Realising
ambitions,
securing
futures
Brooks Macdonald Group plc
Annual Report and Accounts
for the year ended 30 June 2023
Contents
Introduction
Highlights of the year
Group at a glance
Our strong investment expertise
Our investment case
Strategic report
Chairman’s statement
Marketplace
Business model
Our services
Protecting and enhancing wealth case studies
Our strategy
Key performance indicators
CEO’s review
Financial review
Risks
Viability statement
How we engage with our stakeholders
Corporate responsibility report
Task Force on Climate-related Financial Disclosures
report summary
Corporate governance
Introduction to Corporate governance
Board overview
FY23 Company timeline
Consumer Duty project
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
Non-IFRS financial information
Company information
Glossary
Our offices
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Highlights
of the year
Strategic highlights
Continued strong growth in the
Platform MPS, including BMIS,
our B2B offering for advisers
with overall PMPS FUM up 70%
over the year, now over 20% of
Group FUM
Continued progress in our BPS
specialist products with FUM up
almost 50% over the year in the
Decumulation Service, partly
offsetting net outflows in the
core BPS in line with the market
The Group’s core investment
management processes
successfully transferred to
the platform provided by
SS&C, Brooks Macdonald’s
technology partner
Acquisitions completed of
Integrity Wealth Solutions
and Adroit Financial Planning,
extending and enhancing
the Group’s existing financial
planning capabilities
Financial highlights
Funds under management
(“FUM”) (£bn)
£16.8bn
Revenue (£m)
£123.8m
Underlying profit
before tax (£m)
£30.3m
FY21
FY22
FY23
16.5
15.7
16.8
FY21
FY22
FY23
118.2
122.2
123.8
FY21
FY22
FY23
30.6
34.5
30.3
Underlying profit margin
before tax (%)
Statutory profit
before tax (£m)
Underlying diluted earnings
per share (p)
24.5%
£22.2m
151.0p
FY21
FY22
FY23
25.9
FY21
25.1
FY21
28.2
FY22
29.5
FY22
24.5
FY23
22.2
FY23
150.6
168.7
151.0
Statutory diluted earnings
per share (p)
112.6p
Own Funds
adequacy ratio (%)
328.1%
Total dividend per
share (p)
75.0p
FY21
FY22
FY23
121.3
FY21
269.9
FY21
63.0
144.4
FY22
356.9
FY22
112.6
FY23
328.1
FY23
71.0
75.0
The underlying figures represent the results for the Group’s activities excluding underlying adjustments as listed on page 39.
These represent alternative performance measures (“APMs”) for the Group. Refer to the Non-IFRS financial information section
on page 182 for a glossary of the Group’s APMs, their definition, and the criteria for how underlying adjustments are considered.
A reconciliation between the Group statutory and underlying profit before tax is included on page 39.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
01
Corporate governanceStrategic reportIntroductionFinancial statements Group at a glance
What we do
Brooks Macdonald Group plc, through its various subsidiaries, provides leading wealth management services in the UK and
internationally. The Group, which was founded in 1991 and began trading on AIM in 2005, had discretionary funds under
management of £16.8 billion as at 30 June 2023.
Brooks Macdonald offers a range of investment management services to private high net worth individuals, pension funds,
institutions, charities and trusts. The Group also provides financial planning as well as international investment management,
and acts as fund manager to a range of onshore and international funds.
How we do it
512
Employees
2
Recent acquisitions
Where we do it
15
Locations
The Group has 15 offices across the UK and
Crown Dependencies, including London,
Birmingham, Cheltenham, East Anglia, Exeter,
Leeds, Manchester, Nuneaton, Southampton,
Tunbridge Wells, Scotland, Wales, Jersey and
Guernsey, and the Isle of Man
02
Brooks Macdonald Group plc Annual Report and Accounts 2023
Our purpose is realising ambitions and securing futures
Brooks Macdonald was founded to give clients wealth management driven by purpose and principles, and that remains as
true as ever.
We have multiple stakeholders – clients always come first, and if we look after our clients, our employees, and our intermediaries,
then our shareholders will get the returns they seek. For all of them, the reason Brooks Macdonald is here is to help them realise
their ambitions and secure their futures.
We work every day to protect and enhance our clients’ wealth through high-quality investment management and financial
planning, underpinned by exceptional client service. We are dedicated to the highest professional standards, inspired by our
guiding principles: we do the right thing, we are connected, we care, and we make a difference. We are proud of the powerful blend
of talented people we have in Brooks Macdonald, and together, we are confident and ambitious in what we can achieve and the
difference we can make for our clients.
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Our purpose
Realising ambitions and
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Read more about:
› Our guiding principles
› Our strong delivery
› Who we engage with
› Our purpose, culture
drivers
and values
› Our business model and
and the value we create
for them
strategy
› Our stakeholders
›
Being a responsible
business
› Our corporate
governance
See pages
54 to 61
See pages
14 to 25
See pages
50 to 53
See pages
74 to 85
Annual Report and Accounts 2023 Brooks Macdonald Group plc
03
Corporate governanceStrategic reportIntroductionFinancial statements
Our strong investment expertise
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. 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.
r v i c e
v i c e )
r
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o rtf o li o S
Bespoke P o rtf o li o S
(including A I M P
Platform Manage
d P
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£3.6
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Total FUM
£16.8bn
£1.8b n
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ortfolio S
M anaged P
(excluding Defensive C a p i t a l
Funds
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04
Brooks Macdonald Group plc Annual Report and Accounts 2023
Our investment case
1
Market opportunity
Delivery capability
2
Strong fundamental market opportunity, driven by
demographic, regulatory and technological changes.
Strong record of execution, including completing and
integrating two acquisitions and migration of core
processes to the SS&C platform.
3
Strong culture
and brand
Strong brand, particularly among UK
financial advisers, with a reputation
for consistent investment process and
commitment to client service.
Distribution
reach
4
Strong relationships in intermediary
channel, positioned to take advantage
of robust demand for outsourced
investment management.
Why Brooks
Macdonald
Strong Centralised Investment Process,
driving consistently robust investment
returns for clients.
Working to deliver market-leading
intermediary experience and client
service levels.
5
Centralised
Investment Process
Service excellence
6
Compelling investment proposition, differentiated
set of specialised BPS products, funds and unitised
solutions, and business-to-business investment
solutions tailored to each adviser.
7
Broad investment
proposition
Strong leadership team with depth of investment
management, adviser-facing and client-facing
experience, complemented by functional expertise.
Quality of
leadership team
8
Annual Report and Accounts 2023 Brooks Macdonald Group plc
05
Corporate governanceStrategic reportIntroductionFinancial statements Strategic report
A comprehensive review of our business and strategy
Chairman’s statement
08
Marketplace
10
Business model
14
Our services
16
Protecting and enhancing wealth case studies
20
Our strategy
24
Key performance indicators
26
CEO’s review
28
Financial review
32
Risks
42
Viability statement
48
How we engage with our stakeholders
50
Corporate responsibility report
54
Task Force on Climate-related Disclosures summary 68
Chairman’s statement
Resilient financial
performance and
continued strategic
progress.
Richard Price
Acting Chairman
08
Brooks Macdonald Group plc Annual Report and Accounts 2023
Introduction
Brooks Macdonald has had another good year,
delivering solid financial performance and
continued strategic progress. Funds under
management (“FUM”) finished the year at
£16.8 billion (FY22: £15.7 billion), up 7.5% due to
the combination of strong net flows and solid
investment performance in turbulent markets.
Despite volatile market conditions driving
weaker investor sentiment, the Group achieved
positive net flows every quarter. Net flows for
the year were 5.2%, slightly ahead of last year’s
4.8%, with the annualised rate of 9.2% in the
third quarter (three months to 31 March) being
particularly pleasing.
Our team works every day to protect and
enhance our clients’ wealth, and our Centralised
Investment Process, embedded across
the business, continues to deliver strong
performance over the medium and longer term.
Overall Group investment performance for this
financial year was 2.3%, slightly ahead of the
MSCI PIMFA Private Investor Balanced Index,
which was up 1.6%.
Performance overview
The Group once again delivered growth at the
FUM and revenue level, with revenue of £123.8
million (FY22: £122.2 million). Cost pressures
meant that underlying profit before tax was
£30.3 million, down 12.2% on last year (FY22:
£34.5 million), and underlying diluted earnings
per share (“EPS”) was down 10.5% to 151.0p (FY22:
168.7p).
Statutory profit before tax fell 24.7% to £22.2
million (FY22: £29.5 million). Statutory basic
EPS fell 23.0% to 114.7p (FY22: 149.0p).
Delivering our strategy
We have a clear strategy based on the three
value drivers of market-leading organic growth,
service and operational excellence, and
selective high-quality M&A. We have continued
to deliver against all three drivers:
› Our organic growth has been underpinned
by our Platform Managed Portfolio Service
(“PMPS”), including our business-to-business
offering, BM Investment Solutions, with
organic net new business of 65.6% for the
financial year. PMPS now accounts for 20.7%
of Group total FUM (FY22: 13.1%).
› We have continued to embed our processes
on the platform provided by our technology
partner, SS&C, and continued our digital
transformation, migrating our financial
planning activities to Intelliflo and (just after
financial year end) implementing Salesforce
for client relationship management.
› We completed two acquisitions, Integrity
Wealth Solutions and Adroit Financial
Planning.
The acquisitions have built on our existing
financial planning capabilities and we will
shortly be moving to an organisation more
explicitly structured around our intermediary
business on one hand, and our developing
Private Clients business on the other.
Dividend
The Board has recommended a final dividend
of 47.0p (FY22: 45.0p), which, subject to approval
by shareholders, will result in total dividends for
the year of 75.0p (FY22: 71.0p). This represents an
increase of 5.6% in total dividend on the previous
year and underlines the Board’s confidence in
the prospects for the Group. The final dividend
will be paid on 3 November 2023 to shareholders
on the register at the close of business on 22
September 2023.
Board changes
There were several changes to the Board during
the financial year. In January, we announced
that Chief Financial Officer, Ben Thorpe, and
Chief Operating Officer, Lynsey Cross, would be
leaving the business in due course and would be
standing down from the Board with immediate
effect.
153.8p
Underlying basic EPS down 11.7%
from the FY22 figure of 174.1p
In February, we announced that the Chairman,
Alan Carruthers, was leaving the Board due to
ill health. I would like to take this opportunity to
reiterate the gratitude of the Group to Alan for
the immense contribution he made to Brooks
Macdonald during his tenure. The Group also
announced that I would take over as Acting
Chairman, pending a permanent replacement
being appointed.
Later in February, we announced that James
Rawlingson was being appointed Non-Executive
Director with effect from 2 March 2023. He took
over as Chair of the Audit Committee in May,
following receipt of regulatory approval.
Finally in June, we announced that Andrea
Montague would join the Board as an Executive
Director with effect from 1 August 2023, and
take over as Chief Financial Officer, subject to
regulatory approval.
Looking ahead
The industry continues to be subject to
regulatory change, with the FCA’s new
Consumer Duty rules going live on 31 July,
shortly after the financial year end. We welcome
the new Consumer Principle that requires
firms to act to deliver good outcomes for retail
customers and our processes and client-centric
culture are proving well aligned to the new
requirements.
Demographic and pension policy trends
continue to underpin the strategic opportunity
for the UK wealth sector in general, and Brooks
Macdonald in particular, despite the continuing
macroeconomic uncertainty, the improving
interest rate environment for savers, and their
impact on investor sentiment. The Group
continues to deliver solid performance and
robust cash generation, with a strong balance
sheet. We have supportive shareholders and
our employees continue to deliver outstanding
service to our clients and intermediaries. We
look to the future with confidence.
75.0p
Dividend up 4.0p or 5.6% (FY22: 71.0p)
Richard Price
Acting Chairman
13 September 2023
Read more
about our
corporate
governance on
pages 74 to 85
Read more
about our
performance on
pages 32 to 41
Annual Report and Accounts 2023 Brooks Macdonald Group plc
09
Marketplace
Short-term trends
UK and global economy
Market conditions: Stubbornly high inflation has led central
banks across the world to raise interest rates further and for
longer than expected, with market expectations of the peak
point for rates moving higher and further into the future. The
UK in particular, has seen the most persistent inflation in the
G7. This has predictably affected investor sentiment with
people holding a greater proportion of their wealth in cash or
money market funds, which now offer improved yields.
Changing product preferences
Market conditions: Advisers are increasingly moving away
from their historic use of discretionary fund managers as
providers of bespoke portfolio services in their custody, to
model portfolio services and funds delivered on third-party
platforms. This changing product mix gives the industry
a lower revenue yield per £ of funds under management,
but has less impact, or even positive impact, at the level of
profit margin.
Our response: Given current market uncertainty, within
our asset allocation, we advocate balance in portfolios, both
between value and growth stocks and across geographies,
including the UK. We have also increased our allocation to UK
gilts, given the attractive yields on offer. Low coupon UK gilts
can be tax efficient for UK taxpayers, so we have launched a
range of portfolios investing in gilts, giving investors a low risk
alternative to cash. More broadly, we continue to work closely
with intermediaries and current and prospective private
clients to manage sentiment to support our net flows, which
have remained positive throughout FY23.
Our response: We have strong offerings in both model
portfolio services (our Managed Portfolio Service (“MPS”))
and funds (our Blueprint and Risk Managed ranges), and
we have made them available in different formats (e.g. our
Responsible Investment MPS) across all major platforms (21
in total). This has enabled us to drive strong positive net flows,
particularly in Platform MPS (where the portfolios are held on
third-party platforms). Within that, our B2B BM Investment
Solutions offering, where we provide a range of support to the
adviser, for example white-labelled or co-branded marketing
materials, has been particularly successful.
