with effect from 1 September 2021, a £5,000 (8.3%) increase was approved
to bring the base fees more in line with the market and to reflect the increased complexity of their roles.
Chairman
Base fee
Senior Independent Director
Committee Chair
30 June
2022
£200,000
£65,000
£10,000
£10,000
30 June
2021
£200,000
£60,000
£10,000
£10,000
Change
in fees
–
8.3%
–
–
How the policy will be applied to Executive Director remuneration
for the financial year ending 30 June 2022
Base salary review
The Committee undertook a review of the remuneration arrangements of the newly appointed and existing Executive Directors.
The Committee approved a salary of £400,000 for the newly appointed CEO, Andrew Shepherd and £290,000 for Lynsey
Cross following her appointment onto the Board. Ben Thorpe was also awarded a salary increase to £350,000 from £331,000 in
recognition of his change in role to Chief Financial Officer and taking on key strategic responsibility for Products and Propositions.
All salary increases were effective from 1 July 2021. All roles were benchmarked and the Committee consider the salaries to be
aligned with market.
Performance targets for the FY22 annual bonus
For FY22, the annual bonus will be based on performance against a balanced scorecard comprising the following key
performance areas:
Underlying PBT
Net flows
Underlying profit margin
Strategic and personal objectives
Total
Weighting
20%
Threshold
10%
20%
20%
40%
100%
10%
10%
20%
50%
% of base
salary at
Target
20%
20%
20%
40%
100%
Maximum
30%
30%
30%
60%
150%
The Committee will set challenging non-financial performance targets for the Executive Directors aligned to the priorities of
the Group, including areas of strategy delivery, client, risk management, people and leadership. The performance targets will be
disclosed in the FY22 Annual Report for reasons of commercial sensitivity.
LTIP
Before the onset of the COVID-19 crisis, the Remuneration Committee had been considering moving away from restricted shares
to a more conventional performance share structure as (i) Phase 1 of the Group’s strategy had been completed, (ii) performance
shares provided better alignment with the Board’s growth aspirations, and (iii) shareholder feedback that the LTIP should be
more closely aligned with shareholder outcomes.
The COVID-19 crisis created significant uncertainty and so last year, it was considered appropriate to continue to award restricted
shares to Executive Directors up to a maximum of 50% of base salary. Whilst the full repercussions of the COVID-19 pandemic
remains to be seen, we believe that the Group is firmly in the growth stage of its strategy. Combined with the appointment of
our new CEO, we believe it is now the right time to move away from restricted stocks and introduce performance shares. The
Committee has consulted with the Company’s largest investors with regards to the Executive Director LTIP scheme.
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Remuneration Committee report continued
Previously, restricted share awards under the LTIP were granted as conditional awards with a three-year vesting period and
two-year post-vesting holding period up to a maximum of 50% of base salary. These will be replaced with a performance-based
LTIP from FY22 onwards. Each award will be conditional on meeting the targets over the three-year vesting period. Any shares
awarded will vest on the three-year anniversary of the award and must be held by the recipient for a further two years. The target
metrics will be based on underlying, diluted EPS as well as a basket of ESG-based metrics. 90% of the award will be based on the
EPS target and 10% will be based on ESG targets. The award level for the CEO and CFO is 200% of base salary and the COO’s award
level is 100% of base salary. Awards will vest upon achieving significantly challenging targets which will be disclosed in the FY22
Annual Report for reasons of commercial sensitivity. We believe this will promote continued engagement from the Executive
Directors but will also fully align their long-term remuneration arrangements with shareholder outcomes.
LTIP Performance metric
3-year underlying diluted EPS Growth
Weighting
90%
Threshold
22.5%
Target Maximum Measurement period
45%
90% Measured over the three financial
Award payout (% of LTIP award)
ESG – to have the following policies in place
being effectively implemented and their
goals met:
– Diversity Policy
– Anti-slavery Policy
– Carbon zero plan
– Regular employee pulse surveys
– ESG Policy
Total as % of award
Total as % of base salary for CEO and CFO
Total as % of base salary for COO
10%
2.5%
5%
10%
years ending FY24, using FY21 as
the base year
25%
50%
25%
50%
100%
50%
100%
200%
100%
Pension
Pension allowances to the Executive Directors will remain unchanged and will be based on 8% of base salary. We will continue
to review our Pension Policy for Executive Directors with the aim of aligning this fully with other Group employees. This is a
departure from the Corporate Governance Code, however the intention is to fully comply by FY23.
Compliance with the FCA Remuneration Code
The Committee regularly reviews its Remuneration Policy’s compliance with the principles of the Remuneration Code of the UK
financial services regulator, as applicable to the Group and appropriate to its size and complexity.
Remuneration votes received at the 2020 AGM
Approval of the Directors’ Remuneration report
Votes for
12,525,574
%
92.8%
Votes
against
970,845
Votes
withheld
106,973
%
7.2%
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (“the Policy”) is determined by the Committee.
Remuneration Policy principles
The Policy is designed to:
• provide a framework to attract, motivate, retain and reward employees;
•
•
•
align remuneration with our business strategy, objectives, Guiding Principles and long-term interests of the Group and
shareholders;
ensure that remuneration is set at an appropriate level, taking into account market rates and best practice;
ensure the ratio between fixed and variable remuneration is appropriate and does not encourage excessive risk-taking;
• be consistent with and promote sound and effective risk management; and
•
comply with all regulatory requirements.
Summary of remuneration elements for Executive Directors for FY22
Element
Base
salary
Purpose
Provides fixed
remuneration at an
appropriate level to attract
and retain talent.
Pension
To aid retention of
key talent.
Benefits
To provide valued benefits
to the individual.
Detail
Individual levels of base salary are reviewed annually with any increases
effective from 1 July, unless there are any exceptional reasons for increases
at another time of the year.
Executive Directors receive a pension contribution from the Company
equal to 8% of salary, which can either be paid into the Group’s defined
contribution pension scheme, paid into an alternative pension scheme, or
taken in cash (in part or in full).
Executive Directors receive benefits including private medical insurance,
private health insurance, life assurance, critical illness cover, as well as, an
annual health assessment.
Annual
bonus
Rewards annual Group and
personal performance and
aligns reward with longer-
term performance through
deferral into shares.
Based on financial and non-financial performance metrics.
One-third of annual bonus is deferred into shares over three years with
tranche vesting in three equal portions after 12, 24 and 36 months.
Malus and clawback principles apply to annual bonus awards under the
Group’s malus and clawback policy.
LTIP
Rewards performance over
the long term.
Executive Directors may be considered for performance-based LTIP
awards up to 200/100% of base salary.
The award vests after three years subject to meeting performance targets
determined at grant. The metrics for the 2022 grant will be based on:
• Diluted EPS
•
ESG-based metrics
90%
10%
The Remuneration Committee may apply different measures and
weightings for future awards under the scheme.
Post-vesting, recipients are required to hold the shares, net of sales to
settle income tax and National Insurance contributions due on vesting,
for a further two years. This will create further long-term alignment with
shareholders’ interests by creating a combined vesting and holding period
of five years.
Malus and clawback principles apply under the Group’s malus and
clawback policy.
Maximum
opportunity
Benchmarked
against relevant
market levels.
8% of base
salary.
In line with
Group Policy.
150% of base
salary.
Up to 200% of
base salary for
the CEO and
CFO.
Up to 100% for
the COO.
(in face value of
shares at grant).
FY22
Y1
Y2
Y3
Y4
Y5
Basic pay
Base pay and benefits
67% in cash
Bonus
33% vests in one year
33% deferred in shares
33% vests in two years
33% vests in three years
Long-term
incentives
Three-year vesting
Two-year holding period
In accordance with the 2018 Corporate Governance Code, the Committee has ensured that the remuneration structure above is
clear, transparent, and predictable, given that the maximum opportunity of variable pay is capped. The annual bonus metrics and
deferral have been kept simple and easy to measure. The delivery of variable pay, part in cash and share awards that are subject
to malus and clawback mitigates risk and ensures that the Executive Directors are aligned to the interests of shareholders. The
balanced scorecard of metrics and targets provides a clear link between performance against the Group’s strategic and commercial
goals and individual awards, with behaviours consistent with Our Guiding Principles forming a key part of this assessment.
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Approach to remuneration for new
Executive Director appointments
The Executive Director contracts have no fixed duration.
The remuneration package for a new Executive Director
is set in line with the terms and maximum levels of the
Group’s approved Remuneration Policy in force at the time
of appointment. Currently, for annual bonus and LTIPs, the
maximum opportunity is 150% and 200% of base salary
respectively. The Committee may also offer additional cash
and/or share-based elements to replace awards or potential
earnings forgone on becoming an Executive Director (if in the
interests of the Group and shareholders and in accordance
with regulatory requirements). In considering any such
payments, the Committee could take account of the amount
forgone and its nature, vesting dates and any performance
requirements attached.
Service contracts and loss of office payments
Service contracts normally continue until the Executive
Director’s retirement date unless otherwise agreed, and the
service contracts provide a mechanism for early termination.
The Group is able to enter into settlement agreements with
Executive Directors and to pay compensation in resolution
of potential legal claims. The default treatment of any
outstanding share-based entitlements granted to an Executive
Director under the Group’s LTIP or other share plans is that
any outstanding awards lapse on cessation of employment.
This treatment was applied to Caroline Connellan upon her
departure from the Group in accordance with the Share Plan
rules. In certain prescribed circumstances, such as death,
disability, redundancy, retirement or other circumstances
at the discretion of the Committee (taking into account the
individual’s performance and the reasons for their departure),
“good leaver” status can be applied. In such cases, the normal
practice is for LTIP awards held to be retained and prorated
(where necessary) on the original vesting schedule, with
the performance conditions continuing to apply, with the
exception of Deferred Bonus shares which vest in full on the
original vesting schedule.
Approval
This report in its entirety has been approved by the Committee
and the Board of Directors on its behalf by:
John Linwood
Remuneration Committee Chair
15 September 2021
Shareholding requirements
Executive Directors are required to build and maintain a
holding in Brooks Macdonald shares or rights to shares equal
to 200% of base salary within five years of commencing
in role, or the date of adoption of the Policy. A formal post-
employment shareholding policy was duly considered, and
it was concluded that this was not appropriate for the Group.
This is a departure from the Corporate Governance Code,
however we believe the five year combined vesting and
holding period on all LTIPs as well as the Group’s Malus and
Clawback Policy is sufficient. The Group, nonetheless, has
committed to continue to review this position in the future.
Statement of consideration of
shareholder views
The Committee regularly compares the Policy with
shareholder guidelines and takes account of the results of
shareholder votes on remuneration. The Remuneration
Committee Chair consults with major investors ahead of
any material changes to the Policy and is available to meet
with institutional shareholders to discuss any of the policy-
related disclosures or outcomes contained in this Directors’
Remuneration Report. During FY21, consultations with major
investors have taken place to seek feedback on proposed
changes to Executive Director LTIPs and their views taken into
account when determining the performance metrics.
Statement of consideration of employment
conditions elsewhere in the Company
A consistent remuneration philosophy is applied to all
employees across the Group. For the financial year ending
30 June 2022, all employees continue to be eligible for
discretionary performance-related annual bonus based on
a balanced scorecard of financial and non-financial metrics.
The principle of bonus deferral applies to annual bonuses
for all employees whose bonuses exceed certain monetary
thresholds.
Employees are able to provide direct feedback on the Group’s
remuneration policies to their manager or the HR department
and as part of our regular “Speak Up” employee engagement
survey. In addition, the HR Director equally brings items
around people and the people agenda to meetings of the
Executive Committee which cover, inter alia feedback on the
effectiveness of the Group’s Remuneration Policy and how it is
viewed by employees. The HR Director also provides similar
updates to the Board.
External appointments
Executive Directors are normally permitted to take on one
external appointment as a Non-Executive Director. Prior Board
approval is required for any new appointment. Fees in excess
of £15,000 per annum are paid to the Group.
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Composition and meetings
David Stewart was the Chair of the Committee until
31 July 2020, following which Robert Burgess was appointed
as his replacement (appointed from the 1 August 2020).
All of the Group’s Non-Executive Directors are members of
the Committee.
Collectively, the Committee considers that its membership
has the appropriate expertise to discharge its responsibilities
effectively, including relevant wealth management, financial,
risk management, compliance, regulatory, and legal experience.
The Committee’s attendance during the year ended 30 June
2021 is set out in the summary table on page 76.
Robert Burgess
Risk and Compliance Committee Chair
During the year, the Committee sustained focus on continuing
to embed the risk management framework throughout the
Group’s transition to a new operating model.
Role and responsibilities
The Risk and Compliance Committee (“RCC”) assists the
Board in meeting its risk management, regulatory, compliance
and internal control responsibilities. In discharging these
governance responsibilities, the Committee Chair liaised
closely with the Chair of the Audit Committee to ensure a clear
allocation of responsibilities between the two Committees,
ensuring governance completeness across the risk landscape.
The commonality in the membership of each Committee
ensures effective management of any remaining risk.
The Committee considers best practice, taking account of the
requirements of the Code, where appropriate, and those of the
FCA and other relevant regulatory bodies, including guidance
on risk management and internal controls, as well as, other
requirements set by the Board. The Committee has established
procedures to ensure that each of its roles and responsibilities
is adequately covered over the year.
The full responsibilities of the Committee are set out in the
Committee’s Terms of Reference, which are reviewed annually
and available on the Group’s website.
The Committee’s areas of focus
Risk appetite,
strategy and
exposure
management
Capital
requirements
• Overseeing and recommending to
the Board, the Group’s Risk Appetite
Statement, and of limits and policies
for controlling risk within the Board’s
stated appetite;
• Reviewing any breaches to the
limits and policies, and assessing the
adequacy of mitigating or remedial
actions;
• Monitoring steps taken by
management to bring breaches in
line with the Board’s Risk Appetite;
and
• Assessing regularly and updating,
where appropriate, the Risk
Appetite Statement, involving a
regular reassessment of the Group’s
Principal Risks and Uncertainties,
underpinned by key metrics which
articulate the status and tolerance
levels of key business risks. The
process is underpinned by the
capture of outputs from the review
of risks undertaken by the Executive
Committee and independent
challenge provided by the CRO and
the Group Risk team.
• Overseeing the Group’s Internal
Capital Adequacy Assessment
Process (“ICAAP”) and its
compliance with regulatory capital
and liquidity requirements;
• Recommending the risks to be
considered and stress tested in the
ICAAP, as well as, liquidity stress
tests to be undertaken;
• Reviewing and challenging the
methodology and output of stress
tests, considering recommended
management responses,
and ensuring that results are
incorporated appropriately in
the Group’s capital and liquidity
planning; and
• Ensuring that ongoing consideration
is given to capital and liquidity
matters as decisions are taken by
the Group Board and Executive
Committee.
Top-down and
emerging risks
Risk
management
framework
• Monitoring external developments,
for example competition, market
conditions, macroeconomic
environment, regulatory, taxation
and legal developments, the global
COVID-19 pandemic and assessing
the potential impact on the Group;
• Periodically reviewing the Group’s
potential risk exposures, and
considering and challenging
management’s methodology
to identify and address such
exposures; and
• Recommending to the Board the
Principal Risks and Uncertainties
to be reported in the Annual Report
and Accounts.
• Reviewing, on at least an
annual basis, the adequacy and
effectiveness of the Group’s risk
and control processes to support
its strategy and objectives, and
monitoring the implementation of
enhancements identified;
• Reviewing the Group’s approach
to the management of outsourcing
arrangements;
• Maintaining oversight of material
issues, errors, breaches and
complaints, including consideration
of the adequacy of management
actions proposed and any
consequent implications for the
Group’s Risk Appetite status and
framework; and
• Overseeing the scope and
effectiveness of second line
assurance work and considering
the results of work undertaken by
the third line insofar as it affects the
Committee’s areas of responsibilities.
Ensuring that the assurance
programme undertaken is adequate
in view of the complexity and risk
profile of the Group, monitoring its
completion and agreeing remedial
actions arising as appropriate.
106
107
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Main activities during the year
Some of the Committee’s key considerations are outlined in
the table below:
Cyber crime
and resilience
Risk and Compliance Committee report continued
The Committee’s areas of focus continued
Overseeing
regulatory
compliance
• Considering regulatory
developments and the potential
impact on the Group;
Oversight
of the
effectiveness
of the Risk and
Compliance
functions
• Reviewing key regulatory topics
through reports prepared by second
(and third) line assurance teams; and
• Overseeing regulatory related
projects.
•
Safeguarding the independence
of the Risk and Compliance teams,
and reviewing the adequacy of
resources, reporting any concerns to
the Board;
• Receiving reports from assurance
teams, and in particular the CRO, and
promoting an open and transparent
risk culture;
• Maintaining effective oversight of
the Risk and Compliance functions,
monitoring performance against
plan; and
• Reviewing key communications
with regulators and fostering
a culture of co-operation and
compliance.
108
Progression of
legacy matters
Enhancement
of the Risk
Appetite
Statement
including
a refresh of
Board level
metrics
Further
alignment
across risk
reporting
across
assurance
functions
Internal Capital
Adequacy
Assessment
Process and
Liquidity Risk
Management
Framework
(“LRMF”)
Money
Laundering
Reporting
Officer’s report
Ensured progress of resolution of
previously reported Channel Islands
legacy matters related to a number
of discretionary portfolios formerly
managed by Spearpoint (acquired
by the Group in 2012). Continuing to
oversee ongoing discussions with
all stakeholders, including relevant
regulators, as the Group seeks to bring
these matters to conclusion.
Risk Appetite Statements, were
developed further with a refresh of
Board level metrics reporting the
Group’s position across each of the
key risks it faces and identifying
effective means to regularly validate
the overall risk position, incorporate
this into business planning and make
recommendations for mitigating action
as appropriate.
Aligned and enhanced risk reporting
across the three lines in a secure
collaborative environment, allowing
assurance data to be leveraged by all
three and facilitating the coordination
and consolidation of assurance
reporting for review by Senior
Management.
Supervised the ICAAP undertaken in
the year, including development of risk
scenarios, the design of stress tests and
reporting to the Board on the level of
capital and liquidity resources required.
Considered in detail the Annual
Money Laundering Reporting
Officer’s report, including the need
for any enhancements or other
recommendations made.
Given the heightening of cyber-related
crimes and regulatory focus on both
business and operational resilience,
especially during the ongoing COVID-19
pandemic, steps were taken to
strengthen the Group’s Cyber Security
team and the implementation of a
Cyber Security Improvement Plan. The
Committee will continue to review this
area as a priority.
Undertook regular horizon scanning of
the regulatory landscape, considering
the impact of planned and possible
regulatory developments in all
jurisdictions in which the Group
operates.
The Committee has considered
the potential impact on the Group’s
operations and strategy arising from
unfavourable terms beyond the
transition period, as well as, implications
of increased political and economic
uncertainty arising from Brexit-related
events.
Regulatory
developments
UK withdrawal
from the
European
Union (“Brexit”)
Looking forward
The Committee recognises that the current political and
macroeconomic environment will remain uncertain for the
foreseeable future, especially given the COVID-19 pandemic
induced volatility in the financial markets. The RCC will
monitor the implications of this carefully. The further
embedding of the Group’s risk management framework
will continue to be an area of focus, as will the review
in detail of significant risks such as cybercrime and
outsourcing, to ensure that the Group’s defences
and controls are maintained at an appropriate
level. The Committee believes that the pace of
regulatory change will continue, and it will consider
management plans to meet new requirements.
Among other matters, the Committee will review
the embeddedness of SM&CR.
Approval
This report in its entirety has been approved by
the Committee and the Board of Directors on its
behalf by:
Robert Burgess
Risk and Compliance Committee Chair
15 September 2021
Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Report of the Directors
The Directors present herewith their Annual Report, together
with the audited Financial statements of the Group for the year
ended 30 June 2021.
Principal activities and business review
Brooks Macdonald specialises in providing investment
management services in the UK and internationally. The
Company is a public limited company whose shares are traded
on the Alternative Investment Market of the London Stock
Exchange. A review of the business, together with its strategic
outlook and future developments is set out in the Strategic
report on pages 10 to 69, which is incorporated by reference in
this Report.
Section 172, employee and other
stakeholder engagement
When making decisions and setting the Company’s strategy,
the Directors of Brooks Macdonald consider the long-term
interests of the Group. In doing so, they weigh the competing
interests of the Company’s stakeholders and the effect their
decision may have on the Company’s reputation. Further
information on how the Company considers the interests
of its stakeholders can be found on pages 50 to 53 and more
details of how the Company seeks to limit its impact on the
environment are provided in the Corporate responsibility
report starting on page 54.
Results and dividends
The Group’s statutory profit before taxation for the year
ended 30 June 2021 was £25,091,000 (FY20: £10,052,000)
and the statutory profit after taxation was £19,642,000
(FY20: £6,426,000).
The Directors recommend a final dividend of 40.0p
(FY20: 32.0p) per share subject to approval by the shareholders
at the AGM on 28 October 2021. Once approved, this will be
paid on 5 November 2021 to shareholders on the Company’s
register at close of business on 24 September 2021. An interim
dividend of 23.0p (FY20: 21.0p) per share was paid on
16 April 2021. This results in total dividends for the year ended
30 June 2021 of 63.0p (FY20: 53.0p) per share, representing
a total estimated distribution to shareholders of £9,802,000
(FY20: £8,459,000).
Share capital
Details of the Company’s authorised and issued share
capital, and movements thereof, are set out in Note 27 of the
Consolidated financial statements. The Company has no
preference shares in issue and has one class of ordinary shares
which carry no right to fixed income. There are no specific
restrictions on the size of a holding nor on the transfer of
shares, which are both governed by the general provisions
of the Articles of Association and prevailing legislation. The
Directors are not aware of any agreements between holders
of the Company’s shares that may result in restrictions on the
transfer of securities or on voting rights.
110
Directors and their interests
The Directors of the Company, who were in office during the
year and up to the date of signing the Financial statements, are
listed below together with their beneficial interests in the share
capital of the Company.
Number of shares
Chair
Alan Carruthers
Executives1
Caroline Connellan
(resigned on 27 May 2021)
Ben Thorpe2
Non-Executives
John Linwood
Richard Price
Diane Seymour-Williams
(stepped down 27 October 2020)
David Stewart
(resigned 31 July 2020)
Dagmar Kershaw
(appointed 1 July 2020)
Robert Burgess
(appointed 1 August 2020)
At 30 June
2021
At 30 June
2020
1,450
1,450
N/A
10,408
300
1,450
N/A
N/A
–
3,044
10,448
8,908
300
1,450
4,000
–
N/A
N/A
1. Andrew Shepherd and Lynsey Cross were appointed after 30 June 2021.
Andrew held 34,367 shares in the Company at this date. Lynsey did not have
any beneficial interests in the share capital of the Company on this date.
2. At 30 June 2021, Ben Thorpe held 18,071 share options that had vested but had
not yet been exercised, net of tax.
Details of share options held by the Directors at the beginning
and end of the year can be found in the Remuneration
Committee report on pages 90 to 105.
Employee share plans
Details of employee share plans are outlined in Note 29 to
the Consolidated financial statements. The shares are held in
trust for participants. The scheme is operated by Barclays and
voting rights are exercised by the employer-nominated trustee
on receipt of participants’ instructions.
Employee Benefit Trust
In 2010, the Group established an Employee Benefit Trust
(“EBT”) to acquire shares in the Company to satisfy awards
made under the Group’s share-based incentive schemes. RBC
cees Limited act as the trustee of the EBT. During the year, the
EBT purchased 291, 337 shares.
Retirement and reappointment of Directors
All of the Directors of the Group Board will retire at the AGM and
are eligible to nominate themselves for election or re-election.
Employees
Details of the Group’s employment practices, and its policies
on diversity and inclusion, are set out in the Corporate
responsibility report on page 59.
Political donations
The Group did not make any political donations during the
year (FY20: £nil).
Insurance and Directors’ indemnities
The Company maintains appropriate insurance cover
in respect of litigation against Directors and Officers. The
Company has granted indemnities to all of its Directors on
terms consistent with the applicable statutory provisions.
Accordingly, qualifying third-party indemnity provisions, as
defined by Section 234 of the Companies Act 2006, were in
place during the financial year and remain in force at the date
of this Report.
Internal controls and risk management
The Directors confirm that they have carried out a robust
assessment of the emerging and principal risks facing Brooks
Macdonald, including those that could threaten the Group’s
business model, future performance, solvency or liquidity.
The Board considers that the information it receives enables
it to review the effectiveness of the Group’s internal controls
in accordance with the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting.
Details on how the Board monitors the Group’s risk management
and internal controls are contained in the Risk management and
principal risks section of the Strategic report on page 42.
Substantial shareholdings
As at 30 June 2021, the Company’s largest shareholders were
as follows:
Liontrust Asset Management
Octopus Investments
Brooks Macdonald Asset
Management
Chelverton Asset Management
Artemis Investment Management
Aberdeen Standard Investments
Invesco
Brooks Macdonald Employee
Benefit Trust
Canaccord Genuity Wealth
Management
Fidelity International
Number of
shares
3,177,611
% of total
voting rights
19.64
2,357,054
14.57
1,016,345
1,000,000
995,717
879,569
810,842
584,655
561,294
553,688
16,181,138
6.28
6.18
6.15
5.44
5.01
3.61
3.47
3.42
Financial risk management and policies
Details of the Group’s financial risk management objectives
and policies are set out in Note 30 to the Consolidated financial
statements.
Events since the end of the year
Details of events after the reporting date are set out in Note 35
to the Consolidated financial statements.
Independent Auditors
The Audit Committee has recommended to the Board that
the incumbent auditor, PricewaterhouseCoopers LLP, are
reappointed for a further term. PricewaterhouseCoopers LLP
have expressed their willingness to continue in office as the
Group’s appointed auditor and a resolution to reappoint them
will be proposed at the forthcoming AGM.
Each of the Directors in office at the date of the signing of
this report confirms that, so far as they are aware, there is no
relevant audit information of which the Group’s auditor is
unaware. Each Director has taken all reasonable steps that they
ought to have taken as a director in order to make themself
aware of any relevant audit information and to establish that
the Group’s auditor is aware of that information.
Going concern
The Group’s business activities, performance and position,
together with the risks it faces and the factors likely to affect its
future development are set out in the Strategic report.
In view of the market volatility and economic uncertainty
experienced during the financial year resulting from the
outbreak of the COVID-19 pandemic, the Directors reviewed
the Group financial forecasts prepared by Management.
These covered the Group’s expected future profitability,
dividend policy and capital and liquidity projections including
stressed scenarios, such as, a prolonged market downturn.
Management’s mitigating actions, should these scenarios
unveil, were also assessed by the Directors. The Board also
received regular reports from management on the Group’s
business continuity plan and the seamless transition to remote
and hybrid working.
As noted in the Viability statement on page 48, the Directors
have considered the Group’s prospects for a period exceeding
12 months from the date the Financial statements are approved
and have concluded that the Group has adequate financial
resources over that period and, accordingly, are satisfied that
the going concern basis for the preparation of these Financial
statements is appropriate.
Annual General Meeting
The 2021 AGM will be held on 28 October 2021 at 21 Lombard
Street, London, EC3V 9AH. The notice of the meeting together
with details of the resolutions proposed and explanatory
notes are enclosed with this Report and can also be found on
the Group’s website. Full details of the meeting arrangements
are given in the AGM Notice of Meeting. Any changes to the
arrangements for our AGM as a result of further government
guidance or restrictions will be posted on our website.
By order of the Board of Directors
Phil Naylor
Company Secretary
15 September 2021
111
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Statement of Directors’ responsibilities
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ responsibility statement
We confirm that to our knowledge:
•
•
the Group and Parent Company financial statements,
which have been prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
and loss of the Company and the undertakings included in
the consolidation taken as a whole; and
the Strategic report and Financial statements include
a fair review of the development and performance
of the business and the position of the Group and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report and Accounts taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
By order of the Board of Directors
Andrew Shepherd
CEO designate
15 September 2021
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
Parent Company 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
Companies Act 2006 and have elected to prepare the Parent
Company financial statements on the same basis.
Under company law, the Directors must not approve the
Financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Parent
Company and of their profit or loss for that period. In preparing
the Financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant and reliable;
•
•
state whether they have been prepared in accordance with
applicable IFRSs as adopted by Companies Act 2006;
assess the Group and Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group and Parent Company
or to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Parent
Company and enable them to ensure that the Financial
statements comply with the Companies Act 2006.
The Directors are also responsible for such internal controls
as they determine are necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility
for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic report, Report
of the Directors, Directors’ remuneration report and
Corporate governance report that comply with that law and
those regulations.
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to the members of Brooks Macdonald Group plc
REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
Opinion
In our opinion, Brooks Macdonald Group plc’s group
financial statements and company financial statements
(the “financial statements”):
•
give a true and fair view of the state of the group’s and of the
company’s affairs as at 30 June 2021 and of the group’s and
company’s profit and the group’s and company’s cash flows
for the year then ended;
• have been properly prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report and Accounts (the “Annual Report”),
which comprise: the Consolidated and Company statements
of financial position as at 30 June 2021; the Consolidated
statement of comprehensive income for the year ended
30 June 2021, the Consolidated and Company statements
of cash flows for the year ended 30 June 2021, and the
Consolidated and Company statements of changes in
equity for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Our audit approach
Overview
Audit scope
• The scope of our audit and the nature, timing and extent
of audit procedures performed were determined based
on our risk assessment, taking into account changes from
the prior year, the financial significance of subsidiaries
and other qualitative factors. The Group has two business
segments, UK Investment Management and International,
including 14 legal entities that operated in the UK
and Channel Islands during the reporting period. We
conducted audit testing over 8 components in total. Taken
together, our audit work accounted for more than 99% of
Group revenues and 90% of Group profit before tax.
Key audit matters
• Ongoing impact of COVID-19 (Group and parent)
• Recognition of investment management fee revenue
(Group and parent)
• Acquisition of Brooks Macdonald Investment Fund
Managers Limited (Group)
Materiality
• Overall group materiality: £1,000,000 (FY20: £989,400)
based on 5% of profit before tax adjusted gain on bargain
purchase.
• Overall company materiality: £700,000 (FY20: £679,098)
based on 1% of net assets.
• Performance materiality: £750,000 (Group) and £525,000
(Company).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
This is not a complete list of all risks identified by our audit.
Acquisition of Brooks Macdonald Investment Fund Managers
Limited (“BMIFM”) is a new key audit matter this year.
Acquisition of Cornelian Asset Managers Group Limited
(“CAM”), which was a key audit matter last year, is no longer
included because of the fact that the acquisition was audited
during the prior year. Otherwise, the key audit matters below
are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Ongoing impact of COVID-19 (Group and parent)
The COVID-19 viral infection has continued to be a global
pandemic in 2021. It has caused disruption to supply chains
and travel, slowed global growth and caused volatility in global
markets during the first half of 2021 and to date. The Directors
have prepared the Financial statements of the Group on a
going concern basis, and believe this assumption remains
appropriate. This conclusion is based on the assessment that,
notwithstanding the significant market uncertainties, they are
satisfied that the Group has adequate resources to continue
in operational existence for the foreseeable future and that
the Group and its key third-party service providers have in
place appropriate business continuity plans and will be able to
maintain service levels through the coronavirus pandemic.
We critically assessed the Directors’ conclusions on any
potential impact from COVID-19 during the year. We evaluated
the Directors’ assessment of the impact of the COVID-19
pandemic on the Group up to the point of approval of the
Annual Report by considering how the financial statements
might be impacted by the aforementioned disruption and
the complexity in measuring such impacts. In assessing the
Directors’ going concern assessment, we evaluated whether
it considered impacts arising from COVID-19. Our procedures
in this respect included the following through to the date of
approval of the Annual Report:
• Evaluating the Group’s updated risk assessment and
considering whether it addresses the relevant threats
presented by COVID-19;
• Evaluating management’s assessment of operational
impacts, considering their consistency with other available
information and our understanding of the business and
assessing the potential impact on the Financial statements;
and
• Obtaining evidence to support the key assumptions and
forecasts driving the Directors’ going concern assessment.
This included reviewing the Directors’ assessment of the
Group’s financial position and forecasts as well as their
assessment of liquidity. We assessed the disclosures
presented in the Annual Report in relation to COVID-19
by: Reading the other information, including the Key risks
and Viability statement set out in the Strategic report, and
assessing its consistency with the Financial statements and
the evidence we obtained in our audit. Our conclusions
relating to going concern and other information are set out
in the ‘Going concern’ and ‘Reporting on other information’
sections of our report.
114
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Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
Recognition of investment management fee revenue
(Group and parent)
Investment management fee income is generated by Brooks
Macdonald Asset Management Limited (“BMAM”), Brooks
Macdonald Asset Management (International) Limited (“BMI”)
and Cornelian Asset Managers Limited (“CAM”) entities and is
included within portfolio management fee income in the notes
to the Financial statements. The investment management
fee income component represents 65% of the Group’s £118m
total revenue. This is a key audit matter due to its size and the
significant audit effort involved in testing this revenue stream.
The fees are calculated by applying each client’s fee rate to
their funds under management (“FUM”). The calculation is
largely automated, however there are a number of inherent
risks including the manual input of key contractual terms and
the existence and valuation of funds under management,
which could result in errors.
We performed the following procedures in relation to
investment management fee income:
• We understood and evaluated the design and
implementation of key controls, including relevant
Information Technology (“IT”) controls, in place around the
investment management fee process;
• As we did not rely on controls over the investment
management system; for quarter ends, we reperformed the
reconciliations of client cash and stockholding positions
to external custody and bank confirmations; and obtained
evidence for any differences on a sample basis;
• We agreed further tested management’s review controls
over the performance of these reconciliations and agreed
the FUM used for investment management fee calculations
to these client cash and stock reconciliations;
• We agreed, on a sample basis, fee rates to client contracts;
• We tested the valuation for a sample of investment
positions by agreeing the prices used to calculate FUM to
independent market prices;
• We tested the accuracy of fees, by reperforming the
calculation of the investment management fees using data
techniques for a sample; and
• We reconciled the fees calculated by the investment
management system to the general ledger postings.
Our testing did not identify any evidence of material
misstatement.
Acquisition of Brooks Macdonald Investment Fund Managers
Limited (Group)
Refer to pages 141 to 144 (Note 10: Business Combinations) and
page 130 (Note 2 (e): Business combinations) under accounting
policies. On 30 November 2020, the group acquired the entire
share capital of BMIFM (“the acquisition”). Consideration for
the acquisition consisted of four elements – initial cash, cash for
surplus capital of the value of net assets acquired, shares issues
to the previous shareholders and contingent consideration
payable two years after the completion date in January 2023 if
certain criteria are met. Management have assessed whether
the conditions of the contingent consideration will be satisfied
in line with the terms of the acquisition agreement and have
concluded they will be met. Assets and liabilities existing on
the date of acquisition were recorded on the Consolidated
Balance Sheet, with intangible assets in relation to client
contracts identified and valued. The difference between the
fair value of assets and liabilities acquired and the fair value
of consideration paid was recorded as a gain from a bargain
purchase. The business combination is considered a key audit
matter due to the complexity and high level of judgement
around identification and valuation of intangible assets.
We assessed whether the classification as a business
combination and treatment of the various aspects of the
transaction were in accordance with IFRS 3 ‘Business
Combinations’. With respect to the acquisition, we inspected
the purchase agreement and assessed at the acquisition date
the fair value of consideration and of the assets and liabilities
acquired. In respect of the fair value of consideration paid, we
reviewed the purchase agreement and management’s basis of
valuation for the contingent consideration. The assumptions
used in determining that the conditions of contingent
consideration were probable to be met and were verified to
supporting documentation. In respect of assets and liabilities
that existed on the acquisition balance sheet, we performed
procedures on a sample basis. We reviewed management’s
assessment of the identification of intangible assets in relation
to discretionary and fund management contracts. We
assessed the appropriateness of the methodology used and the
reasonableness of the key assumptions within the model by:
• Corroborating key inputs to the discounted cash flow
model to relevant supporting documentation, including
funds under management (“FUM”) data, revenues and
costs;
• Assessing key assumptions used, including the FUM
growth rates, revenue yield and attrition rates;
• Engaging our valuation experts in assessing the discount
rate and;
• Testing the mechanics and mathematical accuracy of
the model. We ensured the deferred tax liability was
calculated accurately in relation to the recognised
intangible assets. We recalculated the gain on bargain
purchase as the difference between fair value of
assets and liabilities acquired and the fair value of the
consideration paid. We are satisfied that based on the
work performed, the acquisition has been accounted
for appropriately with adequate disclosures made in the
Annual Report and Accounts.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
group and the parent company, the accounting processes and
controls, and the industry in which they operate.
The Group has two operating business segments. UK
Investment Management and International. Within these
segments there are 14 legal entities, of which 3 are considered
financially significant due to their contribution to Group profit
before tax, and were subject to an audit of their complete
financial information. In addition, a further 5 reporting
entities were in scope for specific audit procedures, as these
components contributed a significant proportion of certain
financial statement line items. Together with the procedures
performed at the Group level, including auditing the
consolidation and financial statement disclosures, taxation,
and goodwill impairment assessment, our audit work gave
us the evidence we needed for our opinion on the financial
statements as a whole.