FUM through IFAs (£bn, year end)
Proportion of advisers using only
one DFM for Platform MPS
200
150
100
50
–
37%
30%
28% CAGR
BPS
MPS
Funds
2021
2022
2019
2020
2021
2022
10
Brooks Macdonald Group plc Annual Report and Accounts 2023
Long-term trends
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 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.
Growth of responsible investing
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 consistently
apply a sustainability lens to our core investment process.
Actual and projected number of people
aged 65 and over in the UK by age group,
2020 to 2040 (millions)
Retail liquid assets (£bn)
10.0
7.5
5.0
2.5
–
2020
2025
2030
2035
2040
6,000
5,000
4,000
3,000
2,000
1,000
–
2022
2023
2024
2025
2026
65-74
75-84
85+
Mass market
Mass affluent
HNW
Annual Report and Accounts 2023 Brooks Macdonald Group plc
11
Marketplace continued
Long-term trends
More clients working with IFAs and IFAs
increasingly outsourcing
Market conditions: Investors are increasingly working with
IFAs, our primary distribution channel, with numbers rising
at c.8% p.a. Advisers 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.
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.
Regulatory
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.
The arrival, in 2023, of Consumer Duty, which creates a new
Principle in the FCA Handbook that requires companies
to ‘act to deliver good outcomes for retail customers’, has
set higher and clearer standards of consumer protection
across financial services, and applies to our business in both
investment management and financial planning.
Our response: We welcome the general direction of
regulation, and the introduction of Consumer Duty. We are
committed to ensuring that we are serving advisers and
clients appropriately and professionally, and we are focused
on delivering good outcomes. We actively contribute to
regulatory consultations, both directly and through our
membership of the trade bodies, the Investment Association
and the Personal Investment Management and Financial
Advice Association (“PIMFA”).
Digital technology
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 completed migration of our core processes
to the platform provided by SS&C, our technology partner,
as well as implementing Intelliflo for financial planning
and (just after the financial year end) Salesforce for client
relationship management. But this is only the beginning and
we will continue to push forward our digital transformation,
delivering a better client and adviser experience.
Number of ongoing clients with IFAs
Expected change in outsourced
client assets over the next two years
(% of IFAs surveyed, 2022)
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
–
2016
2017
2018
2019
2020
2021
50%
40%
30%
20%
10%
–
12
Brooks Macdonald Group plc Annual Report and Accounts 2023
Bespoke
MPS
Funds
Increase
Decrease
A major trend over recent years has been the increasing
prevalence of vertical integration, with firms offering both
financial planning and investment management. This is
coming from both directions, with investment managers
buying IFAs to get closer to the client and advice firms,
particularly IFA consolidators, moving away from ‘whole of
market’ advice and taking on investment management as a
further revenue stream.
The industry is highly fragmented and we have seen
considerable consolidation in recent years, among both
IFAs and investment managers, most notably this year,
Rathbones’ acquisition of Investec’s Wealth & Investment
business. 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 purpose of realising ambitions
and securing futures and our medium-term target of
becoming a Top 5 wealth manager in the UK and Crown
Dependencies, gives us a strong competitive position,
allowing us to create value for clients, advisers, staff, and
shareholders.
What the market trends mean
for Brooks Macdonald
The fundamental opportunity for Brooks Macdonald
remains strong and improving, with scope to increase
market share in all products.
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 BM 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 may 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 high-end private banks.
BM market share by product type (%)
Top 24 wealth managers by
FUM (£bn, end 2022)
12
10
8
6
4
2
–
St. James's Place
Schroders
Rathbones + Investec
Evelyn Partners
Brewin Dolphin
Quilter
Raymond James
Ruffer
LGT Vestra
Man GLG
Sarasin
Close Brothers
Canaccord Genuity
Brooks Macdonald
Tatton
Openwork
Premier Miton
JM Finn
Waverton
Parmenion
7IM
Killik & Co
Hargreaves Lansdown
Custody
MPS
Advised
BPS
Platform
MPS
Funds
Private
Clients
–
30
60
90
120
150
Acquisition subject to regulatory approval
Annual Report and Accounts 2023 Brooks Macdonald Group plc
13
Business model
Brooks Macdonald was founded to give clients wealth management driven by purpose and principles,
and that remains as true as ever.
We have defined our purpose as realising ambitions and securing futures for all our stakeholders. We work every day
to protect and enhance our clients’ wealth through high-quality investment management and financial planning,
underpinned by exceptional client service.
Our key resources
We work …
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. We
work to increase the capability of our people continuously,
across all levels of the organisation, through a combination of
developing our internal talent and making selective key hires,
and we have a powerful mix of long-term 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.
… with financial advisers
› 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 build strong relationships with our advisers and
can, on occasion, provide a potential exit route for those
looking to sell their business.
… directly with private clients
›
Some clients approach us directly for financial planning,
when we can work with the client directly to understand
whether they need one-off advice or more regular
financial planning.
› We can provide both ‘restricted’ advice, including the
provision of our investment management services if
they are suitable for the client, and independent ‘whole of
market’ advice where appropriate to the client’s needs.
In all cases where we provide an investment management
service, we manage the client’s portfolio with the same
investment rigour.
We deliver 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.
14
Brooks Macdonald Group plc Annual Report and Accounts 2023
How we do it
How we make a difference
for our stakeholders
We have a robust product development and governance
process to determine which solutions are appropriate to our
clients and the broader market, and to ensure they remain
appropriate. We deliver our services through a network of 15
offices across the UK and the Crown Dependencies.
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.
We have multiple stakeholders – clients always come first,
and if we look after our clients, our employees, and our
intermediaries, then our shareholders will get the returns
they seek.
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.
Employees
We continuously improve the strong people proposition we
have developed, which is called ‘our promise’ and is aimed at
attracting and retaining the best people in the industry.
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.
Shareholders
Shareholders benefit from the performance of the Group
through both capital growth and progressive dividends.
Our competitive advantages
1
2
3
Robust Centralised
Investment Process
Consistent strong performance,
ahead of ARC benchmarks across
all risk profiles for 1 and 10 years, in
line with peers over the medium
term. 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 our
business-to-business BM Investment
Solutions offering.
Best-in-class client and
adviser service
Quality and commitment of our
people delivering consistently
outstanding service, which will
be supported by market-leading
digital offering, delivered with our
technology partner SS&C.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
15
Our services
Group Centralised Investment Process
We are an independent wealth 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:
Deliver strong risk
adjusted returns for
clients
Generate the best ideas
and then use them as
widely as possible
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.
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.
Governance
Investment Committee
Inputs
›
Regulatory backdrop
›
›
Industry best practice
Brooks Macdonald
thought leadership
People
›
Chief Investment Office
›
Risk department
Inputs
› House view
›
›
External research
Investment data
systems
s
Agile, hig
Governance
Asset Selection Committee
Centralised
Investment
Process
House v i e w
h
-
q
u
a
l
i
t
y
M
&
A
People
› Head of Research
›
›
Research team
85 Investment
Managers/Portfolio
Managers
ent rule
m
t
s
e
v
n
I
Governance
Asset Allocation Committee
People
› Nine senior investment
leaders
›
External research
analysts
Inputs
›
Investment views from
our research providers
›
›
External research
In-house investment
strategist
16
Brooks Macdonald Group plc Annual Report and Accounts 2023
1
Asset allocation
2
Asset selection
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.
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.
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.
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.
We encourage external scrutiny of our views and pay the
greatest 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
resources.
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, has put us in a
good position to weather any foreseeable investment storm
that may occur.
We believe that in order to provide the best outcomes for
our clients, it is important to integrate consideration of
environmental, social and governance (“ESG”) factors into our
Centralised Investment Process.
We recognise that a broad range of financial and non-financial
factors may be relevant in making investment decisions. We
have therefore, systematically embedded ESG considerations
into our investment analysis frameworks in order to help
identify financially material risks and opportunities. Common
principles and research disciplines are applied, to the greatest
degree possible, across all research activities within a robust
and transparent framework. However, as global multi-asset
investors, our approach to assessing ESG factors is tailored to
each asset class and the vehicle used to invest in each asset
class. We have published a Responsible Investment Policy,
which outlines our approach and the key quantitative and
qualitative inputs. We will continue to review and develop
our approach to ESG integration to ensure we consider the
most relevant and material information that can help improve
client outcomes.
Brooks Macdonald is a signatory to the United Nations
supported Principles for Responsible Investing (“PRI”) and we
are committed to implementing the six principles of the PRI
across our investment management activities.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
17
Our services continued
We provide our services through seven distinct service lines:
Bespoke Portfolio Service (FUM
£9.5bn as at 30 June 2023)
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 a
distinct sets of needs:
› Responsible Investment Service, designed for
clients with the dual objectives 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, and while for the Advance
strategy, the objective is to invest in, and
Advance, either businesses that provide
solutions to sustainability challenges through
their products and services, or businesses that
have strong corporate policies and outputs
relating to 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
investing following settlement of personal injury
or clinical negligence claims, many of whom are
vulnerable due to the effects of their injuries.
AIM Portfolio Service (FUM £0.2bn
as at 30 June 2023)
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 Relief (“BR”), allowing investors
to benefit from Inheritance Tax (“IHT”) exemptions.
Managed Portfolio Service (FUM
£5.0bn as at 30 June 2023, including
BM Investment Solutions)
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.
BM Investment Solutions
The Group designs 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. The proposition includes
combined marketing efforts with co-branding of
client-facing materials and other business support
to the intermediary.
18
Brooks Macdonald Group plc Annual Report and Accounts 2023
Multi-Asset and Investment Funds
(FUM £1.8bn as at 30 June 2023)
Our fund ranges allow investors to gain access to the
Group’s investment management expertise and CIP
through a pooled fund solution. The Group offers
four ranges:
›
›
›
›
The SVS Brooks Macdonald Blueprint Fund – a
range of four risk-managed multi-asset funds:
Defensive Income, Cautious Growth, Balanced
and Strategic Growth.
The SVS Cornelian Risk Managed 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.
International Multi Strategy Funds – a range of
five risk-managed multi-asset funds: Cautious
Balanced, Balanced, Growth, High Growth, and
US$ Growth.
International Investment Funds – a range of
three fixed income international investment
funds: High Income, Sterling Bond Fund, and
Euro High Income.
By differing their levels of equity exposure, the
multi-asset ranges cater for both investors seeking
capital growth and more cautious investors looking
to generate income, while preserving their capital,
while the international fixed income funds cater for
investors following an objective-oriented approach.
Defensive Capital Fund (FUM
£0.3bn as at 30 June 2023)
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.
Financial Planning
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
‘restricted’, whereby the investment service
will, if suitable, be one provided by the Group,
or independent, where the client requests it or
they have complex requirements. The service is
advice-driven 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
19
Protecting and enhancing wealth through investment
management and financial planning, alongside our
distinctive investment management approach
Investing an inherited lump sum
Our client inherited a lump sum
following the death of her mother.
Given she had no previous experience
of investing, she felt overwhelmed.
One of her main thoughts was
trying to help her children onto the
property ladder. Our private client
manager conducted a cash flow
planning exercise, which showed
that while she was able to gift some
of the inheritance to her children, it
was actually prudent to gift a smaller
amount, thereby protecting her own
financial future. We provided advice
on the tax-efficient investment of the
lump sum gift through the use of her
pension and ISA allowance. Given the
client’s knowledge and experience, our
professional advice was vital to help
her meet her wishes.
Building a local financial advice business
Over many years, we have built a great
working relationship with this small
independent financial advice firm.
Through our investment solutions,
we have managed portfolios for many
of their clients using our Bespoke
Portfolio and Managed Portfolio
services. Both the advisers and
the clients have been able to take
advantage of our new online portal –
InvestBM – to view their investments
with us quickly and securely. We are
now having an exciting conversation
about whether we can help them meet
their goals by either investing in their
business or whether the firm should
join the BM Group.
Making a positive impact on the environment
The younger members of a family
trust, who were taking on stewardship
of the family’s assets, were keen
to see their personal values for
environmental and social causes
reflected in their investments.
We met with the family and their
financial adviser to discuss our two
Responsible Investment Service
strategies. With Advance, investors can
support businesses across the global
economy, who are actively changing
their practices to become more
sustainable, whereas Avoid excludes
investment into funds with exposure
to activities such as gambling, tobacco
or alcohol. The family chose to invest
in the Advance strategy which they
felt best aligned with their principles.
They now receive regular reporting
on the impact and sustainability
characteristics of their investments,
at the same time achieving strong
financial performance that better
reflects their values.
While these case studies are based on real people and events, some details have been changed to protect confidentiality. The suitability of any recommendation is dependent upon each
individual’s personal and financial circumstances, in addition to other factors. These case studies do not constitute advice or a recommendation and investment decisions should not be
made on the basis of them. 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 come 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.
20
Brooks Macdonald Group plc Annual Report and Accounts 2023
Both the advisers and
the clients have been
able to take advantage of
our new online portal –
InvestBM – to view their
investments with us
quickly and securely.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
21
Protecting and enhancing wealth through investment
management and financial planning, alongside our
distinctive investment management approach continued
Planning for an active retirement
Bringing retirement plans forward
was a focus for this couple. Having
had successful careers and saving
into pensions as much as they could,
they were ready to enjoy an active
retirement, travelling together to see
the world. They approached their
financial adviser to explore options for
how they could secure the income to
support their travel ambitions and still
have retirement income for the long
term. Their adviser recommended our
Decumulation service, which offers
an innovative two-portfolio structure;
a short-term portfolio to safeguard
income from downturns in the early
years of withdrawing alongside a
long-term portfolio to provide growth
to combat inflation and longevity
risks. The couple are now enjoying
their travels, confident they will have
enough money to live comfortably
throughout retirement.
Creating a tailored investment approach
A successful professional, our client
had been investing for many years,
building up a portfolio which, while
happily increasing in value, was also
resulting in some tax complications.