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Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Independent Auditors’ report continued
to the members of Brooks Macdonald Group plc
A significant proportion of the Group’s trading and operational and financial processes are based in the UK resulting in the
majority of the audit procedures being performed locally by the UK audit team. Of the components we have performed audit
procedures over, one of these components is based outside the UK, located in the Channel Islands, and therefore we issue Group
Instructions to PwC Channel Islands and receive inter-firm reporting.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Company
Overall
materiality
£1,000,000
(FY20: £989,400)
How we
determined it
5% of profit before tax adjusted to remove the gain on
bargain purchase
Rationale for
benchmark
applied
As with prior years, the most appropriate metric to
apply to Group materiality is profit before tax on the
basis that the Group is primarily measured on its
financial performance via it's consolidated statement of
comprehensive income. We have adjusted profit before
tax to remove the one-off gain on bargain purchase.
£700,000
(FY20: £679,098)
1% of net assets
1% of net assets which is the benchmark used in
prior year. A benchmark of net assets has been
used as the Company’s primary purpose is to act
as a holding Company with investments in the
Group’s subsidiaries, not to generate operating
profits and therefore a profit based measure was
not considered appropriate.
For each component in the scope of our group audit, we
allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across
components was between £5,000 and £1,000,000. Certain
components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to
£750,000 for the group financial statements and £525,000 for
the company financial statements.
In determining the performance materiality, we considered
a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with those charged with governance that we would
report to them misstatements identified during our audit
above £50,000 (Group audit) (FY20: £49,470) and £35,000
(Company audit) (FY20: £33,955) as well as misstatements
below those amounts that, in our view, warranted reporting for
qualitative reasons.
118
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and
the company’s ability to continue to adopt the going concern
basis of accounting included:
• Obtaining the Directors’ updated going concern
assessment and challenged the rationale for assumptions
including reviewing management’s stress testing and
scenario analyses using our knowledge of the business;
and
• Consideration of the impact of COVID-19 on the Directors’
assessment to continue to adopt the going concern basis of
accounting as set out in the key audit matters of this report.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on
the group’s and the company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic report and Report of the Directors,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report
and Report of the Directors for the year ended 30 June 2021
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Report of the Directors.
Corporate governance statement
ISAs (UK) require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the company’s
compliance with the provisions of the UK Corporate
Governance Code, which the Listing Rules of the Financial
Conduct Authority specify for review by auditors of premium
listed companies. Our additional responsibilities with respect
to the corporate governance statement as other information
are described in the Reporting on other information section
of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the
financial statements and our knowledge obtained during the
audit, and we have nothing material to add or draw attention to
in relation to:
• The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s
and company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
financial statements;
• The directors’ explanation as to their assessment of
the group’s and company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a
reasonable expectation that the company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-
term viability of the group was substantially less in scope
than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the
financial statements and our knowledge and understanding of
the group and company and their environment obtained in the
course of the audit.
119
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statements Independent Auditors’ report continued
to the members of Brooks Macdonald Group plc
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit:
• The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the group’s and company’s
position, performance, business model and strategy;
• The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of
the audit committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified
under the Listing Rules for review by the auditors.
Responsibilities for the
financial statements and the audit
Responsibilities of the directors for
the financial statements
As explained more fully in the Statement of Directors’
responsibilities, the directors are responsible for the
preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a
true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to
liquidate the group or the company or to cease operations, or
have no realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to breaches of the UK regulatory
principles, such as those governed by the Financial Conduct
Authority, and we considered the extent to which non-
compliance might have a material effect on the financial
statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the
Companies Act 2006. We evaluated management’s incentives
and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to risk of
fraud in revenue recognition and the posting of inappropriate
journal entries. The group engagement team shared this risk
assessment with the component auditors so that they could
include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the group
engagement team and/or component auditors included:
•
Identifying and testing journal entries, in particular any
journal entries posted with unusual account combinations;
entries posted containing unusual account descriptions
and entries posted with unusual amounts, where any such
journals were identified;
• Reviewing all relevant board minutes;
• Designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing;
• Enquiries with management, compliance and legal,
including consideration of known or suspected instances
of non-compliance with laws and regulations and fraud;
and
• Assessing methods, significant assumptions and
data used by management in making significant
accounting estimates.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance
with Chapter 3 of Part 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 consent
in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not obtained all the information and explanations
we require for our audit; or
•
•
•
adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by
law are not made; or
the company financial statements are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Jeremy Jensen (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
15 September 2021
120
121
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Consolidated financial
statements
122
123
Contents
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
124
125
126
127
128
IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statements Consolidated statement of
comprehensive income
For the year ended 30 June 2021
Consolidated statement of
financial position
As at 30 June 2021
Revenue
Administrative costs
Gross profit
Other gains/(losses) – net
Operating profit
Gain on bargain purchase
Finance income
Finance costs
Profit before tax
Taxation
Profit for the period attributable to equity holders of the Company
Other comprehensive income
Total comprehensive income for the year
Earnings per share
Basic
Diluted
Note
4
5
6
7
10
8
8
9
11
11
2021
£’000
118,206
(96,012)
22,194
(1,438)
20,756
4,966
47
(678)
25,091
(5,449)
19,642
–
19,642
2020
£’000
108,558
(93,794)
14,764
(4,519)
10,245
–
261
(454)
10,052
(3,626)
6,426
–
6,426
125.3p
124.9p
43.2p
43.1p
The accompanying notes on pages 128 to 166 form an integral part of the Consolidated financial statements.
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Financial assets at fair value through other comprehensive income
Deferred tax assets
Total non-current assets
Current assets
Financial assets at fair value through profit or loss
Trade and other receivables
Current tax receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Deferred consideration
Lease liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Deferred consideration
Lease liabilities
Provisions
Total current liabilities
Net assets
Equity
Share capital
Share premium account
Other reserves
Retained earnings
Total equity
30 June
2021
£’000
30 June
20201
£’000
Note
13
14
15
16
18
17
19
20
21
22
23
18
25
24
21
22
23
27
27
28
28
89,897
2,756
5,979
500
2,736
101,868
624
28,449
32
54,899
84,004
185,872
(303)
(5,422)
(279)
(8,902)
(548)
(15,454)
(27,055)
–
(5,934)
(1,447)
(1,979)
(36,415)
134,003
161
78,703
8,467
46,672
134,003
83,804
3,181
6,991
500
1,524
96,000
549
26,081
–
50,168
76,798
172,798
(6,300)
(6,659)
(219)
(7,230)
(330)
(20,738)
(22,765)
(480)
(1,691)
(1,275)
(2,308)
(28,519)
123,541
161
77,982
6,398
39,000
123,541
1. See Note 2c for details regarding the reclassification of current deferred consideration and current provisions as at 30 June 2020.
The Consolidated financial statements on pages 124 to 166 were approved by the Board of Directors and authorised for issue on
15 September 2021, and signed on their behalf by:
Andrew Shepherd
CEO
Company registration number: 4402058
Ben Thorpe
Chief Financial Officer
The accompanying notes on pages 128 to 166 form an integral part of the Consolidated financial statements.
124
124
125
125
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021
Consolidated statement of
changes in equity
For the year ended 30 June 2021
Balance at 1 July 2019
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options payments exercised
Purchase of own shares by Employee
Benefit Trust
Tax on share options
Dividends paid
Total transactions with owners
Share
capital
£’000
139
Share
premium
account
£’000
39,068
Other
reserves
£’000
4,575
Retained
earnings
£’000
43,091
Note
–
–
–
22
–
–
–
–
–
22
–
–
–
38,914
–
–
–
–
–
38,914
–
–
–
–
3,571
(1,770)
–
22
–
1,823
6,426
–
6,426
–
–
1,770
(4,607)
–
(7,680)
(10,517)
12
Total
equity
£’000
86,873
6,426
–
6,426
38,936
3,571
–
(4,607)
22
(7,680)
30,242
Balance at 30 June 2020
161
77,982
6,398
39,000
123,541
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options payments exercised
Purchase of own shares by Employee
Benefit Trust
Tax on share options
Dividends paid
Total transactions with owners
Balance at 30 June 2021
–
–
–
–
–
–
–
–
–
–
161
–
–
–
721
–
–
–
–
–
721
78,703
–
–
–
–
2,991
(1,812)
–
890
–
2,069
8,467
19,642
–
19,642
–
–
1,812
(5,210)
–
(8,572)
(11,970)
46,672
19,642
–
19,642
721
2,991
–
(5,210)
890
(8,572)
(9,180)
134,003
12
The accompanying notes on pages 128 to 166 form an integral part of the Consolidated financial statements.
Consolidated statement of cash flows
For the year ended 30 June 2021
Cash flows from operating activities
Cash generated from operations
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of computer software
Purchase of property, plant and equipment
Consideration paid
Deferred consideration paid
Proceeds from sale of discontinued operations
Interest received
Finance costs paid
Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of shares
Shares issued as consideration
Payment of lease liabilities and initial direct costs
Proceeds of lease reverse premium
Purchase of own shares by Employee Benefit Trust
Dividends paid to shareholders
Net cash (used)/generated in financing activities
Note
26
13
14
10
21
8
8
27
10
22
22
27
12
2021
£’000
36,907
(5,804)
31,103
(3,061)
(620)
(5,287)
(2,421)
–
47
–
(11,342)
721
–
(1,969)
–
(5,210)
(8,572)
(15,030)
20201
£’000
29,433
(5,865)
23,568
(1,614)
(1,958)
(21,102)
(919)
568
252
(5)
(24,778)
38,936
(9,000)
(2,111)
1,250
(4,607)
(7,680)
16,788
Net increase in cash and cash equivalents
4,731
15,578
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
20
50,168
54,899
34,590
50,168
1. See Note 26 for details regarding changes to the prior year classification of cash flows from operating activities and cash flows from investing activities.
The accompanying notes on pages 128 to 166 form an integral part of the Consolidated financial statements.
126
126
127
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statements
For the year ended 30 June 2021
1. General information
Brooks Macdonald Group plc (“the Company”) is the Parent Company of a group of companies (“the Group”), which offers a range
of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts. The
Group also provides financial planning as well as international investment management, and acts as fund manager to a range of
onshore and international funds.
The Company is a public limited company, incorporated and domiciled in the United Kingdom under the Companies Act 2006
and listed on AIM. The address of its registered office is 21 Lombard Street, London, EC3V 9AH.
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 (“IFRS”), as adopted by 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 financial assets at fair value through
other comprehensive income, financial assets and financial liabilities at fair value through profit or loss and deferred
consideration such that they are measured at their fair value.
At the time of approving the Financial statements, the Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Financial statements.
b. Basis of consolidation
The Group’s Financial statements are a consolidation of the financial statements of the Company and its subsidiaries. The
underlying financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent
accounting policies. Subsidiaries and structured entities are all entities controlled by the Company, deemed to exist where the
Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. 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.
The Group has interests in structured entities, with one consolidated structured entity, being the Brooks Macdonald Group
Employee Benefit Trust (Note 27). The Group has interests in other structured entities as a result of contractual arrangements
arising from the management of assets on behalf of its clients, but are not consolidated as the Group does not commit to
financially support its funds, nor guarantee for the repayment of any borrowings (Note 34). The Group has disclosed all of its
subsidiary undertakings in Note 41 of the Company’s Financial statements.
c. Changes in accounting policies
The Group’s accounting policies that have been applied in preparing these Financial statements are consistent with those
disclosed in the Annual Report and Accounts for the year ended 30 June 2020, except as explained below.
New accounting standards, amendments and interpretations adopted in the year
In the year ended 30 June 2021, the Group did not adopt any new standards or amendments issued by the IASB or interpretations
by the IFRS IC that have had a material impact on the Consolidated financial statements.
As a result of the UK leaving the European Union on 31 January 2021, the Group’s Consolidated financial statements for the year
ended 30 June 2021 have been prepared under international accounting standards in conformity with the Companies Act 2006.
This has not had any impact on the recognition, measurement or disclosure in these Consolidated financial statements.
Other new standards, amendments and interpretations listed in the following table were newly adopted by the Group but have
not had a material impact on the amounts reported in these Financial statements. They may, however, impact the accounting for
future transactions and arrangements.
2. Principal accounting policies continued
Standard, Amendment or Interpretation
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
COVID-19-related Rent Concessions (Amendment to IFRS 16)
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2020
Comparative year reclassification
Current deferred consideration has been recognised on the face of the Consolidated statement of financial position in the current
year. In previous periods, current deferred consideration was recognised within current provisions. The comparative information
has therefore been reclassified by moving £1,691,000 from current provisions to current deferred consideration at 30 June 2020
to be consistent with the current period.
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, the Directors believe that the accounting policies where important
estimations are used relate to the measurement of intangible assets, deferred consideration, client compensation provisions and
the estimation of the fair value of share-based payments.
There have been no critical judgements required in applying the Group’s accounting policies in this period, but there have been
the use of important estimations detailed separately below.
The underlying assumptions made are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
year in which the estimate is revised only if the revision affects both current and future periods.
Further information about key assumptions and sources of estimation uncertainty is set out below.
Intangible assets
The Group has acquired client relationships and the associated investment management contracts as part of business
combinations, through separate purchase or with newly employed teams of fund managers, as described in Note 13. In assessing
the fair value of these assets, the Group has estimated their finite life based on information about the typical length of existing
client relationships. Contracts acquired with fund managers and acquired client relationship contracts are amortised on a
straight-line basis over their estimated useful lives, ranging from 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 (“CGU”) are determined by value in use
calculations, which require the use of estimates to derive the projected future cash flows attributable to each unit. Details of the
more significant assumptions are given in Note 13.
In assessing the value of client relationships and the associated investment management contracts and goodwill or gain on
bargain purchase arising as part of a business combination, the Group prepares forecasts for the cash flows acquired and
discounts to a net present value. The Group uses a pre-tax discount rate, adjusting from a post-tax discount rate calculated by the
Group’s weighted average cost of capital (“WACC”), adjusted for any specific risks for the relevant CGU. The Group uses the capital
asset pricing model (“CAPM”) to estimate the WACC, which is calculated at the point of acquisition for a business combination, or
the relevant reporting period. The key inputs are the risk-free rate, market risk premium, the Group’s adjusted beta with reference
to beta data from peer listed companies, small company premium and any risk adjusted premium for the relevant CGU. See
Note 13 for further details on the discount rate for the various CGUs.
Deferred consideration
As described in Note 21, the Group has a deferred consideration balance in respect of the acquisition of Cornelian in February
2020, and the Lloyds Channel Island acquisition in November 2020. Deferred consideration is recognised at its fair value, being
an estimate of the amount that will ultimately be payable in future periods. For Cornelian, the deferred consideration has
been calculated allowing for estimated growth in the acquired funds and estimated cost savings, discounted by the estimated
interest rate. For the Lloyds Channel Islands acquisition, the deferred consideration has been calculated based on client attrition,
discounted by the estimated interest rate. If the estimated discount rate used in the deferred consideration calculations increased
by 2%, the Group’s estimated deferred consideration at 30 June 2021 would decrease by £73,000.
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statements continued
For the year ended 30 June 2021
2. Principal accounting policies continued
Share-based payments
The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating
the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the
inputs to that model (Note 29). The charge to the Consolidated statement of comprehensive income in respect of share-based
payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number
of employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly. A decrease of 10%
in the vesting assumptions would decrease the charge in the Consolidated statement of comprehensive income for the year by
£801,000. The key inputs into the fair value calculations for the options granted during the year are disclosed in Note 29.
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. Where the outflow is not probable or cannot be
reliably measured, the potential obligation is disclosed as a contingent liability in the Financial statements.
Insurance recoveries relating to legal fees are recognised when, and only when, it is virtually certain that reimbursement will be
received if the corresponding obligation is settled. Reimbursements received are disclosed net in the Consolidated statement of
comprehensive income and gross in the Consolidated statement of financial position.
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.
As described in Note 23, the Group has a provision in respect of exceptional costs of resolving legacy matters. The Group has
a present obligation relating to a number of discretionary portfolios formerly managed by Spearpoint, which was acquired
by the Group in 2012, and the provision has been reliably measured at the value of expenditures expected to be required to settle
the obligation.
e. 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 when incurred.
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 remeasured at the
acquisition date and the difference is charged or credited 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 deferred consideration to be paid by the Group to the vendor is recognised at its fair value at the acquisition date, in
accordance with IAS 39. Subsequent changes to the fair value of deferred consideration are recognised in accordance with IFRS 9
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 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.
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 CGUs 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 CGU is compared to its recoverable amount, which is determined using a discounted future cash flow model.
Where goodwill forms part of a CGU 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 CGU retained.
2. Principal accounting policies continued
f. Revenue
Portfolio management fees and financial services commission
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 received. Amounts are shown net of rebates paid to significant investors.
Performance fees are earned from some clients when contractually agreed performance levels are exceeded within specified
performance measurement periods. They are only recognised, at the end of these performance periods, when a reliable estimate
of the fee can be made and is virtually certain that it will be received.
Advisory fees
Advisory 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.
Fund management fees
Where amounts due are conditional on the successful completion of fundraising 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. Fees are calculated on the basis of a percentage of the value of the portfolio over the period.
Interest
Interest receivable is recognised on an accruals basis.
g. Cash and cash equivalents
Cash comprises cash in hand and call deposits held with banks. Cash equivalents comprise short-term, highly liquid investments,
with a maturity of less than three months from the date of acquisition.
h. Share-based payments
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.
i. 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.
j. 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
(“FCA”). 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.
k. 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.
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statements continued
For the year ended 30 June 2021
2. Principal accounting policies continued
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:
Leasehold improvements
Fixtures, fittings and office equipment
IT equipment
– over the lease term
– 5 years
– 4 or 5 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.
Intangible assets
l.
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 20 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 who are employed by the Group. 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 6 to 20
years and those acquired with fund managers over 5 years. Both types of intangible asset are reviewed annually to determine
whether there exists an indicator of impairment or an indicator that the assumed useful economic life has changed.
Computer software
Costs incurred on internally developed computer software are initially recognised at cost, and when the software is available for
use, the costs are amortised on a straight-line basis over an estimated useful life of four years. Initial research costs and planning
prior to a decision to proceed with development of software are recognised in the Consolidated statement of comprehensive
income when incurred.
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 CGUs 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.
m. Financial investments
The Group classifies financial assets in the following categories: fair value through profit or loss; fair value through other
comprehensive income; and amortised cost. The classification is determined by management on initial recognition of the
financial asset, which depends on the purpose for which it was acquired.
Fair value through profit or loss (Note 17)
Financial investments are classified as fair value through profit or loss if they are either held for trading or specifically designated
in this category on initial recognition. Assets in this category are initially recognised at fair value and subsequently remeasured,
with gains or losses arising from changes in fair value being recognised in the Consolidated statement of comprehensive income.
Financial assets at fair value through profit or loss include investments in a regulated OEIC, which are managed and evaluated
on a fair value basis in line with the market value and also investment positions in the underlying recognised funds. Investment
positions in recognised funds are a standard amount of shares per fund that the Group holds to facilitate daily shares and
redemptions by the unit holders for funds managed and are recognised at fair value based on the market value. Other financial
assets at fair value through profit of loss include amounts outstanding as contingent consideration, classified as this upon initial
recognition, which are managed and evaluated on a fair value basis in line with the estimated receivable.
2. Principal accounting policies continued
Fair value through other comprehensive income (Note 16)
Financial investments are classified as fair value through other comprehensive income if the objective of the business model
is achieved by both collecting contractual cash flows and selling financial assets and that the asset’s contractual cash flows
represents solely payment of principal and interest. Assets in this category are initially recognised at fair value and subsequently
remeasured, with gains or losses arising from changes in fair value being recognised in the other comprehensive income.
Financial assets at fair value through other comprehensive income relates to an investment of redeemable preference shares,
which are held to collect contractual cash flows via an annual fixed preferential dividend.
Amortised cost
Financial instruments are classified as amortised cost if the asset is held to collect contractual cash flows and the asset’s
contractual cash flows represents solely payment of principal and interest.
n. 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.
o. 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.
p. 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 substantively 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.
q. Trade receivables
Trade receivables represent amounts due for services performed in the ordinary course of business. They are recognised in
trade and other receivables and, if collection is expected within one year, they are recognised as a current asset and if collection is
expected in greater than one year, they are recognised as a non-current asset. Trade receivables are measured at amortised cost
less any expected credit losses.
r. 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 one year 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.
s. Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Lease liabilities (Note 22)
The Group recognises a lease liability at the inception date of the lease, initially measured at fair value of future lease payments.
The carrying amount is adjusted for interest charged and payments made.
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statements continued
For the year ended 30 June 2021
2. Principal accounting policies continued
Right-of-use assets (Note 15)
The Group recognises a right-of-use asset at the inception date of the lease, initially measured at cost, which represents the initial
amount of the lease liability adjusted for any lease payments made before the commencement date. The right-of-use assets
are depreciated on a straight-line basis over the shortest of the expected life of the asset and the lease term, adjusted for any
remeasurements of the lease liability.
t. Employee Benefit Trust
The Company provides finance to an Employee Benefit Trust (“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 structured entity, as defined in Note 35. 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.
u. 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 Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly
incremental costs (i.e. 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.
v. 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 authorised and no longer at the discretion of the Company. Final dividends are recognised when
approved by the Company’s shareholders at the Annual General Meeting and interim dividends are recognised when paid.
3. Segmental information
For management purposes, the Group’s activities are organised into two operating divisions: UK Investment Management and
International. The Group’s other activity, offering nominee and custody services to clients, is included within UK Investment
Management. These divisions are the basis on which the Group reports its primary segmental information to the Executive
Committee, which is the Group’s chief operating decision-maker. In accordance with IFRS 8 ‘Operating Segments’, disclosures are
required to reflect the information which the Board of Directors uses internally for evaluating the performance of its operating
segments and allocating resources to those segments. The information presented in this Note is consistent with the presentation
for internal reporting.
From 1 January 2021, the Group integrated its previous Financial Planning segment into its UK Investment Management
segment. As a result, the prior year information has been restated to reflect the new segments of UK Investment Management,
International and Group and other consolidation adjustments, consistent with the current year.
The UK Investment Management segment offers a range of investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts, as well as wealth management services to high net worth individuals
and families, giving independent “whole of market” financial advice enabling clients to build, manage and protect their wealth.
The International segment is based in the Channel Islands and offers a similar range of investment management and financial
planning services as the UK Investment Management segment. The Group segment principally comprises the Group Board’s
management and associated costs, along with the consolidation adjustments.
134
134
3. Segmental information continued
Following the Lloyds Channel Islands acquisition (Note 10), the activities since acquisition have been included in the
International segment.
Revenues and expenses are allocated to the business segment that originated the transaction. Sales between segments are
carried out at arm’s length. Centrally incurred expenses are allocated to business segments on an appropriate pro rata basis.
Year ended 30 June 2021
Total revenue
Inter segment revenue
External revenue
Underlying administrative costs
Operating contribution
Allocated costs
Net finance (cost)/income
Underlying profit/(loss) before tax
Gain on bargain purchase
Amortisation of client relationships
Acquisition-related costs
Impairment of client relationship contracts
Dual running costs of operating platform
Finance cost of deferred consideration
Changes in fair value of deferred consideration
Profit/(loss) mark-up on Group allocated costs
Profit/(loss) before tax
Taxation
Profit for the period attributable to equity holders of the Company
Year ended 30 June 2021
Statutory operating costs included the following:
Amortisation
Depreciation
Interest income
UK
Investment
Management
£’000
Group &
consolidation
adjustments
£’000
International
£’000
102,998
(3,003)
99,995
(45,738)
54,257
(25,067)
(285)
28,905
–
(1,770)
(467)
–
(1,000)
–
–
143
25,811
18,211
–
18,211
(10,804)
7,407
(2,864)
(21)
4,522
–
(992)
(2,244)
(1,210)
–
(7)
–
(147)
(78)
–
–
–
(30,870)
(30,870)
27,931
109
(2,830)
4,966
(2,166)
39
(303)
–
(292)
(60)
4
(642)
UK
Investment
Management
£’000
Group &
consolidation
adjustments
£’000
International
£’000
4,307
2,142
3
1,209
495
10
2,166
–
–
Total
£’000
121,209
(3,003)
118,206
(87,412)
30,794
–
(197)
30,597
4,966
(4,928)
(2,672)
(1,513)
(1,000)
(299)
(60)
–
25,091
(5,449)
19,642
Total
£’000
7,682
2,637
13
135
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Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
3. Segmental information continued
Year ended 30 June 20201
Total revenue
Inter segment revenue
External revenue
Underlying administrative costs
Operating contribution
Allocated costs
Net finance income
Underlying profit/(loss) before tax
Goodwill impairment
Acquisition-related costs
Amortisation of client relationships and contracts acquired with
fund managers
Head office relocation costs
Finance cost of deferred consideration
Changes in fair value of contingent consideration
Finance income from contingent consideration
Profit mark-up on Group allocated costs
Profit/(loss) before tax
Taxation
Profit for the period attributable to equity holders of the Company
Year ended 30 June 20201
Statutory operating costs included the following:
Amortisation
Depreciation
UK
Investment
Management
£’000
99,781
(4,552)
95,229
(45,165)
50,064
(26,069)
1
23,996
–
(1,085)
Group &
consolidation
adjustments
£’000
(6)
–
(6)
(32,424)
(32,430)
28,959
29
(3,442)
(4,471)
(2,570)
International
£’000
13,335
–
13,335
(8,026)
5,309
(2,890)
50
2,469
–
(606)
(701)
(1,166)
–
(54)
7
136
21,133
(420)
–
–
–
–
(136)
1,307
(1,762)
–
(145)
–
2
–
(12,388)
UK
Investment
Management
£’000
Group &
consolidation
adjustments
£’000
International
£’000
3,134
2,940
429
324
1,764
120
Total
£’000
113,110
(4,552)
108,558
(85,615)
22,943
–
80
23,023
(4,471)
(4,261)
(2,883)
(1,166)
(145)
(54)
9
–
10,052
(3,626)
6,426
Total
£’000
5,327
3,384
1. The prior year has been restated to reflect the integration of the previous Financial Planning into UK Investment Management as described earlier in this Note.
4. Revenue
Portfolio management fees
Fund management fees
Advisory fees
Financial services commission
Total revenue
2021
£’000
98,006
15,353
4,526
321
118,206
2020
£’000
95,108
8,644
4,325
481
108,558
Portfolio management fees and financial services commission
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 received. Amounts are shown net of rebates paid to significant investors.
Performance fees are earned from some clients when contractually agreed performance levels are exceeded within specified
performance measurement periods. They are only recognised, at the end of these performance periods, when a reliable estimate
of the fee can be made and is virtually certain that it will be received.
Fund management fees
Where amounts due are conditional on the successful completion of fundraising 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. Fees are calculated on the basis of a percentage of the value of the portfolio over the period.
Advisory fees
Advisory 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.
a. Geographic analysis
The Group’s operations are located in the United Kingdom and the Channel Islands. The following table presents external
revenue analysed by the geographical location of the Group entity providing the service.
United Kingdom
Channel Islands
Total revenue
b. Major clients
The Group is not reliant on any one client or group of connected clients for the generation of revenues.
2021
£’000
99,995
18,211
118,206
2020
£’000
95,223
13,335
108,558
136
136
137
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statements continued
For the year ended 30 June 2021
5. Employee information
Administrative costs are recognised as the services are received. The biggest component of the Group’s administrative costs are
the costs of employee benefits as shown below. Other costs incurred in administrative costs can be seen in Note 7.
5. Employee information continued
Retirement benefits are accruing to one Directors (FY20: one) under a defined contribution pension scheme.
The remuneration of the highest paid Director during the year was as follows:
a. Staff costs
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Redundancy costs
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:
Business staff
Functional staff
Total staff
2021
£’000
41,855
5,351
1,909
2,502
330
51,947
2020
£’000
38,502
4,335
1,676
3,080
818
48,411
2021
Number of
employees
2020
Number of
employees
262
181
443
243
192
435
c. Key management compensation
The compensation of the key management personnel of the Group, defined as the Group Board of Directors including both the
Executives and Non-Executives, is set out below.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation
2021
£’000
1,851
50
36
1,937
d. Directors’ emoluments
Further details of Directors’ emoluments are included within the Remuneration Committee report on pages 90 to 105.
Salaries and bonuses
Non-Executive Directors’ fees
Benefits in kind
Pension contributions
Amounts receivable under long-term incentive schemes
Total Directors’ remuneration
2021
£’000
1,084
500
6
1,590
50
159
1,799
2020
£’000
2,040
57
94
2,191
2020
£’000
1,560
475
5
2,040
57
94
2,191
The aggregate amount of gains made by Directors on the exercise of share options during the year was £293,000 (FY20: £167,000).
Remuneration and benefits in kind
Amounts received under long-term incentive schemes
Total remuneration
2021
£’000
722
–
722
2020
£’000
814
63
877
The amount of gains made by the highest paid Director on the exercise of share options during the year was £nil (FY20: £63,000).
6. Other gains/(losses) – net
Other gains/(losses) – net represent the net changes in the fair value of the Group’s financial instruments and intangible assets
recognised in the Consolidated statement of comprehensive income.
Client relationship contracts impairment (Note 13)
Gain from changes in fair value of financial assets at fair value through profit or loss
Goodwill impairment (Note 13)
Loss from changes in fair value of contingent consideration receivable (Note 17)
Other gains/(losses) – net
7. Operating profit
Operating profit is stated after charging:
Staff costs (Note 5)
Amortisation of client relationships and contracts acquired with fund managers (Note 13)
Amortisation of computer software (Note 13)
Acquisition-related costs (Note 10)
Financial Services Compensation Scheme levy (see below)
Impairment of client relationship contracts (Note 13)
Dual running costs of operating platform
Depreciation of property, plant and equipment (Note 14)
Auditors’ remuneration (see below)
Impairment of goodwill (Note 13)
Head office relocation costs
A more detailed analysis of auditors’ remuneration is provided below:
Fees payable to the Company’s auditors for the audit of the consolidated Group and Parent
Company financial statements
Fees payable to the Company’s auditors and its associates for other services:
Audit of the Company’s subsidiaries pursuant to legislation
Audit-related assurance services
Total remuneration
2021
£’000
(1,513)
75
–
–
(1,438)
2021
£’000
51,947
4,928
2,754
2,672
2,219
1,513
1,000
1,045
849
–
–
2021
£’000
260
304
285
849
2020
£’000
–
6
(4,471)
(54)
(4,519)
2020
£’000
48,411
2,883
3,363
4,261
2,160
–
–
2,269
640
4,471
1,166
2020
£’000
195
193
252
640
Financial Services Compensation Scheme levies
Administrative costs for the year ended 30 June 2021 include a charge of £2,219,000 (FY20: £2,160,000) in respect of the Financial
Services Compensation Scheme (“FSCS”) levy, comprising £1,245,000 in respect of the estimated levy for the 2021/22 scheme year,
and £974,000 in respect of the final and supplementary levies for the 2020/21 scheme year.
138
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statements continued
For the year ended 30 June 2021
8. Finance income and finance costs
Finance income
Dividends on preference shares
Bank interest on deposits
Finance income from contingent consideration
Total finance income
Finance costs
Interest on lease liabilities (Note 22)
Change in fair value of deferred consideration
Interest expense
Finance cost of deferred consideration (Note 21)
Total finance costs
9. Taxation
The tax charge on profit for the year was as follows:
UK Corporation Tax at 19% (FY20: 19%)
Over provision in prior years
Total current tax
Deferred tax credits
Under provision of deferred tax in prior years
Research and development tax credit
Income tax expense
34
13
–
47
319
60
–
299
678
2021
£’000
5,466
(127)
5,339
(6)
116
–
5,449
42
210
9
261
304
–
5
145
454
2020
£’000
3,991
(66)
3,925
(674)
462
(87)
3,626
2021
£’000
2020
£’000
9. Taxation continued
The deferred tax credits for the year arise from:
Share option reserve
Accelerated capital allowances
Accelerated capital allowances on research and development
Dilapidations
Amortisation of acquired client relationship contracts
Unused overseas trading losses
Under provision in prior years
Deferred tax credits
2021
£’000
(77)
(53)
(16)
15
309
(184)
116
110
2020
£’000
(247)
(91)
(154)
–
(224)
42
–
(674)
On 1 April 2017, the standard rate of Corporation Tax in the UK was reduced to 19%. As a result, the effective rate of Corporation
Tax applied to the taxable profit for the year ended 30 June 2021 is 19% (FY20: 19%).
It was outlined in the Finance Bill 2021 (11 March 2021), and substantively enacted having received royal ascent on the 10 June 2021
that the UK corporation tax rate would increase to 25% from 1 April 2023 and remain at 19% until that date. As a result, the relevant
deferred tax balances have been remeasured. Deferred tax assets and liabilities are calculated at the rate that is expected to be in
force when the temporary differences unwind; however, limited to the extent that such rates have been substantively enacted.
10. Business combinations
2021
On 30 November 2020, the Group acquired Lloyds Bank International’s Channel Islands wealth management and funds business
(“Lloyds Channel Islands acquisition”). The acquisition brings a high-quality discretionary client base, adds a multi-asset and fixed
income fund range to the Group’s offering, and increases distribution reach through well-established intermediary relationships.
The acquisition consisted of the entire share capital of Lloyds Investment Fund Managers Limited (renamed Brooks Macdonald
International Fund Managers Limited following acquisition), and a portfolio of discretionary management private clients.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The acquisition has been accounted for using the acquisition method and details of the purchase consideration are as follows:
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 before taxation
Profit multiplied by the standard rate of tax in the UK of 19% (FY20: 19%)
Tax effect of amounts that are not deductible (taxable) in calculating taxable income:
Overseas tax losses not available for UK tax purposes
Disallowable expenses
Share-based payments
Depreciation and amortisation
Impairment charges
Non-taxable income
Research and development tax credit
(Over)/under provision in prior years
Income tax expense
2021
£’000
25,091
2020
£’000
10,052
4,767
1,910
(541)
447
30
1,419
287
(951)
–
(9)
5,449
(24)
394
(139)
336
850
(10)
(87)
396
3,626
Business consideration
Business consideration adjustment
Initial business consideration – Discretionary business
Shares consideration
Excess for net assets
Initial shares consideration – Funds business
Initial cash paid
Deferred contingent consideration at fair value
Total purchase consideration
£’000
4,650
(1,070)
4,650
95
Note
i
ii
iii
£’000
3,580
4,745
8,325
308
8,633
i.
ii.
Following completion, an adjustment was made to the business consideration in relation to the revenue that has transferred to the Group. The adjustment reflects
the fall in revenue acquired by the Group compared to the expected revenue that would transfer to the Group in the Sale and Purchase Agreement (“SPA”).
Per the SPA, the completion balance sheet was to contain net assets of £2,500,000 to be acquired by the Group. Any excess or deficit of the actual net assets
acquired would be paid or recouped by the Group. The actual net assets acquired by the Group were £2,595,000, resulting in the Group paying additional
consideration of £95,000.
iii. The total cash deferred contingent consideration is £334,000, payable in two years following completion, based on the client attrition of the funds under
management acquired over the two-year period.
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statements continued
For the year ended 30 June 2021
10. Business combinations continued
The fair value of the deferred consideration liability has been remeasured at 30 June 2021, and remains unchanged, which
assumes the deferred consideration criteria will be met resulting in the full £334,000 to be paid in two years. The client attrition
has been forecast using a similar outflows pattern to that experienced by the rest of the Group. The client attrition is dependent on
several unpredictable variables including client sentiment and market conditions.
Client relationship intangible assets of £9,080,000 and £3,147,000 were recognised on acquisition in respect of the expected cash
inflows and economic benefit from the discretionary and fund management contracts acquired respectively. A gain on bargain
purchase of £4,284,000 was recognised on acquisition in relation to the discretionary business and a gain on bargain purchase of
£682,000 was recognised on acquisition in relation to the funds business as the net identifiable assets acquired were greater than
the total purchase consideration, which has been recognised in 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 Note a below.
Directly attributable acquisition costs of £19,000 (FY20: £606,000) and integration costs of £2,225,000 (FY20: £nil) were incurred
in the acquisition and integration of the Lloyds Channel Islands acquisition, which have been charged to administrative costs in
the Consolidated statement of comprehensive income but excluded from underlying profit. During H1 of the year ended
30 June 2021, the Group incurred the remaining integration costs of £456,000 (FY20: £1,426,000) in relation to the Cornelian
acquisition that completed during the prior year, see further details below in this Note.
a. Net assets acquired through business combination
Trade and other receivables
Cash at bank
Trade and other payables
Corporation tax payable
Total net assets recognised by acquired companies
Fair value adjustments:
Client relationship contracts – discretionary business
Client relationship contracts – fund-management business
Deferred tax liabilities
Net identifiable assets
Gain on bargain purchase
Total purchase consideration
£’000
35
3,038
(367)
(115)
2,591
9,080
3,147
(1,219)
13,599
(4,966)
8,633
The trade and other receivables were recognised at their fair value, being the gross contractual amounts, deemed fully
recoverable.
Impact on reported results from date of acquisition
b.