He came to us for both advice on his
tax issues, and because he felt he had
no real plan for what he was trying to
achieve. He met an adviser from our
Private Clients team to discuss his
goals and, considering his complex
financial situation, the adviser
developed a comprehensive financial
plan, including a recommendation
of our Bespoke Portfolio Service for
a perfect, tailored fit. This helped our
client align his investing with his long-
term financial objectives, while taking
advantage of tax efficiencies in the
near term.
Investing for income and growth
Deciding which investment manager
is best for their client is an important
decision for financial planners. We
were therefore very pleased that, after
conducting detailed due diligence,
this adviser selected our Managed
Platform Service (“MPS”) as the best
solution for his client. We offer four
MPS strategies and five risk profiles
to meet different investment goals.
Our Medium Risk Income & Growth
portfolio was selected as suitable
for this client’s risk appetite and
investment objectives, providing a
combination of income and capital
growth over the longer term. By
choosing our MPS solution, the adviser
was able to free up more time to focus
on the client and their financial plan.
While these case studies are based on real people and events, some details have been changed to protect confidentiality. The suitability of any recommendation is dependent upon each
individual’s personal and financial circumstances, in addition to other factors. These case studies do not constitute advice or a recommendation and investment decisions should not be
made on the basis of them. 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 come 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.
22
Brooks Macdonald Group plc Annual Report and Accounts 2023
By choosing our
MPS solution, the
adviser was able to
free up more time to
focus on the client and
their financial plan.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
23
Our strategy
Brooks Macdonald is delivering strong performance
and has put in place foundations for our continued
future success. Our strategy is clear and we are making
substantial progress, ready to capitalise on the growth
opportunities we see ahead.
Our Purpose – Realising ambitions
and securing futures
Brooks Macdonald was founded to give clients wealth
management driven by purpose and principles, and that
remains as true as ever.
We have multiple stakeholders – clients always come first,
and if we look after our clients, our employees, and our
intermediaries, then our shareholders will get the returns they
seek. For all of them, the reason Brooks Macdonald is here is to
help them realise their ambitions and secure their futures.
We work every day to protect and enhance our clients’ wealth
through high-quality investment management and financial
planning, underpinned by exceptional client service.
We are dedicated to the highest professional standards,
inspired by our guiding principles: we do the right thing, we
are connected, we care, and we make a difference. We are
proud of the powerful blend of talented people we have
in Brooks Macdonald, and together we are confident and
ambitious in what we can achieve and the difference we can
make for our clients.
Looking forward
We are moving to align our business around our two key
distribution channels – intermediaries and private clients.
Our proposition is different in the two channels – outsourced
discretionary investment management for intermediaries
and advice-led integrated wealth management for private
clients. Aligning the organisation to the needs of the different
propositions will make us more effective and efficient in
delivering for clients and advisers.
Our medium-term targets
We have set three medium-term targets
What
Why
1
Our ambition is to be a Top 5 wealth
manager in the UK and Crown
Dependencies
2
Intermediary
› Outsourced
discretionary
investment
management for
advisers
›
FUM
Private Clients
We aim at market-leading organic growth
with 8-10% net flows, and
› Advice-led integrated
wealth management
› AUM/A
3
We are committed to top quartile
underlying profit margin.
›
Propositions, target
audience and
therefore business
models are different
and need dedicated
management.
› Clarity of business
models will facilitate
better alignment with
functions.
› Exposing
different business
characteristics will
increase investor
insight.
24
Brooks Macdonald Group plc Annual Report and Accounts 2023
Our strategy
Our strategy is based on the three value drivers of strong organic growth, service and operational excellence, and selective
high-quality acquisitions, and we have been delivering against all three.
Strategy
Delivery
Market-leading organic growth
› We aim to deliver best-in-class client service and adviser
experience.
› Our rigorous Centralised Investment Process gives
› We delivered over 5% net flows in FY23, with positive net
flows every month, despite volatile markets and weak
investor sentiment.
consistently good client outcomes.
› Our Platform MPS product had net flows of over 65%.
› We have a compelling investment proposition.
› We have continued to see positive net flows and
FUM growth in our specialist BPS products and in
Private Clients.
Service and operational excellence
› We work continuously to make Brooks Macdonald easy
› We migrated all our investment management processes
to do business with.
to the SS&C platform.
› We are building on our SS&C partnership to deliver a
digital transformation in our products and services.
› We will continue to drive for margin improvement
through our scalable business model.
› We implemented Intelliflo for our financial planning
activities.
› We again delivered robust underlying profit margin
despite revenue coming under pressure from
weaker markets.
Selective high-quality acquisitions
› We have ambitious inorganic growth plans – we will not
› We completed the acquisition of Integrity Wealth
make Top 5 without M&A.
› Nonetheless, we rigorously apply our acquisition criteria
– we only acquire good businesses, with a compelling
strategic rationale, good cultural fit, and strong
economics.
› We focus on the delivery of benefits.
Solutions and Adroit Financial Planning, building our
capabilities in advice and financial planning leadership.
› We reviewed and assessed many others, but continued
to strictly apply our criteria.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
25
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 underlying figures represent the results for the Group’s activities, excluding underlying
adjustments as listed on page 39. These represent alternative performance measures (“APMs”) for the Group. Refer to the Non-IFRS
financial information section on page 182 for a glossary of the Group’s APMs, their definition, and the criteria for how underlying
adjustments are considered.
1
FUM and revenue
2
Underlying performance
3
Shareholder return and Balance Sheet strength
Funds under
management (£bn)
7.5%
FY21
FY22
FY23
16.5
15.7
16.8
Organic net
fund flows (£m)
£32m
FY21
(275)
FY22
FY23
785
817
Revenue (£m)
1.3%
FY21
FY22
FY23
118.2
122.2
123.8
Definition
Total funds under
management at the end
of the year.
Relevance
The value of funds
under management has
a direct impact on the
Group’s revenue.
Underlying profit
before tax (£m)
(12.2)%
FY21
FY22
FY23
30.6
34.5
30.3
Definition
Revenue less underlying
costs before tax.
Relevance
This measures the
Group’s performance
excluding the impact of
certain one-off costs or
credits so as to provide
an appropriate year-on-
year comparison.
Definition
Value of net organic
discretionary flows.
Relevance
Net organic growth
measures the new
business generated by
the Group excluding
the impact of acquired
assets and after allowing
for lost business.
Underlying profit
margin before tax (%)
(3.7)pts
FY21
FY22
FY23
25.9
28.2
24.5
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.
Definition
Fee and non-fee income
generated during
the year.
Relevance
The amount of fee
and non-fee income
generated by the Group
is one of the key growth
indicators.
Underlying diluted earnings
per share (p)
(10.5)%
FY21
FY22
FY23
150.6
168.7
151.0
Definition
Total underlying profit
after tax divided by the
diluted weighted average
number of ordinary
shares.
Relevance
This is another key
metric of measuring the
Group’s profitability and
takes into account new
shares issued during the
year and the effect of
dilutive potential shares
issuable.
26
Brooks Macdonald Group plc Annual Report and Accounts 2023
Statutory profit
before tax (£m)
(24.7)%
Definition
Statutory profit before
tax as a percentage of
revenue
Relevance
This measures the
Group’s profitability
reflecting key drivers of
long-term profitability.
Total dividend
per share (p)
5.6%
Statutory profit
margin before tax (%)
(6.2)pts
Definition
Statutory profit before
tax as a percentage of
revenue.
Relevance
This measures the
Group’s profitability
reflecting key drivers of
long-term profitability.
Own Funds
adequacy ratio (%)
(28.8)pts
Statutory diluted earnings
Definition
Total net assets (£m)
per share (p)
(22.0)%
6.0%
Total statutory profit
after tax divided by the
diluted weighted average
number of ordinary
shares.
Relevance
This measures the
Group’s profitability
calculated in accordance
with International
Financial Reporting
Standards and takes
into account new shares
issued during the year
and the effect of dilutive
potential shares issuable.
Definition
Total dividend per
share paid out to
shareholders.
Relevance
Distributions by the
Group in the form of
dividends represent an
important part of the
returns to shareholders.
Definition
The Group’s total
regulatory capital
resources relative to
its Fixed Overhead
Requirement.
Relevance
The Group must hold
a minimum amount of
regulatory capital in line
with the IFPR. This ratio
measures the amount
of capital in relation to
the external minimum
capital requirement
as an indication of
resilience.
Definition
The Group’s total
net assets per the
Consolidated statement
of financial position,
being gross assets less
gross liabilities.
Relevance
This demonstrates the
Group’s balance sheet
strength.
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 underlying figures represent the results for the Group’s activities, excluding underlying
adjustments as listed on page 39. These represent alternative performance measures (“APMs”) for the Group. Refer to the Non-IFRS
financial information section on page 182 for a glossary of the Group’s APMs, their definition, and the criteria for how underlying
adjustments are considered.
1
FUM and revenue
2
Underlying performance
3
Shareholder return and Balance Sheet strength
Funds under
management (£bn)
7.5%
Definition
Total funds under
management at the end
Underlying profit
before tax (£m)
of the year.
Relevance
The value of funds
under management has
a direct impact on the
Group’s revenue.
(12.2)%
Organic net
fund flows (£m)
£32m
Underlying profit
margin before tax (%)
(3.7)pts
Definition
Value of net organic
discretionary flows.
Relevance
Net organic growth
measures the new
business generated by
the Group excluding
the impact of acquired
assets and after allowing
for lost business.
Definition
Fee and non-fee income
generated during
the year.
Relevance
The amount of fee
and non-fee income
generated by the Group
is one of the key growth
indicators.
Revenue (£m)
1.3%
Underlying diluted earnings
Definition
per share (p)
(10.5)%
Definition
Revenue less underlying
costs before tax.
Relevance
This measures the
Group’s performance
excluding the impact of
certain one-off costs or
credits so as to provide
an appropriate year-on-
year comparison.
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.
Total underlying profit
after tax divided by the
diluted weighted average
number of ordinary
shares.
Relevance
This is another key
metric of measuring the
Group’s profitability and
takes into account new
shares issued during the
year and the effect of
dilutive potential shares
issuable.
Statutory profit
before tax (£m)
(24.7)%
FY21
FY22
FY23
25.1
29.5
22.2
Statutory profit
margin before tax (%)
(6.2)pts
FY21
FY22
FY23
21.2
24.1
17.9
Definition
Statutory profit before
tax as a percentage of
revenue
Relevance
This measures the
Group’s profitability
reflecting key drivers of
long-term profitability.
Total dividend
per share (p)
5.6%
FY21
FY22
FY23
63.0
71.0
75.0
Definition
Statutory profit before
tax as a percentage of
revenue.
Relevance
This measures the
Group’s profitability
reflecting key drivers of
long-term profitability.
Own Funds
adequacy ratio (%)
(28.8)pts
FY21
FY22
FY23
269.9
356.9
328.1
Statutory diluted earnings
per share (p)
(22.0)%
FY21
FY22
FY23
121.3
144.4
112.6
Definition
Total statutory profit
after tax divided by the
diluted weighted average
number of ordinary
shares.
Relevance
This measures the
Group’s profitability
calculated in accordance
with International
Financial Reporting
Standards and takes
into account new shares
issued during the year
and the effect of dilutive
potential shares issuable.
Total net assets (£m)
6.0%
FY21
FY22
FY23
134.0
148.4
157.3
Definition
Total dividend per
share paid out to
shareholders.
Relevance
Distributions by the
Group in the form of
dividends represent an
important part of the
returns to shareholders.
Definition
The Group’s total
regulatory capital
resources relative to
its Fixed Overhead
Requirement.
Relevance
The Group must hold
a minimum amount of
regulatory capital in line
with the IFPR. This ratio
measures the amount
of capital in relation to
the external minimum
capital requirement
as an indication of
resilience.
Definition
The Group’s total
net assets per the
Consolidated statement
of financial position,
being gross assets less
gross liabilities.
Relevance
This demonstrates the
Group’s balance sheet
strength.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
27
CEO’s review
The Group’s
fundamental market
opportunity is
excellent.
Andrew Shepherd
CEO
28
Brooks Macdonald Group plc Annual Report and Accounts 2023
Introduction
I am happy to report that this has been another
successful year for Brooks Macdonald, with
our strategy and business model continuing to
deliver solid performance despite challenging
macroeconomic conditions.
Our focus on our purpose of realising ambitions
and securing futures ensures we keep our
clients at the forefront of our minds, while also
providing for our other stakeholders – our
employees, intermediaries and shareholders.
Delivering our strategy
Three value drivers underpin our strategy:
strong organic growth, service and operational
excellence, and selective high-quality
acquisitions. We are committed to delivering top
quartile underlying profit margins, and we have
also set medium-term ambitions of delivering
8-10% net flows and becoming a Top 5 wealth
manager in the UK and Crown Dependencies.
The sustainable and scalable business model
we have put in place positions us well to achieve
those ambitions and we continue to make
progress, ready to capitalise on the growth
opportunities we see ahead.
We completed two acquisitions in the first half
of the financial year – first, Integrity Wealth
Solutions (“Integrity”) based in Nuneaton and
then Adroit Financial Planning (“Adroit”) in
Manchester. We have worked with both firms
over a number of years, delivering outsourced
investment management. These acquisitions
add critical financial planning capability and
leadership as we build our Private Clients
business. We continue to see a steady pipeline of
potential acquisitions and M&A will remain an
important contributor to achieving our goals.
We have spent considerable time putting in
place sound foundations for our Private Clients
business and, looking forward, we are now
moving to make it increasingly visible. The
business proposition for our Private Clients
business – integrated wealth management – is
quite distinct from the outsourced investment
management we offer to our intermediaries and
we will increasingly manage the two businesses
separately. Of course, both will continue to
be underpinned by the rigour and quality of
our Centralised Investment Process, which is
embedded across the Group.
£30.3m
Underlying profit down 12.2%
from the FY22 figure of £34.5m
£16.8bn
FUM up 7.5% over the year
from £15.7bn at 30 June 2022
Financial performance
We had a year of solid financial performance in
FY23, continuing to deliver on our medium-term
commitment to top quartile margins, although
the underlying margin fell 3.7 points to 24.5%,
reflecting market conditions and cost pressures.
We delivered solid revenue and underlying
profit levels of £123.8 million and £30.3 million
respectively.
Statutory profit before tax also fell, to £22.2
million (FY22: £29.5 million).
Our year-end closing FUM was £16.8 billion. Net
flows were positive in all quarters (and indeed
months), 5.2% at Group level for the full year,
peaking at an annualised level of 9.2% in the third
quarter. Total FUM was up 7.5% over the year,
with strong flows supported by solid investment
performance. We have a healthy pipeline going
into FY24, although market conditions are
keeping client sentiment subdued.
Investment performance
and market conditions
Investment performance for the year came in at
2.3%, slightly ahead of the MSCI PIMFA Private
Investor Balanced Index, which rose 1.6%. Our
investment performance was ahead of the ARC
peer benchmark for the year, and remains ahead
of ARC for the 10-year measure, and in line with
peers over the medium term.
Financial markets remained volatile over the
year with sticky inflation pressures keeping
central bank monetary policy tight.
While inflation has been steadily falling in
the United States, UK inflation has remained
stubborn and it is less clear at what level it will
settle in the post COVID-19 world. Against this
backdrop central banks have been eager to show
their commitment to battle inflation, causing
bond markets to price in higher interest rates
for longer. Our short-duration bond allocation
was well positioned for this repricing of bond
markets and allowed portfolios to weather
the recent rises in gilt yields as well as those
around the UK mini-budget of last year. We have
maintained our overweight to equity markets,
which has supported performance over the year,
although some of these gains in international
equities have been offset by a stronger sterling
in the second half of the financial year. Brooks
Macdonald outperformed the peer benchmark
for all risk profiles over the year.
Looking ahead, we expect inflation to continue
to fall in Europe and the UK, but for uncertainty
around the new ‘normal’ level of inflation to
lead to further volatility within bond and equity
markets. We are retaining our overweight
position to equity markets but maintaining our
balance between value and growth investment
styles to allow portfolios to perform in multiple
economic scenarios.
Review of business performance
UK Investment Management
Across UK Investment Management (“UKIM”),
our people have once again worked incredibly
hard to provide exceptional levels of support to
their clients and intermediaries. We have seen
positive net flows throughout the year, reaching
an annualised rate of 12.0% at UKIM level in the
third quarter. BM Investment Solutions (“BMIS”),
our business-to-business offering, where we
work with an adviser firm to provide a tailored
service aligned to the objectives of the clients
and the firm, was once again the strongest
performer for net flows, followed by our Platform
Managed Portfolio Service (“PMPS”).
In our flagship Bespoke Portfolio Service (“BPS”)
product, UKIM has continued to see good growth
in our specialist offerings, the AIM Portfolio
Service, the Responsible Investment Service,
our Decumulation Service, and our Court of
Protection service. We have also successfully
delivered portfolios based on short-dated UK
Government bonds for investors looking to
take advantage of higher interest rates while
retaining access to funds. Beyond the specialist
offerings and the gilt portfolios, however, BPS
saw net outflows driven by a broad market trend,
exacerbated by the impact of higher interest
rates and macroeconomic uncertainty.
Read more
about how we
engage with our
stakeholders on
pages 50 to 53
Read more
about our
people on pages
54 to 61
Annual Report and Accounts 2023 Brooks Macdonald Group plc
29
CEO’s review continued
Although our Funds business had another challenging year,
with persistent net outflows in line with much of the sector,
we continue to see multi-asset funds as a major potential
source of growth for Brooks Macdonald. We have confidence
in the actions we have already taken to drive medium-term
growth and we are reviewing what further steps we should
be taking.
During the year, we added Integrity’s office in Nuneaton to our
portfolio of offices, bringing the total to 15 across the UK and
the Crown Dependencies.
Private Clients
We have continued to develop our Private Clients business,
adding Integrity and Adroit to our existing activities. We
were delighted to welcome Martin Lindsey and Neil
Jefferies, and their respective teams, to the Group and look
forward to working with them to enhance and grow our
capabilities in this area. We are increasingly offering clients
an integrated wealth management proposition with robust
financial planning linked to a Brooks Macdonald investment
management solution, retaining our independent financial
advice for more complex cases or where the client specifically
requests it.
International
In International, Richard Hughes and team have had a difficult
year commercially, with continued elevated outflows, but
we see improving prospects in the coming months, with
new products and focus bringing renewed confidence. The
International business is now fully integrated with the Group
and is leading the way on our private client focus.
People
I am personally committed to a strong people agenda and I
see our client-centric culture as one of our greatest assets. We
continue both to invest in our people and to bring in strong
new hires to add to our talent pool. I was pleased to announce
in December that our General Counsel, Simon Broomfield,
was in addition taking on the role of Chief People Officer
(“CPO”), and Simon is now driving forward our people strategy.
Simon taking on the CPO role was one of a number of changes
in the Executive Committee this year, as several colleagues
left the business – our Chief Financial Officer, Ben Thorpe,
our Chief Operating Officer, Lynsey Cross, and our Chief Risk
Officer, Priti Verma, as well as our previous CPO, Tom Emery,
all moved on and they leave with our gratitude and best
wishes. This allowed us to promote internal talent, Simon
to CPO and Caroline Abbondanza from Chief Technology
Officer to Chief Operating Officer, and to bring in two new
hires from outside the organisation.
Andrea Montague became our new Chief Financial Officer
on 1 August and Louis Petherick as Chief Risk Officer on
4 September, both subject to regulatory approval. Andrea was
most recently Group Chief Risk Officer at Aviva, having been
previously Group Chief Financial Controller, and Louis joins
from FNZ UK, where he was Chief Risk Officer. I am delighted
to welcome Andrea and Louis to the Group, and I am pleased
with the strength of our new management team.
Outlook
The fundamental market opportunity for the Group is
excellent, with an ageing population and a supportive policy
environment alongside growing wealth. As we continue
to deliver robust investment performance and supportive
financial planning, plus exceptional client service, helping our
stakeholders realise their ambitions and secure their futures,
we can expect to see further strong business growth.
Our strategy remains based on the three value drivers of
strong organic growth, service and operational excellence,
and selective high-quality acquisitions. We are committed
to delivering top quartile underlying profit margins, we are
aiming to deliver 8-10% annual net flows in the medium term,
now potentially delayed by short-term headwinds, and we
aspire to be a Top 5 wealth manager in the UK and Crown
Dependencies.
I have confidence in our team, who bring a wide range of
expertise and experience as well as real passion and ambition
to see Brooks Macdonald succeed. I would like to finish, as
ever, by thanking our clients, the intermediaries we work with,
and our people for their continuing support. I look forward to
an exciting future together.
The Strategic report in its entirety has been approved by
the Board of Directors and is signed on its behalf by:
Andrew Shepherd
CEO
13 September 2023
30
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
31
£123.8m
Revenue up 1.3% from the FY22 figure
of £122.2m
24.5%
Underlying profit margin down 3.7 points
from the FY22 margin of 28.2%
£22.2m
Statutory profit before tax down 24.7%
from the FY22 figure of £29.5m
Review of results for the year
The Group delivered a solid set of results for
FY23, despite a backdrop of a challenging
macroeconomic environment and volatile
markets impacting client sentiment. The Group
achieved positive net flows of £0.8bn or 5.2%
in FY23 ahead of the rate achieved in FY22 of
4.8%. The Group also continued to deliver on
its ambitious growth strategy, completing the
acquisitions of Integrity Wealth Solutions and
Adroit Financial Planning in the year.
As experienced across the industry, the weaker
markets seen during the financial year have
impacted the Group’s revenue growth, whilst
the inflationary pressures prevailing during the
year, along with increased costs in connection
to the Group’s digital transformation and
costs incurred for terminated M&A processes,
amongst other non-staff cost movements, have
resulted in an uplift in total costs. This resulted in
an underlying profit for the year of £30.3 million,
representing a decrease of 12.2% on the prior
year. The underlying profit margin was of 24.5%
(FY22: 28.2%).
Financial review
I am excited about
the structural market
opportunities and
our ambitious growth
strategy.
Andrea Montague
Chief Financial Officer
32
Brooks Macdonald Group plc Annual Report and Accounts 2023
Group financial results summary
The table below shows the Group’s financial performance for the year ended 30 June 2023 with the comparative period and
provides a reconciliation between the underlying results, which the Board considers to be an appropriate reflection of the
Group’s underlying performance, and the statutory results. Underlying profit represents an alternative performance measure
(“APM”) for the Group. Refer to the Non-IFRS financial information section on page 182 for a glossary of the Group’s APMs, their
definition, and the criteria for how underlying adjustments are considered. A breakdown of the underlying adjustments is
shown on page 39.
Table 1 – Group financial results summary
Revenue
Fixed staff costs
Variable staff costs
Total staff costs
Non-staff costs
FSCS levy
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 basic earnings per share
Underlying diluted earnings per share
Statutory profit margin before tax
Statutory basic earnings per share
Statutory diluted earnings per share
Own Funds adequacy ratio
Dividends per share
FY23
£m
123.8
(45.2)
(10.9)
(56.1)
(36.9)
(0.5)
(37.4)
FY22
£m
122.2
(40.5)
(14.8)
(55.3)
(31.3)
(1.1)
(32.4)
Change
1.3%
11.6%
(26.4)%
1.4%
17.9%
(54.5)%
15.4%
(93.5)
(87.7)
6.6%
30.3
(8.1)
22.2
(4.1)
18.1
24.5%
153.8p
151.0p
17.9%
114.7p
112.6p
328.1%
75.0p
34.5
(12.2)%
(5.0)
62.0%
29.5
(24.7)%
(6.1)
(32.8)%
23.4
(22.6)%
28.2%
174.1p
168.7p
24.1%
149.0p
144.4p
356.9%
71.0p
(3.7)ppt
(11.7)%
(10.5)%
(6.2)ppt
(23.0)%
(22.0)%
(28.8)ppt
5.6%
Annual Report and Accounts 2023 Brooks Macdonald Group plc
33
Financial review continued
FUM movement in the year
The table below shows the opening and closing FUM position and the flows for the year broken down by segment and by the
key services within UK Investment Management (“UKIM”).
Table 2 – Movements in funds under management
Opening
FUM
1 Jul 22
8,581
960
2,053
3,013
11,594
439
1,418
1,857
13,451
BPS
MPS Custody
MPS Platform
MPS total
UKIM discretionary
Funds – DCF
Funds – Other
Funds total
UKIM total
Year ended 30 June 2023 (£m)
Organic net new business
Q1
(6)
(3)
243
240
234
(14)
(20)
(34)
200
Q2
(82)
2
297
299
217
(17)
(24)
(41)
176
Q3
(43)
(7)
505
498
455
(20)
(14)
(34)
421
Q4
(76)
(17)
302
285
209
(35)
(37)
(72)
137
Total
(207)
(25)
1,347
1,322
1,115
(86)
(95)
(181)
934
Total
inv.
perf.
153
31
89
120
273
(15)
47
32
305
Closing
FUM
30 Jun 23
8,527
966
3,489
4,455
12,982
338
1,370
1,708
14,690
Total
mvmt
Total
organic
net new
business
(2.4)%
(2.6)%
65.6%
43.9%
9.6%
(0.6)%
0.6%
69.9%
47.9%
12.0%
(19.6)% (23.0)%
(3.4)%
(6.7)%
(8.0)%
(9.7)%
9.2%
6.9%
International
2,216
(9)
(20)
(48)
(40)
(117)
58
2,157
(5.3)%
(2.7)%
Total
15,667
191
156
373
97
817
363
16,847
5.2%
7.5%
Total investment performance
MSCI PIMFA Private Investor Balanced Index1
1 Capital-only index.
2.3%
1.6%
The Group achieved positive net flows of £0.8 billion or 5.2% during the year, up on the rate achieved in FY22 of 4.8%. Investment
performance contributed £0.4 billion, leading to an overall growth in the Group’s closing FUM of 7.5% from the start of the
financial year to £16.8 billion (FY22: £15.7 billion).
Investment performance for the year was 2.3%, surpassing the MSCI PIMFA Private Investor Balanced Index benchmark, which
increased by 1.6% over the same period. Investment performance was ahead of the ARC peer benchmark for the year, and
remains ahead of ARC for the 10-year measure, and in line with peers over the medium term.
Within UKIM, the BPS offering recorded net outflows of £0.2 billion during the year (FY22: £0.1 billion net inflows) with the
prevailing market volatility impacting investor sentiment and higher interest rates driving increased trends towards higher
cash holdings, debt repayment and investment in money market funds in the short term. Within BPS, we continue to see good
traction in our specialist products – the AIM Portfolio Service, the Responsible Investment Service, the Decumulation Service,
and the Court of Protection Service – all focused on meeting different client needs.
Platform MPS and, within that, the Group’s B2B offering BM Investment Solutions (“BMIS”) continued to grow and had a strong
year, recording net inflows of £1.3 billion (FY22: £0.8 billion), which has continued to be an area of strategic focus for the Group
in FY23.
The Funds business recorded total net outflows of £0.2 billion during the year (FY22: £0.1 billion), driven by market conditions
and in line with observed sector-wide behaviour.
The International business reported net outflows for the year of £0.1 billion (FY22: break-even), also driven by market and
economic headwinds.