In the period from acquisition to 30 June 2021, the Lloyds Channel Islands acquisition earned revenue of £5,315,000 and statutory
profit before tax of £3,005,000.
c. Net cash outflow resulting from business combinations
Total purchase consideration
Less deferred cash consideration at fair value
Cash paid to acquire Lloyds Channel Islands
Less cash held by Lloyds Channel Islands
Net cash outflow – investing activities
142
142
£’000
8,633
(308)
8,325
(3,038)
5,287
10. Business combinations continued
2020
On 28 February 2020, the Group acquired the entire share capital of Cornelian Asset Managers Group Limited (“Cornelian”), an
Edinburgh-based independent, well-established wealth manager with national distribution reach. Cornelian Asset Managers
Group Limited had two wholly owned subsidiaries: Cornelian Asset Managers Limited and Cornelian Asset Managers Nominees
Limited, which also formed part of the Group on acquisition.
The acquisition has been accounted for using the acquisition method and details of the purchase consideration are as follows:
Cash paid
Shares issued
Cash paid for final net assets acquired
Deferred contingent consideration at fair value
Total purchase consideration
Note
i
ii
iii
£’000
22,000
9,000
5,757
7,466
44,223
i.
i.
i.
The Group issued 1,690,141 ordinary shares in November 2019 to fund the cash consideration (Note 27), based on the share price on 21 November 2020 of £18.25
discounted by £0.50 to £17.75 per share.
The Group issued 453,172 ordinary shares to the previous shareholders of Cornelian Asset Managers Group Limited at a price of £19.86 per share, based on the
share price at 28 February 2020 (Note 27).
The total cash deferred contingent consideration is £8,000,000, payable in up to three instalments in March 2021, October 2021 and March 2022, based on the
future value of the funds under management acquired, and cost savings and synergies achieved on integrating the business (Note 21).
The fair value of the deferred consideration liability has been remeasured at 30 June 2020, and remains unchanged, which
assumes the deferred consideration criteria will be met resulting in the full £8,000,000 to be paid at the various payment dates.
The growth of funds under management (“FUM”) has been forecast using a similar growth pattern to that experienced by the rest
of the Group. The future value of the FUM is dependent on several unpredictable variables including client retention and market
movements. The cost savings and synergies are expected to be yielded in full, which has been forecast based on the Group’s five-
year Medium-Term Plan (“MTP”).
Client relationship intangible assets of £25,623,000 were recognised on acquisition in respect of the expected cash inflows and
economic benefit from the discretionary and fund-management contracts acquired. Goodwill of £16,111,000 was recognised on
acquisition in respect of the expected growth in the funds under management and associated cash inflows. 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 Note d below.
Directly attributable acquisition costs of £2,229,000 and integration costs, including staff retention costs of £1,426,000, were
incurred in the acquisition and integration of Cornelian, which have been charged to administrative costs in the Consolidated
statement of comprehensive income but excluded from underlying profit.
d. Net assets acquired through business combination
Computer software
Property, plant and equipment
Financial assets at fair value through profit and loss
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Total net assets recognised by acquired companies
Fair value adjustments:
Client relationship contracts – discretionary business
Client relationship contracts – fund-management business
Deferred tax liabilities
Net identifiable assets
Goodwill
Total purchase consideration
The trade and other receivables were recognised at their fair value, being the gross contractual amounts.
£’000
87
74
543
1,244
6,655
(1,229)
(17)
7,357
18,012
7,611
(4,868)
28,112
16,111
44,223
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statements continued
For the year ended 30 June 2021
Impact on reported results from date of acquisition
10. Business combinations continued
e.
In the period from acquisition to 30 June 2020, Cornelian earned revenue of £3,048,000 and statutory profit before tax of
£452,000. Had Cornelian been consolidated from 1 July 2019, the Consolidated statement of comprehensive income would show
revenue of £7,328,000 and statutory profit before tax of £1,685,000.
11. Earnings per share continued
Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average
number of shares in issue throughout the year. Diluted earnings per share represents the basic earnings per share adjusted for
the effect of dilutive potential shares issuable on exercise of employee share options under the Group’s share-based payment
schemes, weighted for the relevant period.
f. Net cash outflow resulting from business combinations
The weighted average number of shares in issue during the year was as follows:
Total purchase consideration
Less:
− Shares issued as consideration
− Deferred cash consideration at fair value
Cash paid to acquire Cornelian
Less cash held by Cornelian
Net cash outflow – investing activities
£’000
44,223
(9,000)
(7,466)
27,757
(6,655)
21,102
Weighted average number of shares in issue
Effect of dilutive potential shares issuable on exercise of employee share options
Diluted weighted average number of shares in issue
Earnings per share for the year attributable to equity holders of the Company were:
11. Earnings per share
The Directors believe that underlying earnings per share provide a truer reflection of the Group’s performance in the year.
Underlying earnings per share, which is an alternative performance measure, are calculated based on ‘underlying earnings’,
which is also an alternative performance measure and is defined as earnings before finance costs of deferred consideration,
finance income of contingent consideration, changes in the fair value of deferred and contingent consideration, gain on bargain
purchase, goodwill impairment, client relationship contracts impairment, amortisation of client relationships and contracts
acquired with fund managers, acquisition-related costs, dual running costs of operating platform and head office relocation costs.
Details of why these amounts are excluded from underlying earnings, an alternative performance measure, are described in the
Strategic report on page 38. The tax effect of these adjustments has also been considered.
Earnings for the year used to calculate earnings per share as reported in these Consolidated financial statements were as follows:
Earnings attributable to ordinary shareholders
Gain on bargain purchase
Amortisation of acquired client relationship contracts (Note 13)
Acquisition-related costs (Note 10)
Impairment of acquired client relationship contracts (Note 13)
Dual running costs of operating platform
Finance cost of deferred consideration (Note 21)
Changes in fair value of deferred consideration (Note 21)
Goodwill impairment (Note 13)
Head office relocation costs
Changes in fair value of contingent consideration (Note 17)
Amortisation of contracts acquired with fund managers (Note 13)
Finance income of contingent consideration (Note 17)
Tax impact of adjustments
Underlying earnings attributable to ordinary shareholders
2021
£’000
19,642
(4,966)
4,928
2,672
1,513
1,000
299
60
–
–
–
–
–
(760)
24,388
2020
£’000
6,426
–
2,867
4,261
–
–
145
–
4,471
1,166
54
16
(9)
(939)
18,458
2021
Number
of shares
15,671,672
50,891
15,722,563
2020
Number
of shares
14,870,729
46,052
14,916,781
2021
p
125.3
124.9
155.6
155.1
2021
£’000
4,999
3,573
8,572
2020
p
43.2
43.1
124.1
123.7
2020
£’000
4,382
3,298
7,680
Based on reported earnings:
Basic earnings per share
Diluted earnings per share
Based on underlying earnings:
Basic earnings per share
Diluted earnings per share
12. Dividends
Amounts recognised as distributions to equity holders of the Company in the year were as follows:
Final dividend paid for the year ended 30 June 2020 of 32.0p (FY19: 32.0p) per share
Interim dividend paid for the year ended 30 June 2021 of 23.0p (FY20: 21.0p) per share
Total dividends
Final dividend proposed for the year ended 30 June 2021 of 40.0p (FY20: 32.0p) per share
6,229
5,161
The interim dividend of 23.0p (FY20: 21.0p) per share was paid on 16 April 2021.
A final dividend for the year ended 30 June 2021 of 40.0p (FY20: 32.0p) per share was declared by the Board of Directors on
15 September 2021 and is subject to approval by the shareholders at the Company’s Annual General Meeting. It will be paid on
5 November 2021 to shareholders who are on the register at the close of business on 24 September 2021. In accordance with IAS 10
‘Events After the Reporting Period’, the aggregate amount of the proposed dividend expected to be paid out of retained earnings
is not recognised as a liability in these Financial statements.
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statements continued
For the year ended 30 June 2021
13. Intangible assets
Cost
At 1 July 2019
Additions
Cost of intangible assets on acquisition of subsidiary
Disposals
At 30 June 2020
Additions
Disposals
At 30 June 2021
Accumulated amortisation and impairment
At 1 July 2019
Amortisation charge
Accumulated amortisation of intangible assets on
acquisition of subsidiary
Accumulated amortisation on disposals
Impairment
At 30 June 2020
Amortisation charge
Accumulated amortisation on disposals
Impairment
At 30 June 2021
Net book value
At 1 July 2019
At 30 June 2020
At 30 June 2021
Goodwill
£’000
Computer
software
£’000
Acquired
client
relationship
contracts
£’000
Contracts
acquired with
fund
managers
£’000
35,776
16,111
–
–
51,887
–
–
51,887
6,742
–
–
–
4,471
11,213
–
–
–
11,213
29,034
40,674
40,674
8,874
1,614
1,006
(991)
10,503
3,061
(2,166)
11,398
3,192
2,444
919
(991)
–
5,564
2,754
(2,166)
–
6,152
5,682
4,939
5,246
32,161
25,623
–
–
57,784
12,227
–
70,011
16,726
2,867
–
–
–
19,593
4,928
–
1,513
26,034
15,435
38,191
43,977
3,521
–
–
–
3,521
–
–
3,521
3,505
16
–
–
–
3,521
–
–
–
3,521
16
–
–
Total
£’000
80,332
43,348
1,006
(991)
123,695
15,288
(2,166)
136,817
30,165
5,327
919
(991)
4,471
39,891
7,682
(2,166)
1,513
46,920
50,167
83,804
89,897
The amortisation charge of intangible assets is recognised within administrative costs in the Consolidated statement of
comprehensive income.
Intangible assets totalling £74,462,000 at 30 June 2021 are recognised in the United Kingdom and £15,435,000 are recognised in
the Channel Islands.
13. Intangible assets continued
a. Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (“CGUs”) that are expected to
benefit from that business combination. The carrying amount of goodwill in respect of these CGUs within the operating segments
of the Group comprises:
Funds
Braemar Group Limited (“Braemar”)
Levitas Investment Management Services Limited (“Levitas”)
International
Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald
Retirement Services (International) Limited (collectively “Brooks Macdonald International”)
Cornelian
Cornelian Asset Managers Group Limited (“Cornelian”)
Total goodwill
2021
£’000
3,320
–
3,320
2020
£’000
3,320
–
3,320
21,243
21,243
16,111
16,111
40,674
40,674
Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2021 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 and forecasts
approved by the relevant subsidiary company boards of directors. The most recent budgets prepared are part of the detailed
budget process for the year ending 30 June 2022, and then extrapolated over a longer period of the next four years, resulting
in the budgets and forecasts covering a period of five years. Cash flows are then extrapolated beyond the five-year budget and
forecast period using an expected long-term growth rate, with the long-term growth rate considered reasonable against the
budgeted and forecast growth.
The Cornelian CGU recoverable amount was calculated as £39,420,000 at 30 June 2021, indicating that there is no impairment.
The key underlying assumptions of the calculation are the discount rate, the short-term growth in earnings and the long-term
growth rate of the business. The revenue generated in the cash flow forecasts is based on FUM forecasts multiplied by the
relevant yields, with FUM growth ranging between 6% and 7% annually over the five-year period. FUM growth is forecast using
estimated new business targets, expected outflows and estimated impact of market performance. Expenditure growth is forecast
between 4% and 6% annually over the five-year period. Both the FUM growth and expenditure growth reflect historic actual
growth and planned management actions and are considered to be reasonable in the current market and industry conditions.
A pre-tax discount rate of 13% has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks
relating to Cornelian. The recoverable amount was based on the estimated cash inflows over the next five financial years, the
period covered by the most recent forecasts, which reflect planned management actions and are considered to be reasonable
in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the
long-term average growth rate for the funds and investment management industries in which the CGU operates.
Sensitivity analysis has been performed and an impairment would arise if the one of the following occurred:
• An increase of the pre-tax discount rate by 1%.
• A decrease in the perpetuity growth rate by 2%.
• A decrease in the pre-tax cash flows by 12% from the forecasts.
Based on a value-in-use calculation, the recoverable amount of the Brooks Macdonald International CGU at 30 June 2021 was
£83,061,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate,
the short-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 12% (FY20: 11%) has
been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald
146
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statements continued
For the year ended 30 June 2021
13. Intangible assets continued
International. The key input in forecasting revenue is FUM, which is forecast to grow between 12% and 17% annually over the five-
year period. FUM growth is forecast using estimated new business targets, expected outflows and estimated impact of market
performance. Annual cash inflow growth rates range between 9% and 45% over the next five financial years, the period covered
by the most recent forecasts, which reflect historic actual growth and planned management actions and are considered to be
reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the
context of the long-term average growth rate for the funds, investment management and financial planning industries in which
the CGU operates. Sensitivity analysis has not been performed given the vast headroom the recoverable amount provides over
the goodwill balance.
Based on a value-in-use calculation, the recoverable amount of the Braemar CGU at 30 June 2021 was £10,461,000, indicating that
there is no impairment. A pre-tax discount rate of 14% (FY20: 11%) has been used, based on the Group’s assessment of the risk-free
rate of interest and specific risks relating to Braemar. The key underlying assumptions of the calculation are the discount rate, the
growth in FUM of the funds business and the long-term growth rate. The revenue generated in the cash flow forecasts is based on
FUM forecasts multiplied by the relevant yields, with FUM growth ranging between 6% and 7% annually over the five-year period.
FUM growth is forecast using estimated new business targets, expected outflows and estimated impact of market performance.
Expenditure growth is forecast between 3% and 7% annually over the five-year period. The inputs to the forecast cash inflows
over the next five financial years, reflect historic actual growth and planned management activities and are considered to be
reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the
context of the long-term average growth rate for the funds industry in which the CGU operates. Sensitivity analysis has not been
performed given the vast headroom the recoverable amount provides over the goodwill balance.
At 30 June 2021, headroom exists in the calculations of the respective recoverable amounts of these CGUs over the carrying
amounts of the goodwill allocated to them. On this basis, the Directors have concluded that there is no impairment required to the
goodwill balances at 30 June 2021.
At the end of the financial year ended 30 June 2019, the Group entered into a five-year partnership agreement in relation to
Levitas that carried a lower sponsorship fee, the aim of this reduction was to enhance FUM flows and deepen the relationship
with the fund distributor. Unfortunately, for reasons beyond the Group’s control, the anticipated fund inflows were not
forthcoming and the Levitas fund recorded net outflows during the financial year ended 30 June 2020, impacting its rate of
growth and future cash flows. Based on an updated value-in-use calculation, the recoverable amount of the Levitas CGU at
30 June 2020 did not support the goodwill balance of £4,471,000 and was fully impaired.
b. Computer software
Costs incurred on internally developed computer software are initially recognised at cost and when the software is available for
use, the costs are amortised on a straight-line basis over an estimated useful life of four years.
During the year ended 30 June 2021, the Group conducted a review of the computer software assets and retired assets from the
fixed asset register with a £nil net book value, and no longer used in the business. This resulted in disposals of computer software,
with cost and accumulated amortisation both totalling £2,166,000 (2020: £991,000).
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 (6 to 20 years). During the year, the Group recognised an impairment of £1,513,000 on the
client-relationship intangible assets as the expected useful economic life was reduced from 15 to 12 years. No further impairment
indicators were present for the acquired client relationship contract intangible assets.
Of the client-relationship intangible assets held by the Group at 30 June 2021, the expected amortisation charge for the year
ending 30 June 2022 is £5,443,000. If the useful economic lives are reduced by one year, the charge would increase by £1,302,000.
During the year ended 30 June 2021, the Group acquired client relationship contracts totalling £12,227,000, as part of the Lloyds
Channel Islands acquisition (Note 10), which were recognised as separately identifiable intangible assets in the Consolidated
statement of financial position. The additions included contracts related to the Lloyds discretionary business of £9,080,000, with
a useful economic life of 15 years, and £3,147,000 related to the Cornelian funds-management business, with a useful economic
life of six years.
13. Intangible assets continued
d. Contracts acquired with fund managers
This asset represents the fair value of the future benefits accruing to the Group from contracts acquired with fund managers.
Payments made to acquire such contracts are stated at cost and amortised on a straight-line basis over an estimated useful life
of five years.
14. Property, plant and equipment
Cost
At 1 July 2019
Additions
Cost of property, plant and equipment on acquisition of subsidiary
Disposals
At 30 June 2020
Additions
Disposals
At 30 June 2021
Accumulated depreciation
At 1 July 2019
Depreciation charge
Accumulated depreciation of property, plant and equipment on
acquisition of subsidiary
Depreciation on disposals
At 30 June 2020
Depreciation charge
Depreciation on disposals
At 30 June 2021
Net book value
At 1 July 2019
At 30 June 2020
At 30 June 2021
Leasehold
improvements
£’000
Fixtures,
fittings
and office
equipment
£’000
IT equipment
£’000
3,150
1,241
19
(466)
3,944
434
(1,748)
2,630
1,420
1,072
19
(466)
2,045
476
(1,748)
773
1,730
1,899
1,857
8,305
328
104
(7,720)
1,017
29
(322)
724
7,942
317
102
(7,720)
641
104
(322)
423
363
376
301
3,334
389
195
(1,436)
2,482
157
(697)
1,942
2,250
639
123
(1,436)
1,576
465
(697)
1,344
1,084
906
598
Total
£’000
14,789
1,958
318
(9,622)
7,443
620
(2,767)
5,296
11,612
2,028
244
(9,622)
4,262
1,045
(2,767)
2,540
3,177
3,181
2,756
During the year ended 30 June 2021, the Group conducted a review of the property, plant and equipment assets and retired assets
from the fixed asset register with a £nil net book value, and no longer used in the business. This resulted in disposals of property,
plant and equipment with cost and accumulated depreciation both totalling £2,767,000.
Property, plant and equipment totalling £2,331,000 at 30 June 2021 are recognised in the United Kingdom and £425,000 are
recognised in the Channel Islands.
148
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statements continued
For the year ended 30 June 2021
15. Right-of-use assets
Cost
At 1 July 2019
Additions
At 30 June 2020
Additions
At 30 June 2021
Accumulated depreciation
At 1 July 2019
Depreciation charge
At 30 June 2020
Depreciation charge
At 30 June 2021
Net book value
At 1 July 2019
At 30 June 2020
At 30 June 2021
Property
£’000
1,799
6,692
8,491
601
9,092
244
1,256
1,500
1,613
3,113
1,555
6,991
5,979
The additions relate to three additional leases that commenced during the year ended 30 June 2021. The Group’s right-of-use
assets relates solely to property-related leases.
Right-of-use assets totalling £5,498,000 at 30 June 2021 are recognised in the United Kingdom and £481,000 are recognised in the
Channel Islands.