34
Brooks Macdonald Group plc Annual Report and Accounts 2023
Revenue
Table 3 – Breakdown of the Group’s total revenue
Fee income
Transactional and FX income
Financial planning income (excluding acquisitions)
Financial planning income (acquired)
Interest income
Total revenue
FY23
£m
91.5
13.3
4.1
2.5
12.4
123.8
FY22
£m
101.8
14.7
4.1
–
1.6
122.2
Change
%
(10.1)
(9.5)
–
N/A
675.0
1.3
Total revenue for the Group increased by 1.3% to £123.8 million in FY23 (FY22: £122.2 million).
Fee income of £91.5 million declined by 10.1% compared to the prior year (FY22: £101.8 million) driven by lower average FUM
levels as a result of prevailing market conditions during the financial year, and the relative change in product mix, with the
growth in net flows primarily driven by the MPS service. The implementation of a new competitive rate card for the Cornelian
Risk Managed Funds range introduced in FY23 to drive asset growth has also contributed to the reduction of fee income in FY23.
Transactional and FX income reduced by 9.5% on last year due to lower trading volume in the year and the continuing trend of
clients moving to the fee-only rate card.
Financial planning fees totalled £6.6 million in FY23, representing an increase of £2.5 million on FY22, primarily attributable to
the income generated by the Integrity Wealth Solutions and Adroit Financial Planning businesses acquired during the year.
Interest income increased significantly from £1.6 million to £12.4 million, driven by the rise in the Bank of England base rates
during FY23, net of amounts paid out to clients on cash holdings.
Table 4 – Revenue, average FUM and yields
BPS fees
BPS non-fees (transactional & FX)
BPS non-fees (interest income)
Total BPS
MPS Custody
MPS Platform
MPS non-fees (interest income)
Total MPS
UKIM discretionary
Funds
Total UKIM
International fees1
International non-fees
Total International
Total FUM-related revenue
Financial planning income2
Other income
Total non-FUM-related revenue
Total Group revenue
Revenue
FY22
£m
59.9
12.7
1.0
73.6
6.1
3.5
0.3
9.9
Change
£m
(5.7)
(2.3)
8.7
0.7
(0.4)
1.7
0.8
2.1
83.5
12.8
96.3
18.5
2.1
20.6
116.9
4.1
1.2
5.3
122.2
2.8
(3.2)
(0.4)
(2.4)
2.1
(0.3)
(0.7)
2.5
(0.2)
2.3
1.6
FY23
£m
54.2
10.4
9.7
74.3
5.7
5.2
1.1
12.0
86.3
9.6
95.9
16.1
4.2
20.3
116.2
6.6
1.0
7.6
123.8
Average FUM
Yield2
FY23
£m
FY22
£m
Change
%
8,318
967
2,750
9,108
1,029
1,808
3,717
2,837
12,035
1,997
14,032
2,198
11,945
2,220
14,165
2,443
2,198
16,230
2,443
16,608
(8.7)
(6.0)
52.1
31.0
0.7
(10.0)
(0.9)
(10.0)
(10.0)
(2.3)
FY23
bps
65.1
12.5
11.7
89.3
59.1
18.8
11.7
32.3
71.7
48.3
68.4
73.3
18.9
92.2
71.6
FY22
bps
65.8
13.9
1.1
80.8
59.3
19.2
3.3
34.9
69.9
57.8
68.0
75.5
8.6
84.1
70.4
Change
bps
(0.7)
(1.4)
10.6
8.5
(0.2)
(0.4)
8.4
(2.6)
1.8
(9.5)
0.4
(2.2)
10.3
8.1
1.2
MSCI PIMFA Private Investor Balanced Index3
1,665
1,774
(6.1)
1 The revenue and yields in respect of the Lloyds Channel Islands previously acquired businesses are included within the International fees line in the above table
as these businesses are now fully embedded.
2 Following a corporate restructure of the business in FY22, fees earned on financial planning advice in the International business is included in the Annual
Management Charge and are no longer billed separately. Comparatives have been updated to reflect a like-for-like comparison with advice fees shown in the
International fees line for both years. As a result, the financial planning revenue in the table above relates to solely UK financial planning income.
3 Capital-only index (average based on quarterly closing balances).
Annual Report and Accounts 2023 Brooks Macdonald Group plc
35
Financial review continued
The Group’s average FUM fell by 2.3% from FY22 to FY23, ahead of the average monthly movement in the MSCI PIMFA Private
Investor Balanced Index, which fell by 6.1% over the same period.
The yield on BPS fees for UKIM decreased by 0.7bps to 65.1bps during the year (FY22: 65.8bps), driven by fee pressure and rates
achieved on new business. The BPS non-fee transactional and FX income yield reduced by 1.4bps in the year, as a result of lower
trading volumes and a relatively lower proportion of dealing accounts. On the other hand, the yield on interest income saw
significant growth from 1.1bps to 11.7bps driven by the increases in the Bank of England base rates during the year, partly offset by
interest paid out by the Group on clients’ cash balances.
The yield on MPS Custody of 59.1bps remained relatively stable on FY22, whereas the yield on MPS Platform fell slightly by
0.4bps to 18.8bps due to the impact of product mix as Platform MPS includes our BM Investment Solutions offering that attracts
relatively larger mandates and benefit from discounted tiered rates. The MPS non-fee yield on interest income increased
substantially, from 3.3bps last year to 11.7bps in FY23.
The Funds fee yields reduced by 9.5bps to 48.3bps during FY23, in line with expectations, driven by the Cornelian Risk Managed
Fund range moving onto a more competitive rate card in July 2022. As part of our growth strategy, we are targeting a significant
increase in market share with advisers and networks that predominately use multi-asset funds to deliver their investment offering.
International fee income yield reduced by 2.2bps to 73.3bps during FY23, driven by a change in mix and the impact of the timing
of inflows and outflows recorded during the year. Similarly to UKIM, non-fees income yield increased significantly by 10.3bps as
a result of the rise in rates earned on both GBP and foreign currency account balances, along with increased foreign exchange
trading activity.
Underlying costs
Total underlying costs increased by 6.6% from £87.7 million in FY22 to £93.5 million in FY23, including £2.0 million incurred in
respect of the two acquired businesses during the year. The key movements are set out in the bridge chart and explained below.
Table 5 – Underlying expenditure bridge FY23
£ millions
Investment net £5.8m
3.2
(1.1)
(0.6)
Organic
growth
Inorganic
growth
1.7
2.0
97
94
91
88
85
2.9
87.7
0.3
1.4
(4.0)
93.5
Integrity an d A droit
Ter m inated acq uisitio n costs
SS & C transitio nal
Inflatio nary payrises
F Y 22 expen diture
Migratio n to
service credits
acq uired costs
an d net ne w hires
SS & C platfor m
an d other o ne-off costs
P Y release of historic
Red uctio n in
FSC S lev y
tax-related provisio ns
Other net m ove m ents
N et decrease in
staff variable pay
F Y 23 expen diture
36
Brooks Macdonald Group plc Annual Report and Accounts 2023
Table 6 – Breakdown of net movement in total underlying costs into staff and non-staff costs
Staff costs increase/(decrease)
Non-staff costs increase
Total FY23 underlying cost increase
Total
£m
0.8
5.0
5.8
Integrity
& Adroit
£m
1.6
0.4
2.0
BM Core
£m
(0.8)
4.6
3.8
Staff costs
Total staff costs increased by £0.8 million to £56.1 million. Of this, £1.6 million was driven by the incremental costs arising from the
two acquisitions. Excluding acquired costs, staff costs decreased by £0.8 million, from £55.3 million to £54.5 million.
Excluding the impact of acquisitions, fixed staff costs increased by £3.2 million as a result of inflationary pay rises and the impact
of net joiners. The increase in fixed staff costs was offset by a decrease in the variable staff costs from £14.8 million to £10.9
million driven by the reduction in pre-variable pay profit. Within this, the share-based payments charge was down £0.8 million
on the prior year due to lapses recognised in FY23 as a result of leavers, and a reduction in the Group’s share price impacting the
associated employer national insurance contributions.
Non-staff costs
Non-staff costs amounted to £37.4 million, representing an increase of 15.4% on the prior year. Excluding the cost impact of
the two recently acquired businesses of £0.4 million, non-staff costs increased by £4.6 million or 14.2%. In addition to generic
inflationary increases seen across the industry during the year, the following items contributed to the net increase.
During the year, the Group migrated investment management processes onto the SS&C technology suite, delivering brand-
new capabilities and supporting the Group’s digital transformation, whilst providing a scalable platform for future growth. The
platform migration resulted in a net increase of £2.1 million in FY23, comprising £3.2 million additional spend on the enhanced
capabilities, offset by a transitional service credit of £1.1 million recognised during the embedding period.
Furthermore, during the year, the Group incurred £1.0 million in connection with terminated M&A processes and £0.7 million
in legal fees in respect of legacy matters cases, now fully settled. In the prior year, the Group recognised a release of historic tax
provisions amounting to £1.4 million, which was not repeated in FY23.
The above noted uplift in non-staff costs were offset by a reduction in Financial Services Compensation Scheme (“FSCS”) levy
of £0.6 million from £1.1 million in FY22 to £0.5 million in FY23 as a result of lower compensation forecasts expected by the FSCS
for FY23.
Profit before tax
Combined, the above gave rise to an underlying profit before tax for the year of £30.3 million, a decrease of 12.2% on the prior
year (FY22: £34.5 million) and resulting in a profit margin of 24.5%, down by 3.7 points on last year (FY22: 28.2%).
The Group’s statutory profit before tax was of £22.2 million (FY22: £29.5 million). A breakdown of the underlying adjustments
together with an explanation of each is included on page 39.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
37
Financial review continued
Segmental analysis
For FY23, the Group reported its results across two key operating segments, UK Investment Management and International.
The tables below provide a breakdown of the full-year performance broken down by these segments, with comparatives.
The operations in relation to Integrity Wealth Solutions and Adroit Financial Planning have been included in the UK Investment
Management segment from the respective acquisition dates.
UKIM, which includes the Group’s Private Clients business, reported a 2.5% increase in revenue, driven by higher financial
planning and interest income, offset by a decline in fee income and transactional income. Total underlying costs increased by
6.2% as a result of the factors outlined previously. This gave rise to an underlying profit for FY23 of £34.5 million (FY22: £36.0
million) and an underlying profit margin of 33.3%.
The volatile markets and economic uncertainties experienced in FY23 also impacted the International segment, which
reported a decrease in underlying profit to £0.1 million (FY22: £0.2 million). The decline in profitability was driven by a reduction
in fee income within revenues as discussed previously and an uplift in total costs, partly driven by legal and professional fees.
Table 7 – Segmental analysis
FY23 (£m)
Revenue
Direct costs
Operating contribution
Indirect cost recharges and net finance income
Underlying profit/(loss) before tax
Underlying adjustments
Statutory profit/(loss) before tax
UK
Investment
Management
103.5
(47.4)
56.1
(21.6)
34.5
(4.8)
29.7
International
20.3
(13.6)
6.7
(6.6)
0.1
(3.0)
(2.9)
Group and
consolidation
adjustments
–
(33.4)
(33.4)
29.1
(4.3)
(0.3)
(4.6)
Total
123.8
(94.4)
29.4
0.9
30.3
(8.1)
22.2
Underlying profit margin before tax
Statutory profit/(loss) margin before tax
33.3%
28.7%
0.5%
(14.3)%
N/A
N/A
24.5%
17.9%
FY22 (£m)
Revenue
Direct costs
Operating contribution
Indirect cost recharges and net finance costs
Underlying profit/(loss) before tax
Underlying adjustments
Statutory profit/(loss) before tax
Underlying profit margin before tax
Statutory profit/(loss) margin before tax
UK
Investment
Management
101.0
(43.4)
57.6
(21.6)
36.0
(1.9)
34.1
International
21.2
(12.8)
8.4
(8.2)
0.2
(3.0)
(2.8)
Group and
consolidation
adjustments
–
(31.2)
(31.2)
29.5
(1.7)
(0.1)
(1.8)
Total
122.2
(87.4)
34.8
(0.3)
34.5
(5.0)
29.5
35.6%
33.8%
0.9%
(13.2)%
N/A
N/A
28.2%
24.1%
Restatement of segmental view
We have undertaken a review of cost allocations across the Group to support branch and team level performance reporting,
ensuring the costs are allocated consistently across the Group. As a result, the prior year segmental reporting has been restated
to ensure consistent reporting with the current year reporting.
38
Brooks Macdonald Group plc Annual Report and Accounts 2023
Reconciliation between underlying and statutory profits
Underlying profit before tax is considered by the Board to be an appropriate reflection of the Group’s performance compared
to the statutory results as it excludes income and expense categories, which are deemed to be of a non-recurring nature or
a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage.
Underlying profit is deemed to be an alternative performance measure (“APM”); (refer to the Non-IFRS financial information
section on page 182 for a glossary of the Group’s APMs, their definitions, and the criteria for how underlying adjustments
are considered). A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2023 with
comparatives is shown in the table below:
Table 8 – Reconciliation between underlying profit and statutory profit before tax
Underlying profit before tax
Amortisation of client relationships
Dual running operating platform costs
Acquisition and integration-related costs
Changes in fair value and finance cost of deferred contingent consideration
Other non-operating income
Total underlying adjustments
FY23
£m
30.3
(5.7)
(1.6)
(0.6)
(0.2)
–
(8.1)
FY22
£m
34.5
(5.5)
(2.4)
–
(0.1)
3.0
(5.0)
Statutory profit before tax
22.2
29.5
Amortisation of client relationship contracts (£5.7 million charge)
These intangible assets are created in the course of acquiring funds under management and are amortised over their useful life,
which have been assessed to range between 6 and 20 years. The increase in the charge from last year is due to the additional
assets recognised as part of the acquisitions of Integrity Wealth Solutions and Adroit Financial Planning. This amortisation
charge has been excluded from the underlying profit since it is a significant non-cash item. (Refer to Note 14 to the Consolidated
financial statements for more details).