16. Financial assets at fair value through other comprehensive income
At 1 July
Change in fair value
At 30 June
2021
£’000
500
–
500
2020
£’000
500
–
500
At 30 June 2021, the Group held an investment of redeemable £500,000 preference shares in an unlisted company incorporated
in the UK. The preference shares previously carried an entitlement to a fixed preferential dividend at a rate of 8% per annum,
which reduced to 4% per annum in April 2021 following the renewal of the preference shares. Unlisted preference shares are
classified as financial assets at fair value through other comprehensive income.
The table below provides an analysis of the financial assets and liabilities that, subsequent to initial recognition, are measured
at fair value. These are grouped into the following levels within the fair value hierarchy, based on the degree to which the inputs
used to determine the fair value are observable:
• Level 1 – derived from quoted prices in active markets for identical assets or liabilities at the measurement date;
• Level 2 – derived from inputs other than quoted prices included within Level 1 that are observable, either directly or
indirectly; and
• Level 3 – derived from inputs that are not based on observable market data.
16. Financial assets at fair value through other comprehensive income continued
Financial assets
At 1 July 2020
Net gain from changes in fair value
At 30 June 2021
Comprising:
Financial assets at fair value through other comprehensive income
Financial assets at fair value through profit and loss (Note 17)
Total financial assets
Level 1
£’000
Level 2
£’000
Level 3
£’000
549
75
624
–
624
624
–
–
–
–
–
–
500
–
500
500
–
500
Total
£’000
1,049
75
1,124
500
624
1,124
The Level 3 assets include unlisted preference shares that are valued using a perpetuity income model, based upon the
preference dividend cash flows. The fair value of the assets are not deemed to be impacted by changes in the unobservable
inputs as the dividend cash flows are contractual.
Financial liabilities
At 1 July 2020
Additions
Finance cost of deferred consideration
Fair value adjustments
Payments made
At 30 June 2021
Comprising:
Deferred consideration (Note 21)
Total financial liabilities
Level 1
£’000
Level 2
£’000
Level 3
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,991
308
299
60
(2,421)
6,237
6,237
6,237
Total
£’000
7,991
308
299
60
(2,421)
6,237
6,237
6,237
The Level 3 financial liabilities consist of deferred consideration, valued using the net present value of the expected future
amounts payable. The key inputs are management approved forecasts and expectations against the criteria of the deferred
consideration to set expectations of future amounts payable. The deferred consideration is reviewed and revalued at regular
intervals over the deferred consideration period (Note 21). The fair value is sensitive to the change in management approved
forecasts; however, at each reporting date, the relevant management approved forecasts are deemed to be the most accurate and
relevant input to the fair value measurement.
17. Financial assets at fair value through profit or loss
At 1 July
Additions
Finance income of contingent consideration
Loss from changes in fair value of contingent consideration receivable
Net gain from changes in fair value
Payments received
At 30 June
2021
£’000
549
–
–
–
75
–
624
2020
£’000
613
543
9
(54)
6
(568)
549
During the year ended 30 June 2020, the Group acquired Cornelian Asset Managers Group Limited (see Note 10). On acquisition,
Cornelian Asset Managers Group Limited held 500,000 shares in five of the SVS Cornelian Risk Managed Passive Funds, totalling
£543,000 on acquisition. During the year ended 30 June 2021, the Group recognised a gain on these investments of £75,000. The
Group’s holding in the SVS Cornelian Risk Managed Passive Funds at 30 June 2021 was £624,000.
150
150
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statements continued
For the year ended 30 June 2021
18. Deferred income tax
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.
18. Deferred income tax continued
Deferred tax assets
Deferred tax assets to be settled after more than one year
Deferred tax assets to be settled within one year
Total deferred tax assets
Deferred tax liabilities
Deferred tax liabilities to be settled after more than one year
Deferred tax liabilities to be settled within one year
Total deferred tax liabilities
The gross movement on the deferred income tax account during the year was as follows:
At 1 July
Additional liability on acquisition of client-relationship intangible assets (Note 10)
Adjustment on acquisition of business combination
(Charge)/credit to the Consolidated statement of comprehensive income
Credit recognised in equity
At 30 June
The change in deferred income tax assets and liabilities during the year was as follows:
2021
£’000
2,022
714
2,736
(8,022)
(880)
(8,902)
2021
£’000
(5,706)
(1,219)
(21)
(110)
890
(6,166)
Deferred tax assets
At 1 July 2019
Adjustment on acquisition of business combination
Credit/(charge) to the Consolidated statement of
comprehensive income
Credit to equity
At 30 June 2020
Adjustment on acquisition of business combination
Under provision in prior years charged to the
Consolidated statement of comprehensive income
Credit/(charge) to the Consolidated statement of
comprehensive income
Credit to equity
At 30 June 2021
Share-based
payments
£’000
Trading
losses carried
forward
£’000
Dilapidations
£’000
Accelerated
capital
allowances
£’000
620
–
247
22
889
–
–
77
890
1,856
499
–
(42)
–
457
–
–
184
–
641
–
–
–
–
–
–
44
(15)
–
29
104
(17)
91
–
178
(21)
–
53
–
210
2020
£’000
430
1,094
1,524
(6,463)
(767)
(7,230)
2020
£’000
(1,055)
(4,868)
(17)
212
22
(5,706)
Total
£’000
1,223
(17)
296
22
1,524
(21)
44
299
890
2,736
The carrying amount of the deferred tax asset is reviewed at each reporting date and is only recognised to the extent that it is
probable that future taxable profits of the Group will allow the asset to be recovered.
Deferred tax liabilities
At 1 July 2019
Additional liability on acquisition of client-relationship intangible assets
Credit to the Consolidated statement of comprehensive income
Under provision in prior years charged to the Consolidated statement of
comprehensive income
At 30 June 2020
Additional liability on acquisition of client-relationship intangible assets (Note 10)
Under provision in prior years charged to the Consolidated statement of
comprehensive income
(Credit)/charge to the Consolidated statement of comprehensive income
At 30 June 2021
19. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Total current trade and other receivables
Accelerated
capital
allowances
on research &
development
£’000
Intangible
asset
amortisation
£’000
–
–
(154)
462
308
–
–
160
(16)
452
2,278
4,868
(224)
–
6,922
1,219
309
8,450
2021
£’000
1,820
447
26,182
28,449
Total
£’000
2,278
4,868
(378)
462
7,230
1,219
160
293
8,902
2020
£’000
1,184
1,054
23,843
26,081
The credit risk balance is immaterial in relation to trade receivables, refer to Note 30c. for details on the credit risk assessment.
Accrued income includes portfolio management fee income for the quarter ended 30 June 2021, outstanding at the Consolidated
statement of financial position date.
During the year ended 30 June 2021, the Group completed the Lloyds Channel Islands acquisition (Note 10). On acquisition,
Lloyds Investment Fund Managers Limited (renamed Brooks Macdonald International Fund Managers Limited following
acquisition), held investment positions in the underlying recognised funds, totalling £4,000, recognised in other receivables.
Investment positions in recognised funds are a standard amount of shares per fund that Brooks Macdonald International Fund
Managers Limited holds to facilitate daily shares and redemptions by the unit holders. The requirement to advise the custodian
of shares to be created or cancelled within two hours of the valuation point, which is generally before the dealing prices for the
day have been released, results in Brooks Macdonald International Fund Managers Limited holding shares. The value of the
investment positions in the recognised funds at 30 June 2021 was £286,000, with an equal and opposite balance recognised in
other payables.
20. Cash and cash equivalents
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.
21. Deferred consideration
Deferred consideration payable is split between non-current liabilities and current liabilities to the extent that it is due for
payment within one year of the reporting date. It reflects the Directors’ best estimate of amounts payable in the future in respect
of certain client relationships and subsidiary undertakings that were acquired by the Group. Deferred consideration is measured
at its fair value based on discounted expected future cash flows. The movements in the total deferred consideration balance
during the year were as follows:
152
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Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
21. Deferred consideration continued
23. Provisions
At 1 July
Additions
Finance cost of deferred consideration
Fair value adjustments
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
2021
£’000
7,991
308
299
60
(2,421)
6,237
5,934
303
6,237
2020
£’000
1,299
7,466
145
–
(919)
7,991
1,691
6,300
7,991
During the year ended 30 June 2021, the Group completed the Lloyds Channel Islands acquisition (Note 10) and part of the
consideration is to be deferred over a period of two years. The total cash deferred consideration of £334,000 was recognised at
its fair value of £308,000 on acquisition. The deferred consideration is payable in December 2022 based on the future revenue
generated by the discretionary business acquired. Since acquisition to 30 June 2021, the Group recognised a finance cost of
£7,000 on the Lloyds Channel Islands acquisition deferred consideration. The fair value of the Lloyds Channel Islands acquisition
deferred consideration at 30 June 2021 was £315,000.
During the year ended 30 June 2021, the fair value of the estimated deferred consideration for Cornelian Asset Managers Group
Limited (Note 10) was revalued by £60,000 due to a change in the estimated timing of when the consideration will be payable.
During the year ended 30 June 2021, the Group revalued the deferred consideration by £60,000 due to a change in the estimated
timing of when the consideration will be payable and paid £2,000,000 to the vendors of Cornelian. During the year ended
30 June 2021, the Group recognised a finance cost of £286,000 in relation to the Cornelian deferred consideration. The fair value
of the Cornelian deferred consideration at 30 June 2021 was £5,922,000 (FY20: £7,576,000).
During the year ended 30 June 2021, the final payment was made in relation to the acquisition of Levitas totalling £421,000
(FY20: £919,000). Full details of the Levitas acquisition are disclosed in Note 13 of the 2015 Annual Report and Accounts. The fair
value of the Levitas deferred consideration at 30 June 2021 was £nil.
Deferred consideration is classified as Level 3 within the fair value hierarchy, as defined in Note 16.
22. Lease liabilities
At 1 July 2019
Additions
Payments made against lease liabilities
Interest on lease liabilities
At 30 June 2020
Additions
Payments made against lease liabilities
Interest on lease liabilities
At 30 June 2021
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total lease liabilities
£’000
1,799
7,865
(2,034)
304
7,934
585
(1,969)
319
6,869
1,447
5,422
6,869
At 1 July 2019
Charge to the Consolidated statement of
comprehensive income
Additions on acquisition of subsidiary
Utilised during the year
At 30 June 2020
Charge to the Consolidated statement of
comprehensive income
Utilised during the year
At 30 June 2021
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total provisions
Exceptional
costs of
resolving
legacy
matters
£’000
701
Client
compensation
£’000
100
FSCS levy
£’000
928
Leasehold
dilapidations
£’000
366
266
–
(328)
38
347
(385)
–
–
–
–
–
–
(93)
608
–
(8)
600
600
–
600
2,171
–
(1,598)
1,501
2,218
(2,474)
1,245
1,245
–
1,245
381
103
(470)
380
136
(103)
413
134
279
413
Total
£’000
2,095
2,818
103
(2,489)
2,527
2,701
(2,970)
2,258
1,979
279
2,258
a. Client compensation
Client compensation provisions relate to the potential liability arising from client complaints against the Group. Complaints are
assessed on a case-by-case basis and provisions for compensation are made where judged necessary. The amount recognised
within provisions for client compensation represents management’s best estimate of the potential liability. The timing of the
corresponding outflows is uncertain as these are made as and when claims arise.
b. Exceptional costs of resolving legacy matters
Following a review into legacy matters arising from the former Spearpoint business, which was acquired by the Group in 2012,
a provision was recognised for costs of resolving these including associated expenses in the years ended 30 June 2017 and
30 June 2018. These matters relate to a number of discretionary portfolios formerly managed by Spearpoint, now managed
by Brooks Macdonald Asset Management (International) Limited, and a Dublin-based fund, for which Spearpoint acted as
investment manager. The amount utilised during the year represented a goodwill payment made to a client of £8,000. The
amount remaining at 30 June 2021 of £600,000 relates to the remaining goodwill offers yet to be accepted by clients. During the
year ended 30 June 2020, a contingent liability was recognised in relation to potential claims related to the legacy matters (Note
32), which is still recognised as at 30 June 2021.
c. FSCS levy
Following confirmation by the FSCS in April 2021 of its final industry levy for the 2021/22 scheme year, the Group has made a
provision of £1,245,000 (FY20: £1,501,000) for its estimated share.
d. Leasehold dilapidations
Leasehold dilapidations relate to dilapidation provisions expected to arise on leasehold premises held by the Group, and monies
due under the contract with the assignee of leases on the Group’s leased properties.
The additions relate to additional property-related leases that commenced during the year ended 30 June 2021.
154
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statements continued
For the year ended 30 June 2021
24. Trade and other payables
Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
Total trade and other payables
2021
£’000
4,758
5,744
1,115
15,438
27,055
2020
£’000
4,573
6,070
51
12,071
22,765
Included within accruals and deferred income is an accrual of £508,000 (FY20: £306,000) in respect of employer’s National
Insurance contributions arising from share option awards under the LTIS (Note 29b). 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 29).
25. Other non-current liabilities
At 1 July
Additional liability in respect of share option awards
Transfer to current liabilities
At 30 June
2021
£’000
330
384
(166)
548
2020
£’000
714
193
(577)
330
Other non-current liabilities include employer’s National Insurance contributions arising from share option awards under the
LTIS and LTIP schemes. During the year, an additional liability was recognised during the year of £384,00 (FY20: £193,000)
in respect of existing awards, granted in previous years, that are expected to vest in the future. During the year, an amount of
£166,000 (FY20: £577,000) was transferred to current liabilities, reflecting awards that are expected to vest within the next 12
months. At 30 June 2021, the non-current liability for employer’s National Insurance contributions arising from share option
awards under the LTIS and LTIP schemes was £548,000 (FY20: £330,000).
26. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Adjustments for:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Other losses/(gains) – net
(Increase)/decrease in receivables
Increase/(decrease) in payables
(Decrease)/increase in provisions
Increase/(decrease) in other non-current liabilities
Share-based payments charge
Net cash inflow from operating activities
2021
£’000
20,756
7,682
1,045
1,614
1,438
(2,333)
3,765
(269)
218
2,991
36,907
20201
£’000
10,245
5,327
2,028
1,256
4,519
2,642
(202)
431
(384)
3,571
29,433
1. The cash held by subsidiary entities acquired has been recognised in cash flows from investing activities on the Consolidated statement of cash flows. In the
prior year, this had been classified as cash generated from operations and therefore has been changed to reflect the correct classification. The changes made to
the prior year numbers are that acquisition of subsidiaries, net of cash acquired has been increased by £6,655,000, working capital movement in receivables has
been increased by £1,948,000, working capital movement in payables has been reduced by £1,246,000 and net assets acquired in business combination has been
decreased by £7,357,000.
27. Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
At 1 July 2019
Shares issued:
− on placing
− as consideration
− on exercise of options
− to Sharesave Scheme
At 30 June 2020
Shares issued:
− on exercise of options
− to Sharesave Scheme
At 30 June 2021
Exercise
price
p
–
–
1,381.0 – 1,725.0
1,400.0 – 1,738.0
1,629.8 – 2,260.0
1,600.0 – 2,300.0
Number of
shares
13,950,071
1,690,141
453,172
25,862
7,856
16,127,102
7,976
46,060
16,181,138
Share
capital
£’000
139
17
5
–
–
161
–
–
161
Share
premium
account
£’000
39,068
29,387
8,995
424
108
77,982
65
656
78,703
Total
£’000
39,207
29,404
9,000
424
108
78,143
65
656
78,864
The total number of ordinary shares issued and fully paid at 30 June 2021 was 16,181,138 (FY20: 16,127,102) with a par value of
1p per share.
On 27 November 2019, the Group issued 1,690,141 ordinary shares by way of a non-pre-emptive placing for non-cash
consideration. The shares were placed at an equivalent of 1,775p per share, which raised £29,404,000, net of £600,000 share issue
costs, offset against share premium arising on the issue. The shares were issued to fund the acquisition of Cornelian (Note 10).
In addition, on 28 February 2020, the Group issued 453,172 ordinary shares to the previous shareholders of Cornelian Asset
Managers Group Limited as non-cash consideration for the acquisition. The non-cash consideration of £9,000,000 was
calculated at an equivalent of 1,986p per share in accordance with the Sale and Purchase Agreement.
There was £nil share capital issued on exercise of options and to Sharesave Scheme members in the year ended 30 June 2021
(FY20: £nil).
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, see Note 29b. At 30 June 2021, the EBT held 608,516
(FY20: 409,163) 1p ordinary shares in the Company, acquired for a total consideration of £11,000,000 (FY20: £7,519,000) with a
market value of £13,908,000 (FY20: £6,800,000). They are classified as treasury shares in the Consolidated statement of financial
position, their cost being deducted from retained earnings within shareholders’ equity.
28. Other reserves and retained earnings
Other reserves comprise the following balances:
Share option reserve
Merger reserve
Total other reserves
2021
£’000
8,275
192
8,467
2020
£’000
6,206
192
6,398
a. Share option reserve
The share option reserve represents the cumulative charge to the Consolidated statement of comprehensive income for the
Group’s equity-settled share-based payment schemes, as described in Note 29.
b. Merger reserve
The merger reserve arises when the consideration and nominal value of the shares issued during a merger and the fair value of
assets transferred during the business combination differ.
156
156
157
157
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
28. Other reserves and retained earnings continued
The movements in other reserves during the year were as follows:
29. Equity-settled share-based payments continued
The exercise price and fair value of share options granted during the year was as follows:
At beginning of the year
Share-based payments
Transfer to retained earnings
Tax credit on share-based payments
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
Transfer from share option reserve
Purchase of own shares by Employee Benefit Trust
Dividends paid
At end of the year
2021
£’000
6,206
2,991
(1,812)
890
8,275
2021
£’000
39,000
19,642
1,812
(5,210)
(8,572)
46,672
2020
£’000
4,383
3,571
(1,770)
22
6,206
2020
£’000
43,091
6,426
1,770
(4,607)
(7,680)
39,000
29. Equity-settled share-based payments
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 annualised volatility of up to
50%, covering the period to the end of the contractual life. Volatility has been estimated on the basis of the Company’s historical
share price 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 between seven months and five years, ranging from 0.01% to 2.00%. No options outstanding at 30 June 2021 (FY20:
none) carry any dividend or voting rights.
The share options in issue under the various equity-settled share-based payment schemes have been valued at prices ranging
from £2.31 to £20.96 per share. The charge to the Consolidated statement of comprehensive income for the year in respect of
these was £2,991,000 (FY20: £3,952,000). The weighted average remaining contractual life of all equity-settled share-based
payment schemes at 30 June 2021 was 1.52 years (FY20: 1.88 years). The weighted average share price of all options exercised
during the year was £16.59 (FY20: £19.86).
A summary of the inputs into the fair value calculations for options granted during the year is set out below.