Dual running operating platform costs (£1.6 million charge)
The Group is in a partnership agreement with SS&C to transform our adviser and client service including the onboarding
process and digital experience, as well as enhancing our operating platform. As part of the transition process, the Group has
incurred net incremental costs in running two operating platforms concurrently, with the dual running costs finishing at the end
of H1 FY23. The dual running costs have been excluded from underlying profit in view of their non-recurring nature.
Acquisition and integration-related costs (£0.6 million charge)
These represent costs incurred in relation to the acquisitions of Integrity Wealth Solutions on 31 October 2022 and Adroit
Financial Planning on 15 December 2022. The acquisition-related costs incurred include stamp duty and legal fees and the
integration-related costs include the cost of retention-based share option awards.
Changes in fair value and finance cost of deferred contingent consideration
(£0.2 million charge)
This comprises the associated net finance costs arising on deferred contingent consideration payments from acquisitions
carried out by the Group, together with their fair value measurements, where applicable. The deferred contingent consideration
for Integrity Wealth Solutions was revalued at 30 June 2023. (Refer to Note 24 of the Consolidated financial statements for
more details).
FY22 – Other non-operating income (£3.0 million credit)
During the prior year ended 30 June 2022, the Group received confirmation from HMRC that the supply of certain Group
services was exempt from VAT. As a result, the Group received a refund from HMRC in respect of VAT arising on those services
during the period from 1 July 2017 to 30 June 2020 of £3.0 million. This was treated as an adjusting item to the underlying profit
in view of its non-recurring nature.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
39
Financial review continued
Reconciliation between profits and earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
The tables below provide reconciliations between the Group’s underlying and statutory profit before tax and the underlying
and statutory earnings before interest, tax, depreciation and amortisation (“EBITDA”), which constitutes an APM, and which the
Board considers to be an appropriate alternative measure to the Group’s BAU performance.
Table 9 – Underlying EBITDA reconciliation
Underlying profit before tax
Add back:
Net finance (income)/costs
Depreciation and amortisation
Underlying EBITDA
Table 10 – EBITDA reconciliation
Statutory profit before tax
Add back:
Net finance (income)/costs
Depreciation and amortisation
EBITDA
FY23
£m
30.3
(0.9)
3.8
33.2
FY23
£m
22.2
(0.8)
9.5
30.9
FY22
£m
34.5
0.2
4.0
38.7
FY22
£m
29.5
0.3
9.5
39.3
Change
%
(12.2)
(550.0)
(5.0)
(14.2)
Change
%
(24.7)
(366.7)
–
(21.4)
Taxation
The Group’s total tax charge for the year was £4.1 million, representing a decrease of 32.8% from last year (FY22: £6.1 million). The
Group’s underlying effective tax rate has decreased from 20.8% to 19.7% and the statutory effective tax rate has decreased from
20.8% to 18.4%. The reduction is primarily due to an R&D credit on FY22 qualifying expenditure recognised as a prior period tax
adjustment in FY23, and additional deferred tax credits recognised in the current year. (Details on taxation are provided in
Note 9 of the Consolidated financial statements).
Earnings per share
Basic statutory earnings per share for the Group in FY23 was 114.7p (FY22: 149.0p). On an underlying basis, basic earnings per
share was 153.8p, a decrease of 11.7% on the prior year (FY22: 174.1p) driven by the decrease in underlying earnings. (Details on the
basic and diluted earnings per share are provided in Note 12 of the Consolidated financial statements).
Dividend
The Board recognises the importance of dividends to shareholders and the benefit of providing sustainable shareholder
returns. In determining the level of dividend in any year, the Board considers a number of factors, such as the level of retained
earnings, future cash commitments, statutory profit cover, capital and liquidity requirements and the level of profit retention
required to sustain the growth of the Group. The Board has proposed a final dividend of 47.0p per share (FY22: 45.0p).
Including the interim dividend of 28.0p per share (FY22: 26.0p), this results in a total dividend for the year of 75.0p per share
(FY22: 71.0p), which is an overall increase of 4.0p or 5.6%. (Refer to Note 13 to the Consolidated financial statements for more
details). The recommended dividend is subject to shareholders’ approval, which will be sought at the Company’s Annual
General Meeting on 26 October 2023.
Financial position and regulatory capital
Net assets increased by 6.0% to £157.3 million at 30 June 2023 (FY22: £148.4 million), demonstrating the Group’s continued strong
financial position. The Group’s tangible net assets (net assets excluding intangibles) was £56.7 million at 30 June 2023 (FY22:
£62.5 million). As at 30 June 2023, the Group had regulatory capital resources of £64.6 million (FY22: £70.0 million). As at 30
June 2023, the Group had an own funds adequacy ratio of 328.1% (FY22: 356.9%). The own funds adequacy ratio is defined as the
Group’s own funds as a proportion of the fixed overhead requirement. The total net assets and the own funds adequacy ratio
calculation take into account the respective period’s profits (net of the declared interim dividends) as these are deemed to be
verified at the date of publication of the annual results.
40
Brooks Macdonald Group plc Annual Report and Accounts 2023
Table 11 – Own funds reconciliation
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Intangible assets (net book value)
Deferred tax adjustment
Own funds
FY23
£m
0.2
81.8
9.1
66.2
157.3
(100.6)
7.9
64.6
FY22
£m
0.1
79.1
10.0
59.2
148.4
(85.9)
7.5
70.0
Brooks Macdonald Asset Management Limited, the Group’s main operating subsidiary, is an IFPRU 125k Limited Licence Firm
regulated by the Financial Conduct Authority (“FCA”). In view of this, the Group is classified as a regulated group and subject
to the same regime. As required under FCA rules, and those of both the Jersey and Guernsey Financial Services Commission,
the Group assesses its regulatory capital and liquidity on an ongoing basis through the Internal Capital Adequacy and Risk
Assessment (“ICARA”) and Adjusted Net Liquid Asset (“ANLA”) assessments, which include performing a range of stress tests and
scenario analysis to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. Surplus
levels of capital and liquidity are forecast, taking into account known outflows and proposed dividends to ensure that the Group
maintains sufficient capital and liquidity at all times.
The FY22 ICARA review was conducted for the year ended 30 June 2022 and signed off by the Board in December 2022.
Regulatory capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions
and disposals where applicable, as well as budgeted and forecast trading results. The Group’s IFPR Public Disclosures are
published annually on the Group’s website (www.brooksmacdonald.com) and provide further details about the Group’s
regulatory capital resources and requirements. The Group monitors a range of capital and liquidity statistics on a daily and
monthly basis.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation from operations. Total cash resources at the end of the year were
£53.4 million (FY22: £61.3 million) and the Group had no borrowings at 30 June 2023. This reduction was contributed by the
Group financing the recent acquisitions of Integrity Wealth Solutions and Adroit Financial Planning from its own resources,
resulting in a net cash outflow of £15.1 million.
The Group incurred capital expenditure of £3.7 million (FY22: £3.2 million). This comprised technology-related development
of £3.0 million (FY22: £2.9 million), property-related costs of £0.5 million (FY22: £0.2 million) and IT and office equipment of
£0.2 million (FY22: £0.1 million). The technology-related spend was primarily incurred in connection with our partnership with
SS&C and amortisation started at the end of July 2022 following the migration, with the capital expenditure amortised over the
remaining eight years of the ten-year agreement entered into with SS&C.
FY24 guidance and outlook
Looking ahead, financial markets remain volatile presenting short-term headwinds, expected to impact flows, particularly in H1
FY24. Moreover, the continued change in product mix is expected to impact fee yields. Whilst the Group continues to focus on
cost discipline, inflationary cost pressures are expected to lead to mid-single digit cost growth.
Despite the short-term headwinds on financial performance, the Group continues to be well placed to deliver on its ambitious
strategic objectives in the medium term and continue to grow the business.
Andrea Montague
Chief Financial Officer
13 September 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
41
Risks
A dynamic approach to risk management in order to support positive client outcomes
We continue to develop and enhance our risk management processes across the Group as the risk landscape under which
the firm operates changes, and the impact of the current geopolitical and macroeconomic uncertainties are monitored.
The Group continues to respond to regulatory developments and has implemented changes to our risk management
framework to reflect the requirements of these new regulations, such as the Task Force on Climate-related Financial Disclosures
(“TCFD”) and the Consumer Duty. The Group remains focused on embedding and enhancing the risk management framework,
through its work on resilience, third parties, and client outcomes.
The Group has also maintained its drive towards efficient, data-driven and evidenced-based risk management, which facilitates
the transition to a more agile and dynamic approach to identifying, assessing, managing and monitoring risks.
Overall, the Group remains well capitalised and liquid, with significant buffers above all regulatory requirements.
Risk identific
ati
o
n
R
i
s
k
a
p
p
e
t
i
t
e
Risk
management
methodology
Oversight
(Governance)
Boards and
Committees
Rules and
delegated
authorities
Policies
g
o rti n
R e p
s
n
o
i
t
c
a
l
a
n
o
i
t
i
d
d
A
C
o
n
tr
ols assessment
aly sis
n
k a
R i s
Insight
(Management
information)
Past
Errors, breaches,
near misses and
complaints
Present
Risk profiles and
qualification
Future
Predictor
events
Systems and controls
Communication, education, training and guidance
Culture
42
Brooks Macdonald Group plc Annual Report and Accounts 2023
How we manage risk
The Group risk management framework
Risk management starts with oversight through
appropriate governance; an efficient board
and committee structure, with individual and
collective roles and delegated authorities and a
set of core policies to provide guidance to staff.
Effective risk management relies on insight
through robust and timely management
information. We manage our risks by learning
lessons from past events, such as errors,
breaches, near misses and complaints, by
conducting point-in-time risk assessments
and attempting to predict what the future risk
landscape might look like through our suite of
key indicators.
The risk management methodology within the
Group’s risk management framework (“RMF”)
consists of the following six interlinked steps:
Risk identification. This takes place through
regular business monitoring and periodic
reviews, including risk mapping exercises and
the risks arising from change or new products
and services.
Risk appetite. Once we have identified risks,
we set an appetite for each material risk. This
defines the amount of risk that the Board
is prepared to accept in order to deliver its
business objectives. Risk appetite reflects
culture, strategic goals and the existing operating
and control environment.
Risk analysis. Having set the risk appetite, we
can assess the impact and probability of each
material risk against the agreed risk appetite.
This can include the quantification of capital risk
as part of the Internal Capital Adequacy and Risk
Assessment (“ICARA”).
Controls assessment. We also assess the
effectiveness of controls in reducing the
probability of a risk occurring, or should it
materialise, in mitigating its impact.
Additional actions. Where differences exist
between our risk appetite and the current
residual risk profile, we take action to either
accept, avoid or transfer part or all of those
risks that are outside our risk appetite, or to
reconsider the risk appetite.
Reporting. Ongoing reporting of risks to senior
management provides insight to inform
risk-based decision-making and allocation of
resources to achieve business objectives.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
43
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 aim to operate a sustainable
business that conducts itself in a reputable and prudent
manner, taking into account the interests of our clients
through providing products and services suited to
their needs and risk profile, which demonstrate value
for money.
› As the business continues to grow through sustainable
organic growth and strategic value-adding acquisitions,
the ORAS helps ensure our key stakeholder obligations
are met, supported by internal policies and regulatory
requirements. We commit to using this framework to
ensure we make strategic and business decisions that do
not exceed our overarching risk appetite.
›
In all of the Group’s decisions and operations, we balance
risk versus reward and we consider the below three
dimensions.
Client outcome
› We put client interests at the heart
of everything we do to ensure
appropriate client outcomes.
Financial performance
and resources
› We optimise profitability and
use resources efficiently to drive
financial performance.
› We, at all times, maintain adequate
capital and liquid assets to meet
financial and funding obligations as
they fall due.
› We invest in the development and
wellbeing of our employees.
Client
outcome
Control
environment
Financial
performance
and resources
Control environment
› We, at all times, operate within our risk appetite,
operational risk parameters and regulatory framework,
ensuring a robust control and oversight environment.
44
Brooks Macdonald Group plc Annual Report and Accounts 2023
Key risks
We have identified our risks at Group and business line levels to help manage our key risks in a consistent and uniform way with
oversight from relevant Committees and Boards.
Group level risks
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.
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 have a financial
impact.
Key risks identified
by risk management
framework
Change since
last year
Rationale
for change
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
Unchanged
Unchanged
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
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
Failed trades
Increasing
Indirect market risk
associated with advising on
client portfolios
Indirect market risks
associated with dealing
Indirect market risk
associated with managing
client portfolios
The risk continues to
remain unchanged
given the strong
credit risk control
environment, including
ongoing monitoring
and due diligence on all
counterparties.
The Group has adequate
liquidity resources
significantly above its
Minimum Liquidity
Requirement and
maintains appropriate
banking facilities. The
Group regularly monitors
forecast against actual
cash flows and matches
the maturity profiles
of financial assets and
liabilities. The Group
has robust contingency
funding arrangements,
which are tested on a
periodic basis.
The continued conflict
in Ukraine and the
associated geopolitical
tensions, coupled
with significant global
inflationary pressure,
gives rise to increased
volatility and heightened
downside risk.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
45
Risks continued
Business level risks
Definition
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.
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.
Key risks identified
by risk management
framework
Change since
last year
Rationale
for change
› Adviser concentration
Unchanged
› Acquisitions
›
›
›
›
Business growth
Extreme market events
Investment performance
Product governance
›
Suitability and conduct risk
Unchanged
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.
› Data quality
›
›
›
Cyber/data security
Change management
IT infrastructure and
capability
› Operational maturity
Unchanged
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.
9. Climate risk
The potential financial impacts
associated with the transition to
a low-carbon economy and the
longer-term physical climate risks.