Grant date
Share price at grant £
Vesting period
Volatility %
Annual dividend %
Risk-free rate %
Option value £
Long-Term
Incentive
Plan
Various
14.00–19.50
9–48 months
29–46%
2.62–3.72%
-0.08–0.62%
12.41–19.22
Save As
You Earn
(SAYE)
11/05/2021
20.10
36 months
37%
2.54%
0.14%
5.29
Long-Term Incentive Plan
Employee Sharesave Scheme
Exercise
price
£
–
17.04
Fair
value
£
12.41 – 19.22
5.29
Number
of options
240,965
55,346
At the end of the period, amounts totalling £2,487,000 (FY20: £1,079,000) had vested and were eligible for exercise by
scheme participants.
a. Long-Term Incentive Plan
The Long-Term Incentive Plan was approved by shareholders at the 2018 Annual General Meeting and encompasses annual
deferral of bonuses into a Deferred Bonus Plan (“DBP”), Long-Term Incentive Plan (“LTIP”) awards made to senior management
and Exceptional Share Option Awards (“ESOA”). Certain ESOA grants carry performance conditions. All awards are subject to
continued employment and are made at the discretion of the Remuneration Committee. No awards expired during the year
(FY20: none).
At 1 July
Awarded in the year
Exercised in the year
Forfeited in the year
At 30 June
2021
2020
Weighted
average
exercise price
£
–
–
–
–
–
Number of
options
658,468
240,965
(46,713)
(46,663)
806,057
Weighted
average
exercise price
£
–
–
–
–
–
Number of
options
492,560
270,760
(24,961)
(79,891)
658,468
i. Deferred Bonus Plan (“DBP”) Awards
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2018
2019
2020
All years
Exercise
price
£
Vesting
period
2021
Number of
options
2020
Number of
options
–
–
–
2019 – 2021
2020 – 2022
2021 – 2023
55,286
55,823
70,365
181,474
73,995
75,810
–
149,805
ii. Long-Term Incentive Plan (“LTIP”) Awards
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2018
2019
2020
All years
Exercise
price
£
–
–
–
Vesting
period
2021
2022
2023
2021
Number of
options
2020
Number of
options
29,300
26,352
33,974
89,626
29,300
26,352
–
55,652
158
158
159
159
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
29. Equity-settled share-based payments continued
iii. Exceptional Share Option Awards (“ESOA”)
The number of share options outstanding at the reporting date was as follows:
Financial year of grant
2019
2020
2021
All years
Exercise
price
£
Vesting
period
2021
Number of
options
2020
Number of
options
–
–
–
2019 – 2024
2020 – 2024
2021 – 2024
246,802
160,283
133,579
540,664
297,652
155,449
–
453,101
b. Long-Term Incentive Scheme (“LTIS”)
The Group made no new awards under the LTIS during the year. The existing 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.
No awards expired during the year (FY20: none). The off-cycle awards made in 2017 and 2018 were to two senior Executives to
replace awards forfeited from previous employers.
At 1 July
Exercised in the year
Forfeited in the year
At 30 June
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2010
2011
2012
2013
2014
2015
2016
2017 (off-cycle)
2017
2018 (off-cycle)
All years
Exercise
price
£
–
–
–
–
–
–
–
–
–
–
Vesting
period
2013
2014
2015
2016
2017
2018
2019
2020
2020
2019 – 2020
2021
Number of
options
2020
Number of
options
123,846
(41,915)
(38,591)
43,340
209,216
(78,635)
(6,735)
123,846
2021
Number of
options
2020
Number of
options
–
–
552
1,230
4,037
6,737
8,680
–
6,001
16,103
43,340
–
–
552
5,021
8,855
10,173
16,502
–
66,214
16,529
123,846
At 30 June 2021, options for schemes up to and including the 2018 scheme have vested and are able to be exercised.
29. Equity-settled share-based payments continued
c. Employee Benefit Trust (“EBT”)
Brooks Macdonald Group plc established an Employee Benefit Trust on 3 December 2010 to acquire ordinary shares in the
Company to satisfy awards under the LTIS and LTIP. All finance costs and administration expenses connected with the EBT are
charged to the Consolidated statement of comprehensive income as they accrue. The EBT has waived its rights to dividends. The
following table shows the number of shares held by the EBT that have not yet vested unconditionally.
At 1 July
Acquired in the year
Exercised in the year
At 30 June
2021
Number of
shares
409,163
288,148
(88,795)
608,516
2020
Number of
shares
268,045
244,714
(103,596)
409,163
d. Company Share Option Plan (“CSOP”)
The Company has established a Company Share Option Plan, which was approved by HMRC in November 2013. The CSOP 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 per
recipient. The performance conditions attached to the scheme require 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.
2021
2020
At 1 July
Exercised in the year
Forfeited in the year
At 30 June
Number of
options
40,503
(9,115)
(5,024)
26,364
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2013
2014
2015
2016
2017 (off-cycle)
2017
All years
Exercise
price
£
14.52
13.81
17.19
17.25
20.11
19.66
Weighted
average
exercise
price
£
16.92
16.00
18.99
16.67
Vesting
period
2016
2017
2018
2019
2020
2020
Weighted
average
exercise
price
£
16.76
16.39
16.78
16.92
2020
Number of
options
4,134
4,349
16,678
9,914
1,491
3,937
40,503
Number of
options
73,497
(25,862)
(7,132)
40,503
2021
Number of
options
–
4,349
13,377
6,868
279
1,491
26,364
At 30 June 2020, options for the 2015 scheme have vested and are able to be exercised. The off-cycle award was issued in August
2017 to one member of senior management and vests in August 2020. No awards expired during the year (FY20: none).
160
160
161
161
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
29. Equity-settled share-based payments continued
e. Employee Sharesave Scheme (“SAYE”)
Under the scheme, employees can contribute up to £500 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.
2021
2020
At 1 July
Granted in the year
Exercised in the year
Forfeited in the year
At 30 June
Number of
options
289,849
55,346
(44,921)
(51,884)
248,390
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2017
2018
2019
2020
2021
All years
Exercise
price
£
17.38
14.94
14.00
11.72
17.04
Weighted
average
exercise
price
£
12.73
17.04
14.60
13.71
13.15
Vesting
period
2020
2021
2022
2023
2024
Weighted
average
exercise
price
£
14.79
11.72
14.70
14.68
12.73
Number of
options
204,117
198,276
(7,856)
(104,688)
289,849
2021
Number of
options
2020
Number of
options
–
2,189
24,006
167,060
55,135
248,390
12,641
44,370
34,562
198,276
–
289,849
At 30 June 2020, options for the 2016 scheme have vested and are able to be exercised. 6,326 awards under the 2016, 2017 and
2018 schemes expired during the year (FY20: none).
30. Financial risk management
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 balances available on demand.
At 30 June 2021
Cash flows from financial assets
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
profit or loss
Cash and balances at bank
Trade receivables
Other receivables
Cash flows from financial liabilities
Trade payables
Other financial liabilities
Not more
than
3 months
£’000
After
3 months but
not more
than 1 year
£’000
After
1 year but
not more
than 6 years
£’000
No fixed
payment
date
£’000
On
demand
£’000
–
–
–
54,899
–
–
54,899
–
–
–
–
–
1,820
26,629
28,449
(4,758)
(23,007)
(27,765)
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,650)
(8,650)
–
(6,552)
(6,552)
500
624
–
–
–
1,124
–
–
–
Total
£’000
500
624
54,899
1,820
26,629
84,472
(4,758)
(38,209)
(42,967)
Net liquidity gap
54,899
684
(8,650)
(6,552)
1,124
41,505
At 30 June 2020
Cash flows from financial assets
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
profit or loss
Cash and balances at bank
Trade receivables
Other receivables
Cash flows from financial liabilities
Trade payables
Other financial liabilities
–
–
–
50,168
–
–
50,168
–
–
–
–
–
1,181
24,897
26,078
(4,573)
(18,605)
(23,178)
–
–
–
3
–
3
–
–
–
–
–
–
–
(4,861)
(4,861)
–
(13,508)
(13,508)
500
549
–
–
–
1,049
–
–
–
500
549
50,168
1,184
24,897
77,298
(4,573)
(36,974)
(41,547)
Net liquidity gap
50,168
2,900
(4,858)
(13,508)
1,049
35,751
162
162
163
163
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
30. Financial risk management continued
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 £549,000 (FY20: £502,000). 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 and other financial assets, which are measured at fair value in the Consolidated statement of financial position
(Notes 16 and 17). A 1% fall in the value of these financial instruments would have the impact of reducing total comprehensive
income by £23,000 (FY20: £27,000). An increase of 1% would have an equal and opposite effect.
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 2021,
there was no significant concentration of credit risk in any particular counterparty (FY20: none).
Assets exposed to credit risk recognised on the Consolidated statement of financial position total £54,899,000
(FY20: £50,168,000), being the Group’s total cash and cash equivalents.
Trade receivables with a carrying amount of £1,820,000 (FY20: £1,184,000) 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 one year (FY20: one year).
31. 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 2021 was £134,003,000 (FY20: £123,541,000). 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 that 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 2020 ICAAP
will be approved in December 2020. 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.
32. Guarantees and contingent liabilities
In the normal course of business, the Group is exposed to certain legal issues which, in the event of a dispute, could develop
into litigious proceedings and, in some cases, may result in contingent liabilities. Similarly, a contingent liability may arise in the
event of a finding in respect of the Group’s tax affairs, including the accounting for VAT, which could result in a financial outflow
and/or inflow from the relevant tax authorities.
A claim for unspecified losses has been made by a client against Brooks Macdonald Financial Consulting Limited, a subsidiary
of the Group, in relation to alleged negligent financial advice. The claimant has not yet advised the quantum of their claim so it is
not possible to reliably estimate the potential impact of a ruling in their favour. There remains significant uncertainty surrounding
the claim and the Group’s legal advice indicates that it is not probable that the claim will be upheld; therefore, no provision for any
liability has been recognised at this stage.
Brooks Macdonald Asset Management Limited, a subsidiary company of the Group, 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.
During the prior year ended 30 June 2020, a small number of clients rejected goodwill offers made by Brooks Macdonald Asset
Management (International) Limited in connection with the exceptional costs of resolving legacy matters (Note 23b), which
were released from the provision. It is possible that one or more of these clients might issue claims against Brooks Macdonald
Asset Management (International) Limited but no such claims have been issued as at 30 June 2021. As a result, it is not possible to
estimate the potential outcome of claims or to assess the quantum of any liability with any certainty at this stage.
33. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, are eliminated on consolidation. The
Company’s individual financial statements include the amounts attributable to subsidiaries. These amounts are disclosed in
aggregate in the relevant company financial statements and in detail in the following table:
Brooks Macdonald Asset Management Limited
Brooks Macdonald Asset Management (International) Limited
Brooks Macdonald Retirement Services (International) Limited
Brooks Macdonald Financial Consulting Limited
All of the above amounts are interest-free and repayable on demand.
Amounts owed by
related parties
Amounts owed to
related parties
2021
£’000
–
246
–
–
2020
£’000
–
14
29
–
2021
£’000
–
–
–
2,753
2020
£’000
22,641
–
–
2,638
164
164
165
165
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the consolidated financial
statements continued
For the year ended 30 June 2021
34. Interest in unconsolidated structured entities
Structured entities are those entities that have been designed so that voting or similar rights are not the dominant factor in
deciding who has control, such as when any voting rights relate to administrative tasks only, or when the relevant activities are
directed by means of contractual arrangements. The Group’s interests in consolidated and unconsolidated structured entities
are described below.
The only consolidated structured entity is the Brooks Macdonald Group Employee Benefit Trust, details of which are given
in Note 27.
The Group has interests in structured entities as a result of contractual arrangements arising from the management of assets on
behalf of its clients. Assets under management within the UK Investment Management segment include those managed within
structured entities. These structured entities consist of unitised vehicles such as OEICs, which entitle investors to a percentage
of the vehicle’s net asset value. The structured entities are financed by the purchase of units or shares by investors. As fund
manager, the Group does not guarantee returns on its funds or commit to financially support its funds. Where external finance
is raised, the Group does not provide a guarantee for the repayment of any borrowings. The business activity of all structured
entities, in which the Group has an interest, is the management of assets in order to maximise investment returns for investors
from capital appreciation and/or investment income. The Group earns a management fee from its structured entities, based on a
percentage of the entity’s net asset value.
The funds under management of unconsolidated structured entities total £2.076bn (FY20: £2.051bn). Included in revenue on
the Consolidated statement of comprehensive income is management fee income of £15,353,000 (FY20: £8,644,000) from
unconsolidated structured entities managed by the Group.
35. Events since the end of the year
No material events have occurred between the reporting date and the date of signing the Financial statements.
Financial statements
Company financial
statements
166166
Contents
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the Company financial statements
168
169
170
171
Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021 Company statement of financial position
As at 30 June 2021
Company statement of changes in equity
For the year ended 30 June 2021
Assets
Non-current assets
Intangible assets
Investment in subsidiaries
Financial assets at fair value through other comprehensive income
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
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred consideration
Total current liabilities
Net assets
Equity
Share capital
Share premium account
Share option reserve
Retained earnings
Total equity
Note
2021
£’000
2020
£’000
40
41
42
43
44
45
44
47
47
441
96,258
500
97,199
270
7,996
8,266
951
119,047
500
120,498
75
13,628
13,703
105,465
134,201
–
–
(6,300)
(6,300)
(3,830)
(5,922)
(9,752)
(26,222)
(1,691)
(27,913)
95,713
99,988
161
78,703
6,501
10,348
95,713
161
77,982
6,501
15,344
99,988
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own Statement of
comprehensive income for the year ended 30 June 2021. Brooks Macdonald Group plc reported profit after tax for the year ended
30 June 2021 of £8,786,000 (FY20: £12,696,000).
The Company financial statements were approved by the Board of Directors and authorised for issue on 15 September 2021, and
signed on their behalf by:
Andrew Shepherd
CEO
Company registration number: 4402058
Ben Thorpe
Chief Financial Officer
The accompanying notes on pages 171 to 177 form an integral part of the Company financial statements.
Balance at 1 July 2019
Comprehensive income
Profit for the year
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
Dividends paid
Total transactions with owners
Balance at 30 June 2020
Comprehensive income
Profit for the year
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Purchase of own shares by Employee Benefit Trust
Dividends paid
Total transactions with owners
Note
38
39
38
39
Share
capital
£’000
139
Share
premium
account
£’000
39,068
Share option
reserve
£’000
4,682
Retained
earnings
£’000
14,480
Total
£’000
58,369
–
–
22
–
–
–
–
22
–
–
–
–
12,696
12,696
12,696
12,696
38,914
–
–
–
–
38,914
–
2,274
(455)
–
–
1,819
–
–
455
(4,607)
(7,680)
(11,832)
38,936
2,274
–
(4,607)
(7,680)
28,923
161
77,982
6,501
15,344
99,988
–
–
–
–
–
–
–
–
721
–
–
721
–
–
–
–
–
–
8,786
8,786
8,786
8,786
–
(5,210)
(8,572)
(13,782)
721
(5,210)
(8,572)
(13,061)
Balance at 30 June 2021
161
78,703
6,501
10,348
95,713
The accompanying notes on pages 171 to 177 form an integral part of the Company financial statements.
168
168
169
169
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021
Company statement of cash flows
For the year ended 30 June 2021
Cash flow from operating activities
Cash generated from operations
Tax refund
Net cash generated from operating activities
Cash flows from investing activities
Investment in subsidiaries
Finance income
Deferred consideration paid
Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of shares
Shares issued as consideration
Purchase of own shares by Employee Benefit Trust
Dividends paid to shareholders
Net cash (used)/generated in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
46
41
44
47
39
2021
£’000
9,820
–
9,820
–
30
(2,421)
(2,391)
721
–
(5,210)
(8,572)
(13,061)
2020
£’000
15,931
106
16,037
(30,257)
17
(919)
(31,159)
38,936
(9,000)
(4,607)
(7,680)
17,649
(5,632)
2,527
13,628
7,996
11,101
13,628
The accompanying notes on pages 171 to 177 form an integral part of the Company financial statements.
Notes to the Company financial
statements
For the year ended 30 June 2021
36. Principal accounting policies
General information
Brooks Macdonald Group plc (“Company”) is the Parent Company of a group of companies. The Company is a public limited
company, incorporated and domiciled in the United Kingdom under the Companies Act 2006 and listed on AIM. The address of
its registered office is 21 Lombard Street, London, EC3V 9AH.
Statement of compliance
As a result of the UK leaving the European Union on 31 December 2020, the individual Financial statements of the Company for the
year ended 30 June 2021 have now been prepared under International Accounting Standards in conformity with the Companies
Act 2006. This has not had any impact on the recognition, measurement or disclosure in these Consolidated financial statements.
Developments in reporting standards and interpretations
Developments in reporting standards and interpretations are set out in Note 2c to the Consolidated financial statements.
The principal accounting policies adopted are set out below:
a. Basis of preparation
The Financial statements have been prepared on the historical cost basis, except for the revaluation of financial assets at fair
value through other comprehensive income, financial assets at fair value through profit and loss and deferred consideration such
that they are measured at their fair value.
At the time of approving the Financial statements, the Directors have a reasonable expectation that the Company 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.
Intangible assets
b.
Amortisation of intangible assets is charged to administrative expenses in the Statement of comprehensive income on a straight-
line basis over the estimated useful lives of the assets.
Computer software
Costs incurred on internally developed computer software are initially recognised at cost and when the software is available
for use, the costs are amortised on a straight-line basis over an estimated useful life of four years. Initial research costs and
planning prior to a decision to proceed with development of software are recognised in the Statement of comprehensive income
when incurred.
Investments in subsidiary companies
c.
Where the Company has investments in subsidiary companies whereby one entity (the “subsidiary”) is controlled by another
entity (the “parent”), the investments are stated at cost less, where appropriate, provision for impairment. The carrying values
of investments in subsidiary companies are reviewed annually to determine whether any indicator of impairment exists. Any
impairment is recognised immediately in the Statement of comprehensive income and is not subsequently reversed.
d. Subsidiary company guarantees and contingent liabilities
As required by section 479C of the Companies Act, the Company guarantees all outstanding liabilities to which its unaudited
subsidiary companies are subject at the end of the financial year. Where the outflow is not probable or cannot be reliably
measured, the potential obligation is disclosed as a contingent liability in the Financial statements.
e. Retirement benefit costs
Contributions in respect of the Group’s defined contribution pension scheme are recognised in the Statement of comprehensive
income as they fall due.
f. Employee Benefit Trust
Where the Company holds its own equity shares through an Employee Benefit Trust, 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 Statement of comprehensive income on
the purchase, sale, issue or cancellation of these shares.
170
170
171
171
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the Company financial
statements continued
For the year ended 30 June 2021
37. Critical accounting judgements and key sources of estimation and uncertainty
The preparation of financial information requires the use of assumptions, estimates and judgements about future conditions.
Use of currently available information and application of judgement are inherent in the formation of estimates. Actual results in
the future may differ from those reported. In this regard, the Directors believe that the accounting policies where judgement is
necessarily applied are those that relate to the measurement of investment in subsidiaries and deferred consideration.
There have been no critical judgements required in applying the Company’s accounting policies in this period, apart from those
involving estimations, which are detailed separately below.
The underlying assumptions made are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
year in which the estimate is revised only if the revision affects both current and future periods.
Further information about key assumptions and sources of estimation uncertainty are set out below.
Investment in subsidiaries
The Company’s investment in subsidiaries are reviewed annually for impairment, or when a change in circumstances indicates
that it might be impaired. When required, the recoverable amounts of subsidiaries are determined by value in use calculations,
which require the use of estimates to derive the projected future cash flows attributable to each subsidiary. If the projected cash
flows cannot support the cost of investment, an impairment in the investment in subsidiary may be required. Details of the
investment in subsidiaries are given in Note 41.
Deferred consideration
As described in Note 44, the Company has a deferred consideration balance in respect of the acquisition of Cornelian Asset
Managers Group Limited in February 2020. Deferred consideration is recognised at its fair value, being an estimate of the amount
that will ultimately be payable in future periods. The deferred consideration has been calculated allowing for estimated growth in
the acquired funds and estimated cost savings, discounted by the estimated interest rate.
38. Profit for the year
Brooks Macdonald Group plc reported profit after tax for the year ended 30 June 2021 of £8,786,000 (FY20: £12,696,000). Auditors’
remuneration is disclosed in Note 7 of the Consolidated financial statements. The average monthly number of employees during the
year was eight (FY20: eight). Directors’ emoluments are set out in Note 5d of the Consolidated financial statements.
39. Dividends
Details of the Company’s dividends paid and proposed, subject to approval at the Annual General Meeting, are set out in Note 12 of
the Consolidated financial statements.
40. Intangible assets
Cost
At 1 July 2019
Additions
At 30 June 2020
Additions
At 30 June 2021
Accumulated amortisation
At 1 July 2019
Amortisation charge
At 30 June 2020
Amortisation charge
At 30 June 2021
Net book value
At 1 July 2019
At 30 June 2020
At 30 June 2021
172
172
41. Investment in subsidiaries
Net book value
At 1 July 2019
Additions:
– Investment in subsidiaries
– Capital contribution relating to share-based payments
Impairment of subsidiary
At 30 June 2020
Additions
Impairment of subsidiary
At 30 June 2021
Group
undertakings
£’000
74,251
46,723
2,595
(4,522)
119,047
–
(22,789)
96,258
During the year ended 30 June 2021, the Company recognised an impairment in relation to a subsidiary company, Cornelian
Asset Management Group Limited for £14,289,000, and an impairment in relation to a subsidiary company, Brooks Macdonald
Financial Consulting Limited for £8,500,000. The impairments were recognised due to a reorganisation of the Group structure
and the businesses transferred to a subsidiary company within the Brooks Macdonald Group plc group of companies.
Details of the Company’s subsidiary undertakings at 30 June 2021, all of which were 100% owned and included in the
Consolidated financial statements, are provided below:
Company
Braemar Group Limited
Brooks Macdonald Asset Management Limited
Type of shares
and par value
Ordinary 1p
Ordinary £1
Country of
incorporation
UK
UK
Nature of business
Investment management
Investment management
and financial consulting
Brooks Macdonald Asset Management (International) Limited Ordinary 1p and
Channel Islands Investment management
Brooks Macdonald Financial Consulting Limited
Brooks Macdonald Funds Limited
Brooks Macdonald International Funds Managers Limited
Preference £1
Ordinary 5p
Ordinary £1
Ordinary £1
Financial consulting
UK
UK
Fund management
Channel Islands Fund management
Brooks Macdonald International Nominees (Guernsey) Limited Ordinary £1
Channel Islands Non-trading
Brooks Macdonald Nominees Limited
Ordinary £1
Brooks Macdonald Retirement Services (International) Limited Ordinary £1
Cornelian Asset Managers Group Limited
Cornelian Asset Managers Limited
Cornelian Asset Managers Nominees Limited
Levitas Investment Management Services Limited
Secure Nominees Limited
Ordinary 20p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Software
£’000
1,985
–
1,985
–
1,985
524
510
1,034
510
1,544
1,461
951
441
Non-trading
UK
Channel Islands Retirement planning
UK
UK
UK
UK
Channel Islands Non-trading
Investment management
Fund management
Non-trading
Fund sponsor
173
173
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021
Notes to the Company financial
statements continued
For the year ended 30 June 2021
41. Investment in subsidiaries continued
The registered office for all subsidiaries is 21 Lombard Street, London, EC3V 9AH except for the following:
Company
Brooks Macdonald Asset Management (International) Limited 1st Floor Royal Chambers, St. Julian’s Avenue, St. Peter Port,
Registered office
Brooks Macdonald International Fund Managers Limited
Guernsey, GY1 2HH
5 Anley Street, St. Helier, Jersey, JE2 3QE
Brooks Macdonald International Nominees (Guernsey) Limited Ground Floor, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT
Brooks Macdonald Retirement Services (International) Limited 5 Anley Street, St. Helier, Jersey, JE2 3QE
Cornelian Asset Managers Group Limited
Cornelian Asset Managers Limited
Cornelian Asset Managers Nominees Limited
Secure Nominees Limited
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
1st Floor Royal Chambers, St. Julian’s Avenue, St. Peter Port,
Guernsey, GY1 2HH
Brooks Macdonald Group plc has guaranteed the liabilities of the following subsidiaries in order that they qualify for the
exemption from audit under Section 479A of the Companies Act 2006 in respect of the year ended 30 June 2021:
• Braemar Group Limited
• Brooks Macdonald Nominees Limited
• Cornelian Asset Managers Group Limited
• Cornelian Asset Managers Nominees Limited
• Levitas Investment Management Services Limited
As a condition of the exemption, the Company has guaranteed the year-end liabilities of the relevant subsidiaries until they are
settled in full. The liabilities of the subsidiaries at 30 June 2021 were £2,000.
42. Financial assets at fair value through other comprehensive income
At beginning of year
Net changes in fair value
At end of year
2021
£’000
500
–
500
2020
£’000
500
–
500
At 30 June 2021, the Company held an investment of 500,000 redeemable £1 preference shares in an unlisted company
incorporated in the UK. The preference shares previously carried an entitlement to a fixed preferential dividend at a rate of 8%
per annum, which reduced to 4% per annum in April 2021 following the renewal of the preference shares. Unlisted preference
shares are classified as financial assets at fair value through other comprehensive income.
43. Trade and other receivables
Amounts owed by subsidiary undertakings
Prepayments and accrued income
Total trade and other receivables
Amounts owed by subsidiary companies are unsecured, interest-free and repayable on demand.
2021
£’000
246
24
270
2020
£’000
44
31
75
44. Deferred consideration
Deferred consideration reflects the Directors’ best estimate of amounts payable in the future in respect of certain client
relationships and subsidiary undertakings that were acquired by the Company. Deferred consideration is measured at its fair
value based on discounted expected future cash flows. The movements in the total deferred consideration balance during the
period were as follows:
At beginning of year
Additions
Finance cost of deferred consideration
Fair value adjustments
Payments made during the year
At end of year
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total deferred consideration
2021
£’000
7,991
–
292
60
(2,421)
5,922
5,922
–
5,922
2020
£’000
1,299
7,466
145
–
(919)
7,991
1,691
6,300
7,991
During the year ended 30 June 2020, the Company acquired Cornelian Asset Managers Group Limited (Note 10) and part of the
consideration was deferred over a period of up to two years. The total cash deferred consideration of £8,000,000 was recognised
at its fair value of £7,466,000 upon acquisition. The deferred consideration is payable in up to three instalments in March 2021,
October 2021 and March 2022 and based on the future value of the funds under management acquired and cost savings and
synergies achieved on integrating the business. During the year ended 30 June 2021, the Company revalued the deferred
consideration by £60,000 due to a change in the estimated timing of when the consideration will be payable and paid £2,000,000
to the vendors of Cornelian. During the year ended 30 June 2021, the Company recognised a finance cost of £286,000 in relation
to the Cornelian deferred consideration. The fair value of the Cornelian deferred consideration at 30 June 2021 was £5,922,000
(FY20: £7,576,000).
During the year ended 30 June 2021, the final payment was made in relation to the acquisition of Levitas totalling £421,000
(FY20: £919,000). Full details of the Levitas acquisition are disclosed in Note 13 of the 2015 Annual Report and Accounts. The fair
value of the Levitas deferred consideration at 30 June 2020 was £nil (FY20: £415,000).
45. Trade and other payables
Trade payables
Amounts owed to subsidiary undertakings
Accruals and deferred income
Total trade and other payables
Amounts owed to subsidiary companies are unsecured, interest-free and repayable on demand.
2021
£’000
20
2,754
1,056
3,830
2020
£’000
114
25,279
829
26,222
174
174
175
175
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Notes to the Company financial
statements continued
For the year ended 30 June 2021
46. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Adjustments for:
Impairment of subsidiary
Changes in fair value of deferred consideration
(Increase)/decrease in receivables
Decrease in payables
Share-based payments
Net cash inflow from operating activities
47. Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
2021
£’000
9,108
22,789
60
(195)
(22,053)
111
9,820
At 1 July 2019
Shares issued:
− on placing
− as considerations
− on exercise of options
− to Sharesave Scheme
At 30 June 2020
Shares issued:
− on exercise of options
− to Sharesave Scheme
At 30 June 2021
Number of
shares
13,950,071
1,690,141
453,172
25,862
7,856
16,127,102
7,976
46,060
16,181,138
Share
capital
£’000
139
Share
premium
account
£’000
39,068
17
5
–
–
161
–
–
161
29,387
8,995
424
108
77,982
65
656
78,703
2020
£’000
12,857
4,522
–
615
(2,140)
77
15,931
Total
£’000
39,207
29,404
9,000
424
108
78,143
65
656
78,864
The total number of ordinary shares, issued and fully paid at 30 June 2021, was 16,181,138 (FY20: 16,127,102) with a par value of 1p
per share. Excluding 608,516 (FY20: 409,163) treasury shares held by the Employee Benefit Trust (see below), the Company had
15,572,622 (FY20: 15,717,939) ordinary 1p shares in issue as at 30 June 2021. Details of the shares issued are given in Note 27 of the
Consolidated financial statements.
Employee Benefit Trust
The Company 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, see Note 29c to the Consolidated financial statements. All finance
costs and administration expenses connected with the EBT are charged to the Statement of comprehensive income as they
accrue. The EBT has waived its rights to dividends.
During the year, the EBT received instructions to exercise 85,439 (FY20: 103,596) options. The cost of the shares released on
exercise of these options amounted to £1,617,000 (FY20: £1,738,000). At 30 June 2021, the number of shares held by the EBT was
608,516 (FY20: 409,163) with a market value of £13,908,000 (FY20: £6,800,000) acquired for a total consideration of £11,000,000
(FY20: £7,519,000). These shares are presented as treasury shares in the Company financial statements and their cost is deducted
from retained earnings within shareholders’ equity.
The Company has made annual awards under the LTIP 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.
48. Related party transactions
The remuneration of key personnel of the Company, defined as the Company’s Directors, is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation
2021
£’000
1,590
50
159
1,799
Dividends totalling £14,000 (FY20: £9,000) were paid in the year in respect of ordinary shares held by key management
personnel and their close family members.
During the year, the Company entered into the following transactions with its subsidiaries:
Dividends received:
Brooks Macdonald Asset Management Limited
Levitas Investment Management Services Limited
Cornelian Asset Managers Group Limited
Braemar Group
Total transactions with subsidiaries
2021
£’000
17,500
800
16,289
190
34,779
2020
£’000
2,040
57
94
2,191
2020
£’000
17,500
1,500
4,000
–
23,000
The Company’s balances with fellow Group companies at 30 June 2021 are set out in Note 33 to the Consolidated financial
statements. All transactions with fellow Group companies are carried out at arm’s length and all outstanding balances are to be
settled in cash. None of the balances are secured and no provisions have been made for doubtful debts in respect of any of the
amounts due from fellow Group companies.
49. Financial risk management objectives and policies
The financial risk management objectives and policies applied by the Company are in line with those of the Group as disclosed in
Note 30 to the Consolidated financial statements.
176
176
177
177
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Glossary
Company Secretary
Company registration number
Phil Naylor
4402058
Registered office
Website
21 Lombard Street, London, EC3V 9AH
www.brooksmacdonald.com
Financial calendar
Results announcement
16 September 2021
Ex-dividend date for final dividend
23 September 2021
Record date for final dividend
24 September 2021
Annual General Meeting
28 October 2021
Final dividend payment date
5 November 2021
Officers and advisers
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Principal bankers
The Royal Bank of Scotland plc
280 Bishopsgate
London
EC2M 4RB
Nominated adviser and broker
Public relations
Peel Hunt LLP
7th Floor
100 Liverpool Street
London
EC2M 2AT
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
178
178
Definition
Authorised Corporate Director
Annual General Meeting
Alternative Investment Market
Adjusted Net Liquid Asset
AIM Portfolio Service
Asset Risk Consultants
Brooks Macdonald Group plc
Abbreviation
ACD
AGM
AIM
ANLA
APS
ARC
BMG, Company,
Parent Company
Brooks Macdonald Investment Solutions
BMIS
Business Property Relief
BPR
Bespoke Portfolio Service
BPS
Client Assets Sourcebook
CASS
Capital asset pricing model
CAPM
Chief Executive Officer
CEO
Chief Financial Officer
CFO
Cash-generating unit
CGU
Centralised Investment Process
CIP
Chief Operating Officer
COO
Cornelian, CAM Cornelian Asset Managers Group Limited
COVID-19
CREST
CRO
CSOP
CSR
D&I
DBP
DCF
DFM
EBT
EMEA
EPS
ESG
ESOA
EU
FCA
FIT
FPS
FRC
FSCS
FUM
FVOCI
FVPL
Group
I2020
IAS
IASB
and its controlled entities
Coronavirus global pandemic
The settlement system used by the
London Stock Exchange for settling all its
transactions
Chief Risk Officer
Company Share Option Plan
Corporate Social Responsibility
Diversity and inclusion
Deferred Bonus Plan
Defensive Capital Fund
Discretionary Fund Managers
Employee Benefit Trust
Europe, Middle East and Africa
Earnings per share
Environmental, social and governance
Exceptional Share Options Awards
European Union
UK Financial Conduct Authority
FIT Remuneration Consultants LLP
Fund Portfolio Service
UK Financial Reporting Council
Financial Services Compensation Scheme
Funds under management
Fair value through other comprehensive
income
Fair value through profit or loss
Brooks Macdonald Group plc and its
controlled entities
Investment 2020
International Accounting Standard
International Accounting Standards Board
Abbreviation
ICAAP
IFA
IFPRU
IFRIC
IFRS
IHT
JFSC
KPI
Lloyds Channel
Islands
LRMF
LTIS
LTIP
M&A
MAF
MMCP
MiFID II
MRT
MTP
MPS
NOMAD
OEIC
ORAS
PBT
PMPS
PRI
PwC
RCC
RIS
RMF
RPI
ROU
SAYE
SECR
SM&CR
SPA
SS&C
T&E
TCFD
The Code
UK
UKIM
VAT
WACC
WRAP
Definition
Internal Capital Adequacy Assessment
process
Independent Financial Adviser
The FCA’s Prudential Sourcebook for
Investment Firms
International Financial Reporting
Interpretations Committee
International Financial Reporting
Standards
Inheritance Tax
Jersey Financial Services Commission
Key Performance Indicator
Lloyds Banking Group’s Channel Islands
wealth management and funds business
Liquidity Risk Management Framework
Long-term incentive scheme
Long-term incentive plan
Mergers and acquisitions
Multi-Asset Fund
Mid-Market Closing Price
Markets in Financial Instruments
Directive II
Material Risk Takers
Medium-Term Plan
Managed Portfolio Service
Nominated adviser
Open-Ended Investment Company
Overarching risk appetite statement
Profit before tax
Platform Managed Portfolio Service
Principles for Responsible Investing
PricewaterhouseCoopers LLP
Risk and Compliance Committee
Responsible Investment Service
Risk management framework
Retail price index
Right-of-use asset
Employee Sharesave Scheme
Streamlined Energy and Carbon Reporting
Senior Managers and Certification Regime
Sale and Purchase Agreement
SS&C Technologies
Travel and entertaining
Task Force on Climate-related Financial
Disclosures
UK Corporate Governance Code
United Kingdom
UK Investment Management
Value added tax
Weighted average cost of capital
Waste & Resources Action Plan
179
179
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021IntroductionStrategic reportCorporate governanceFinancial statementsIntroductionStrategic reportCorporate governanceFinancial statementsBrooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021 Our offices
Wales and West
5 Leamington Spa
Ground Floor
38 Hamilton Terrance
Leamington Spa
CV32 4LY
6 Exeter
Broadwalk House
Southernhay West
Exeter
EX1 1TS
7 Wales
3 Ty Nant Court
Morganstown
Cardiff
CF15 8LW
8 Cheltenham
Festival House
Jessop Avenue
Cheltenham
GL50 3SH
London –
Head Office
1 21 Lombard Street
London
EC3V 9AH
South East
2 Hampshire
The Long Barn
Dean Estate
Wickham Road
Fareham
Hampshire
PO17 5BN
3 Tunbridge Wells
2 Mount Ephraim Road
Tunbridge Wells
Kent
TN1 1EE
4 East Anglia
Suite 2, Beacon House
4 Kempson Way
Bury St. Edmunds
Suffolk
IP32 7AR
North
9 Manchester
24 Mount Street
Manchester
M2 3NX
10
Leeds
1 Park Row
Leeds
LS1 5HN
Scotland
11
2nd Floor Suite
Hobart House
80 Hanover Street
Edinburgh
EH2 1EL
International
12
Jersey
5 Anley Street
St. Helier
Jersey
JE2 3QE
13
Guernsey
1st Floor Royal Chambers
St. Julian’s Avenue
St. Peter Port
Guernsey
GY1 2HH
Isle of Man
14
Third Floor
Exchange House
54-62 Athol Street
Douglas
IM1 1JD
(Subject to regulatory approval)
180180
11
14
10
9
8
5
2
4
3
1
7
6
12
13
Brooks Macdonald Group plc / Annual Report and Accounts 2021Brooks Macdonald Group plc / Annual Report and Accounts 2021