›
›
›
›
›
›
Third-party suppliers
People
Resilience
Prudential requirements
Unchanged
Reputational risk
Financial crime
Unchanged
› Governance
›
›
›
›
›
›
Legacy issues
Regulatory, tax and legal
compliance
Resilience
Investment risk
People
Third-party suppliers
› Operation maturity
Unchanged
46
Brooks Macdonald Group plc Annual Report and Accounts 2023
Despite current
macro-economic and
geological challenges,
the Group continues to
post positive net flows,
therefore highlighting
the resiliency of its
business model.
The Group continues
to work on numerous
initiatives to promote
good risk and
compliance culture and
awareness to ensure
positive client outcomes.
The Group continues to
monitor and enhance
its oversight framework
to mitigate any external
threats brought about by
the current geopolitical
environment, coupled
with idiosyncratic risks
linked to the Group’s
transition to a new
operating model.
The Group continues
to maintain capital
resources and liquid
assets above its
minimum regulatory
requirement and internal
thresholds.
This risk continues to
remain unchanged
given that the regulatory
landscape and focus on
the wealth management
industry has not
changed.
This risk remains
unchanged as the
business embeds the
various TCFD disclosure
requirements.
Emerging risks
Definition
Context
10. Margins pressure
The potential risk to profits as a result of
market instability.
A declining bond market (owing to rising interest rates) and an unstable
equity market, may have an impact on profit margins.
11. Geopolitical landscape
In light of an ongoing energy crisis and cost-of-
living issues.
Geopolitical events have a direct impact on market risk listed previously.
Prolonged economic downturn also has an impact on client sentiment
and thus business and strategic risk as listed previously.
12. Generational wealth change
The potential decrease in AUM as financial
assets are passed down from one generation to
the next.
With generational wealth poised to change hands, primarily from
the baby boomers to Gen X and millennials through the next decade,
younger investors may have different priorities and views on how their
inheritance is managed.
13. Cyber threats
The threat of a malicious attack by individuals
or organisations attempting to gain access
to the Company’s network to corrupt data,
disrupt, and steal confidential information.
With the continuing geopolitical events, the cyberthreat landscape is
worsening. There has been an increase in the sophistication of cyber
threat activity.
14. Disruptive technologies
The risk that innovative technologies
significantly alter the way businesses operate.
With the introduction of new technologies such as AI, the industry is
being impacted particularly in automated trading, investment advice,
fraud detection, customer service, and portfolio management.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
47
Viability statement
In accordance with the UK Corporate Governance Code,
the Board has assessed the Group’s viability over a five-year
period. The decision to do so is to be aligned with the Group’s
strategy, its budgeting and forecasting process and the
scenarios set out in the 2022 Internal Capital Adequacy and
Risk Assessment (“ICARA”).
The Board has carried out a robust assessment of the
principal risks facing the Group along with the stress tests
and scenarios that would threaten the sustainability of its
business model, future performance, solvency or liquidity.
This assessment is based on the Group’s Medium-Term Plan
(“MTP”), the ICARA and an evaluation of the Group’s emerging
and principal risks, as set out in the Risks section on pages 42
to 47 and outlined in the Risk and Compliance Committee
report on pages 112 to 115.
In assessing the future viability of the overall business, the
Board has considered the current and future strategy. The
Board has also considered the business environment of the
Group and the potential threats to its business model arising
from regulatory, demographic, political and technological
changes. Moreover, the Board’s assessment considered the
current macroeconomic environment, the impact of volatile
markets and the prevailing high inflation and interest rates,
on the Group’s profitability, regulatory capital and liquidity
forecasts. The Board’s assessment of the Group’s capital and
liquidity position also considers the implications of meeting
the Group’s proposed interim and final dividend pay-outs.
The five-year MTP forms part of the Group’s annual business
planning process. The model translates the Group’s current
and future strategy into a detailed year-one budget, followed
by higher-level forecasts for years two through to five.
The combination of this detailed budgeting, longer-term
forecasting and various stress tests provides a transparent
and holistic view of the forward-looking financial prospects
of the Group. The Board reviews and challenges the Group’s
MTP annually. The MTP covering the five-year period
from FY23 to FY27, which underpins the 2022 ICARA was
challenged and approved by the Board in June 2022. The MTP
for the five-year period covering FY24 to FY28 was reviewed
and challenged by the Board in June 2023.
In addition to the annual MTP preparation process, a re-
forecast is carried out by management and reviewed by
the Board on a quarterly basis. These reflect updates for
prevailing trading conditions and other changes required to
the budget assumptions set at the start of the year.
As part of the ICARA, the Group models a range of downside
scenarios and a severe but plausible stress scenario designed
to assess the Group’s ability to withstand a market-wide shock,
such as a sharp market decline triggered by a global recession;
Group-specific stresses, such as the loss of an investment
management team or key introducer, and a combination
of both.
The Group modelled a multi-layered scenario involving a
significant decline in financial markets over a five-year period
(a drop of 23% and 5% in years one and two respectively,
followed by a gradual recovery), combined with the loss of a
key investment management team. This scenario would have
a material impact on the Group’s profitability compared to the
MTP base case, giving rise to a small regulatory capital deficit
by the end of FY27, before putting in place any mitigating
management actions.
Management identified a number of mitigating actions that
could be implemented in the event of such severe stresses.
In this scenario, the mitigation actions implemented were to
reduce discretionary compensation and reduce the dividend
payments to ensure a capital surplus was maintained against
the minimum capital requirement. No additional actions
were taken with regards to profitability as although the Group
experiences a sharp decline in profitability, the reduction was
temporary, and profits were forecast to increase from FY25
onwards. In the Group’s modelling on the above-mentioned
multi-layered scenario, post the implementation of the
management mitigating actions the Group would revert to
a healthy capital surplus position. If deemed appropriate,
mitigating actions could include a broader and more
significant reduction in the Group’s cost base (IT, property,
change initiatives and others). The implementation of the
above actions depends on the nature of the specific stress
events and the time frames over which they occur.
These scenarios are refreshed on a regular basis to ensure
they remain relevant and continue to be a suitable tool for
developing our controls and mitigating actions. The latest
ICARA refresh exercise took place in spring 2023, where it
was confirmed that the stress tests modelled previously in
the 2022 ICARA were still deemed appropriate and materially
relevant. Management also considers a reverse stress case
and carries out an assessment of the cost to the Group of a
wind-down in the event of a non-recoverable shock to the
operating model. Moreover, management has identified a
number of actions that could be implemented in the event of
severe stresses.
Taking into consideration the assessment of the above
factors, including the results of the latest ICARA, the Group’s
risk management framework and the mitigating actions that
can be put in place, the Board has reasonable expectations
the Group will be able to continue in operation and meet its
liabilities as they fall due over the period under assessment.
This assessment also supports the Group’s Consolidated
financial statements to be prepared on a going concern
basis, as discussed in Note 2 of the Consolidated financial
statements.
48
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
49
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 8 and 9, the CEO’s review
on pages 28 to 31, and the Corporate responsibility report on
pages 54 to 67.
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 Consumer Duty case study on
pages 52 and 53.
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.
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. Since the
COVID-19 pandemic, online interaction
has complemented face-to-face
meetings, with the hybrid environment
giving more choice to clients. We have
also increased the content available
to clients on our website, including
providing podcasts and regular market
commentary.
Our desire to give our clients
better access to information
about their investments
resulted in the development
of the InvestBM platform as
part of our partnership with
SS&C. ESG continues to be an
important topic for our clients
and is reflected in the Group’s
ESG strategy, objectives and
initiatives.
50
Brooks Macdonald Group plc Annual Report and Accounts 2023
How we engage with our stakeholders and make informed decisions
Why we engage
How we engage
Outcomes
Intermediaries
Shareholders
Employees
Our focus is on
working with
intermediaries
(financial advisers,
trustees, etc.) to
provide investment
management
services to their
clients, freeing up the
intermediary’s time
to focus on client
service and financial
planning. We work
closely with advisers
to help them make
their businesses
more successful
which in turn helps
us achieve our
growth ambitions.
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.
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 work closely with our advisers,
offering them a range of services, and
aim 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 a more arm’s length provision of our
consistent high-quality investment
management to others. In uncertain
times and difficult markets, we review
the frequency and method of adviser
engagement, making use of investment
bulletins, webinars and online
academies, amongst others.
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. In response
to demand from advisers,
we continue to develop
our Decumulation service,
allowing clients to secure a
flexible, long-term income from
their investments.
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.
The wellbeing of our staff is a
key focus for the Group. We run
regular employee engagement
surveys, the results of which
are closely monitored by the
Executive Committee and
other senior leaders. The
results continue to show strong
engagement across the Group,
and the results of the recent
survey can be seen on page 56.
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 is
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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
51
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
Regulated entities within the Group
correspond with relevant regulators
during the financial year in respect
of their supervision activity. We also
send proactive correspondence to
our regulators throughout the year
with respect to any changes and
developments in our business.
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 to
both support our
community and to
reduce our impact on
the environment as
much as possible.
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 and we regularly review our
processes to see if we can reduce our
impact on the environment.
We make all relevant
regulatory reporting
submissions and respond to
any regulatory requests.
We have a constructive
relationship to ensure
alignment with the relevant
regulatory frameworks and
have met the regulators’
expectations on the topics of
discussion.
We regularly attend meetings
with, and provide input to,
the industry bodies and
associations we are affiliated
with to ensure we are engaged
with the latest issues impacting
our industry and clients.
The Foundation made
donations of over £25,000
during the year to a variety of
charities that are important to
our people, including 2 Wish
Upon A Star, Stand Against
Racism, and Inequality &
Safer LBG.
We have introduced a
structured procurement
process in order to ensure
that we select business
partners who are aligned with
our beliefs.
Stakeholder engagement in action
Consumer Duty and its impact on our stakeholders
Brooks Macdonald is committed to implementing the new Consumer Duty rules in a way that will deliver good
outcomes for its clients.
For new and existing products or services that are open to
sale or renewal, the following FCA rules came into force on
31 July 2023:
› A new Consumer Principle that requires firms to act to
deliver good outcomes for retail customers.
›
›
Cross-cutting rules providing greater clarity on our
expectations under the new Principle and helping
firms interpret the four outcomes.
Rules relating to the four outcomes we want to see
under the Consumer Duty. These represent key
elements of the firm-consumer relationship, which are
instrumental in helping to drive good outcomes for
customers.
These four outcomes relate to:
1. products and services
2. price and value
3. consumer understanding
4. consumer support
The FCA’s rules require firms to consider the needs,
characteristics and objectives of their customers, including
those with characteristics of vulnerability, and how they
behave at every stage of the customer journey. As well as
acting to deliver good customer outcomes, firms need to
understand and evidence whether those outcomes are
being met.
52
Brooks Macdonald Group plc Annual Report and Accounts 2023
Clients
Consumer Duty places a significant emphasis on enhancing
client protection and ensuring fair treatment of clients. Brooks
Macdonald recognises the importance of fostering trust
and maintaining transparency with its clients. Through the
implementation of Consumer Duty, Brooks Macdonald is
committed to providing transparent communication to clients
about fees, charges, and services. This aligns with the Consumer
Duty principles of clear information, reasonable value, and
appropriate support. We want to empower clients to make well-
informed decisions by ensuring they understand our offerings
and receive the assistance they require. We have processes
in place to ensure clients with characteristics of vulnerability
are not disadvantaged. Brooks Macdonald appreciates that
vulnerable clients may have needs that are more challenging
and complex than the average client. Our staff will respond
in a considered and tailored way and facilitate the necessary
arrangements to assist vulnerable clients. By enhancing the
client experience, Brooks Macdonald expects to build stronger
relationships and improve client satisfaction.
Regulators
Consumer Duty regulations aim to
enhance consumer protection and
prevent potential misconduct within
the financial sector with the new rules
setting higher and clearer standards
of consumer protection across
financial services and requiring firms
to put their customers’ needs first.
As a compliant organisation, Brooks
Macdonald welcomes the regulatory
framework associated with Consumer
Duty. By improving on our governance
and robust compliance processes,
ensuring fair treatment, and maintaining
transparency, Brooks Macdonald will
strengthen its relationship with regulators.
This will foster a culture of trust and
collaboration, leading to a more stable and
well-regulated financial industry.
Community and environment
Brooks Macdonald acknowledges its responsibility towards
the community and environment. By prioritising Consumer
Duty, the Company commits to promoting responsible financial
practices that align with sustainable development goals. This
includes offering environmentally friendly investment options
and supporting initiatives that contribute positively to the local
community. Our Responsible Investment Service (“RIS”) is
already a demonstration of Brooks Macdonald’s increasing focus
on sustainability factors throughout the advice and portfolio
management process. Brooks Macdonald’s adherence to
Consumer Duty will drive social and environmental sustainability,
benefitting both the community and environment, whilst also
delivering on our financial objectives and helping our customers to
achieve their own.
Advisers
Advisers play a crucial role in the financial decision-
making process for clients. Consumer Duty emphasises the
importance of providing suitable and tailored advice that
meets the individual needs of clients. Brooks Macdonald
recognises the significance of well-trained and ethical advisers.
Through Consumer Duty, Brooks Macdonald will continue
to ensure that the advisers we work with have the tools they
need to deliver for clients and that they are equipped with
the necessary knowledge to deliver good outcomes for their
clients. Brooks Macdonald have a new ‘Due diligence toolkit’
page on our website which satisfied the FCA’s requirement
to “share with distributors by the end of April 2023 the
information necessary for them to meet their obligations
under the Duty”. We also have resources on our website to
help advisers better understand and tackle the issues behind
client vulnerability.
Shareholders
Consumer Duty can have a positive
impact on shareholder value by
fostering a culture of trust and
integrity. As Brooks Macdonald
demonstrates its commitment
to Consumer Duty, shareholders
can expect improved business
performance, increased client
retention, and enhanced brand
reputation. The emphasis on fair
treatment and transparency will
attract responsible investors who
prioritise ethical business practices.
Shareholders will benefit from
a more sustainable and resilient
financial institution.
Consumer
Duty and its
impact on our
stakeholders
Employees
Consumer Duty is closely tied to an organisation’s
internal culture, values and the treatment of its employees.
Brooks Macdonald recognises the importance of an engaged
and motivated workforce. By prioritising Consumer Duty,
Brooks Macdonald will empower its employees to act in
the best interest of clients, fostering a culture of ethics and
professionalism. Enhanced training programmes and clear
guidelines on fair treatment will ensure employees feel
supported and aligned with Brooks Macdonald’s commitment
to Consumer Duty.
Consumer Duty serves as a guiding principle for Brooks
Macdonald in its interactions with clients, the community and
environment, regulators, advisers, shareholders, and employees.
By prioritising consumer protection, fair treatment, transparency,
and responsible financial practices, Brooks Macdonald aims to
create a positive impact across its stakeholder groups. Through
the implementation of Consumer Duty, Brooks Macdonald
expects to build stronger relationships, improve business
performance, and contribute to a more sustainable and well-
regulated financial services industry.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
53
Corporate responsibility report
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 Group continues 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
Pillars
Our people
Our people are our greatest
strength. We are focused on
developing our people to be the
best they can be.
Our community
We support and invest in our
communities and encourage
our people to do the same.
Our environment
›
Embed our promise to support
Brooks Macdonald being an inclusive,
inspiring place to work.
› Develop leaders who prioritise
engagement, diversity and wellbeing.
›
Increase employee engagement.
› Have fun and celebrate our
achievements.
›
›
›
›
Continue to develop the BM
Foundation.
Support community causes and
events.
Encourage staff to complete
voluntary work.
Continue to evolve our
environmental procurement strategy
and apply the waste hierarchy to all
we do in our offices.
› Our target remains to be net zero
across all our operations by 2030.
›
›
Continue reducing our Tier 1 and 2
impacts.
Identifying Tier 3 data to target and
outline any gaps.
We are a responsible Group
committed to improving our
environmental and social impact.
54
Brooks Macdonald Group plc Annual Report and Accounts 2023
›
›
›
›
›
›
Reviewed and improved our Your
Team At Its Best training programme
for people managers, ensuring how
we manage is aligned to our guiding
principles.
Improved on our employee
engagement score.
Further embedded our At Our Best
performance management approach.
Continued to enhance our employee
policies and benefits.
The BM Foundation made over 25
donations, totalling over £25,000
during the year.
The Group matches all donations
made by the BM Foundation.
› All staff are able to use a paid
volunteering day.
›
›
›
›
The Group continued its partnership
with the Dame Kelly Holmes Trust
in FY23.
Employees voted for two further
charities to fund raise and support
during the year.
Reused office refurbishments and
transferred excess furniture to other
offices as part of our Wales office
refurbishment.
Increased utilisation of our electric
green car scheme where colleagues
can reduce the cost of purchasing
a car, whilst benefitting the
environment.
› Our overall energy consumption has
remained within a 1% margin and our
total greenhouse gas emissions have
decreased by 7%.
June 2023 ‘Speak Up’
employee engagement score:
69
(FY22: 67)
June 2023 ‘Speak Up’
employee response rate:
81%
(FY22: 84%)
Number of employees by age
(years) (as at 30 June 2023):
18-29
30–39
40–49
120
154
113
50–59
60+
Total
98
27
512
Number of employees by
length of service (years)
(as at 30 June 2023):
Under 1 year 85
1–9 years
340
10–19 years 68
20–29 years
30+ years
Total
12
7
512
Annual Report and Accounts 2023 Brooks Macdonald Group plc
55
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 customers.
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 want to make
a difference for our customers and their advisers.
Our Chief People Officer, Tom Emery, left the business at the
end of the 2022 calendar year, and was replaced by Simon
Broomfield in a new, expanded role of General Counsel
and Chief People Officer. We remain focused on ‘realising
ambitions and securing futures,’ both for our customers and
our people.
Our culture
We are proud of the strong culture we have built at Brooks
Macdonald. We know culture is a primary driver for attracting
talent, and for achieving the right outcomes for our customers.
As our business grows and evolves, we work hard to maintain
the culture and values that are important to us.
Guiding principles
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 customers, partners, and each other. Our values are
absolutely non-negotiable.
The guiding principles form the foundation of our capabilities
and performance evaluation frameworks. When recruiting,
we assess candidates against our foundations to make sure
Engagement with our people
June 2023 Speak Up score – 69 (+2 from June 2022)
we recruit people who share our values. When we evaluate
our people, we review performance against the foundations,
not just against financial targets.
In November each year we celebrate our annual ‘above and
beyond’ awards, nominated and voted for by our people.
We present awards for each of our guiding principles, with
our diamond award presented to the person who has
shown outstanding and unwavering commitment to all four
throughout the year.
Speak Up highlights
81% of our people completed our most recent Speak Up
survey in June 2023, compared to 84% in June 2022, and 74%
in November 2021. This high level of engagement with the
survey shows it is a trusted feedback channel that our people
are comfortable using.
Our survey asks questions across a broad range of areas
important to our people, including strategy, diversity, equity
and inclusion (“DE&I”), leadership, wellbeing (including
flexible working), 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.
Overall engagement
Advocacy
Diversity and inclusion
Wellbeing
10%
10%
4%
11%
22%
17%
6%
24%
68%
73%
85%
70%
Positive
Neutral
Negative
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Brooks Macdonald Group plc Annual Report and Accounts 2023
The results show continued strong engagement across the
Group. Particularly pleasing are the results for DE&I across
the Group, which show that 85% of our people responded
positively, and only 4% reported negatively on diversity and
inclusion in our organisation. There are some variances
between individual business and functional scores but no
pronounced differences. The survey continues to illustrate
that what people love most about working at Brooks
Macdonald are the people and the culture.
We produce individualised reports for each business area so
that individual managers can focus on the areas pertinent to
their people. This allows us to gain further insight and put in
place robust actions to improve engagement in each area.
Leadership development
We know that our people leaders set the tone and drive the
culture. We focus leadership skills on three core areas: leading
the business, leading others, and leading self.
We have continued our leadership development programme,
‘your team at its best’, which was originally rolled out during
2022. ‘Your team at its best’ is a leadership development
programme that aims to support all people leaders. The
programme focuses on:
› What it means to be a leader at Brooks Macdonald
alignment to our vision, guiding principles and leadership
development framework, plus the latest theory and
insights.
› How to ensure your team is at its best everyday
conscious role modelling, inspiring trust, ownership and
responsibility, resilience, and personal/team development.
›
›
Processes and procedures
everything leaders need to know and where to find it, the
culture of performance management, and signposting of
further support.
Live examples and practice sessions
bringing to life key learning using ‘live’ examples in break-
out groups.
The programme is in the form of a self-directed learning guide
as well as facilitated face-to-face training.
In addition, our ‘your team at its best’ community provides
support through insights, discussion, and best practice for
all leaders, using the Microsoft Teams platform. We hold
‘your team at its best’ group sessions periodically so that
all new leaders joining the organisation experience the
same development programme. This helps us to maintain a
consistent approach to leadership across our business.
We are committed to developing the leadership capability of
our people, developing high-performing teams, and a high-
performance culture, whilst maintaining a psychologically
safe and inclusive team environment. We focus on effective
coaching for leaders, which research suggests is a key element
of effective leadership.
Talent and development
Nurturing our employees to reach their full potential is
central to our success as a business and a clear focus of our
people strategy.
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, flagship development programmes,
coaching and various industry events. We foster a culture
of on-the-job learning and empower people managers to
support the personal development of their people.
Last year we introduced ‘at our best’; a performance
management framework that focuses on nurturing a
coaching culture for high performance that encourages
everyone to be at their best. The framework provides a
flexible tool focused on more regular, quality conversations
and better access to personal development tools for all our
people to use. The key elements of the ‘at our best’ framework
are our foundations, and the group capability framework,
which are based on our guiding principles. The performance
of our people is measured against these foundations, and our
managers are held accountable for investing time and focus
into the leadership and growth of their teams.
’At our best’ works together with ‘your team at its best’ and
forms the basis of ongoing performance conversations, as well
as performance evaluation and talent mapping.
We recognise the value in taking on talented people at
the beginning of their careers and our emerging talent
programmes are central to our aim of ‘realising ambitions and
securing futures’. Graduate 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 will support the development of
our emerging talent pipeline.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
57
Corporate responsibility report continued
Investment 20/20
One of the ways we develop our emerging talent is through
our successful partnership with Investment 20/20 where, to
date, we have successfully recruited over 40 trainees since
2019. A number of these trainees have since taken up full-time
positions in a variety of roles across the company, including
technology, risk and compliance, finance, and investment
management.
Trainees join the Company 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 several events hosted by
Investment 20/20 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 wealth
management. For school leavers, a traineeship presents an
opportunity to explore an alternative route to university. For
Brooks Macdonald, the benefits of taking trainees allow for
greater diversity at entry-level roles, as well as the opportunity
to develop young people with no prior experience and
making a positive contribution to the wider community.
Graduate trainee programme
In January 2022, 10 graduate trainees started with Brooks
Macdonald. As part of our recruitment strategy, we partnered
with Investment 20/20 to ensure we continue to recruit
from diverse, socio-economic backgrounds. As a firm, we are
committed to improving both demographic and cognitive
diversity of future recruits and breaking down barriers in the
wealth management industry. All 10 remain with the firm.
Building on the success of our 2022 graduate trainee intake,
we launched our new graduate recruitment programme
in January 2023. Our application process was designed to
remove as much bias as possible from the selection process
and to align fully with our guiding principles and Group
capability framework. We used a video application process,
on the Modern Hire platform, and engaged Thrive to provide
psychometric testing. We sought to recruit graduates in our
Marketing, Research, Risk and Compliance, and Investment
Management teams, and had more than 700 applicants
across all graduate roles. Our new graduates joined in
September 2023.
Gender pay gap
In April 2023, we published our gender pay gap report, which
reflected the remuneration paid to our UK-based employees
within the reporting period up to 5 April 2022.
The hourly pay gap and bonus pay gap metrics measure the
difference in the average earnings of men and women across
all roles. It is not an equal pay comparison, which would
compare the earnings of men and women doing the same or
similar value work.
Our gender pay gap report showed marginal improvement
in some metrics and our deeper analysis provides certainty
that men and women are paid equally for performing
equivalent work. However, the difference between average
(median) remuneration for men and women remains. This
results from the under-representation of women in higher-
paid, client-facing roles. This is an industry-wide issue in
wealth management, and addressing it remains a significant
challenge.
Diversity, Equity and Inclusion (“DE&I”)
At Brooks Macdonald, we aim to nurture a culture that values
and supports our people and their views, regardless of their
background. We are committed to creating a culture that
is ‘inclusive by design,’ in which the diverse perspectives,
experiences and backgrounds of our people are valued and
our people are free to be creative and dynamic.
Currently, two out of seven of our Group Board are women
and we have three women out of ten on our Executive
Committee. Across senior management as a whole., 69% are
male and 31% are female.
We have a suite of policies to support nurturing an inclusive
culture, including:
› Domestic abuse;
› Menopause at work;
› Mental health at work;
› Dignity at work;
› Gender transitioning guidance; and
›
Family leave to include, miscarriage, still birth, abortion
and babies born prematurely or with health issues.
To support our continued commitment to gender diversity
and reducing our gender pay gap, we offer enhanced parental
and adoption leave, supporting this with six months’ full pay.
We are fortunate to have amongst our people a number of
very active and passionate advocates for diversity, equity and
inclusion. We continue to meet with our DE&I group to gain
different views, insights and feedback and have celebrated
several DE&I events across the financial year. We still have lots
more to do as a business and within the industry, but we aim
to make diversity, equity and inclusion central to everything
that we do so that we are ‘inclusive by design’.
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Brooks Macdonald Group plc Annual Report and Accounts 2023
We continue to partner with organisations that help to break
down barriers, promote social mobility, and provide greater
representation of marginalised groups in our industry. Over
the last financial year, we have partnered with:
›
›
›
›
›
LGBT Great;
City Hive;
#10,000blackinterns;
Investment 20/20;
EY Foundation;
› Girls Are Investors (“GAIN”);
›
Employers Initiative on Domestic Abuse;
› Neurodiversity in Business;
›
Talking Talent; and
› Women in Finance Charter.
See our case study on the recent progress and work the DE&I
group have carried out on page 61.
Recognising and rewarding our people
To support our people to give their best and recognise their
changing social responsibility, wellbeing and flexible working
needs, we continue to review our total rewards offering. We
have continued to invest in our personal development budget
to support all our people in exploring their personal growth
and skills improvement. We are currently exploring new ways
to enhance our package of benefits, with a particular focus on
DE&I, and hope to be able to announce further changes soon.
Our 2023 Sharesave scheme was launched in April and saw
over half of the company’s eligible employees (51%) take
up the offer. This was an amazing participation rate which
enables a significant proportion of our people to participate in
the success of the business.
Currently, our flexible benefits package offers a wide range of
benefits including:
›
Pension;
› Minimum 27 days’ holiday with the option to purchase
Flexible working and wellbeing
We take a flexible approach to working, which we see as an
important factor in attracting and retaining the best talent, and
a key enabler to improving diversity, equity and inclusion.
We are focused on empowering our leaders and our people
to work in the way that enables their teams to be at their best,
to deliver the best possible service for our clients, and ensure
our people are provided with opportunities for learning,
collaboration and innovation.
›
›
›
›
›
›
additional days;
Enhanced family leave benefits (maternity, paternity,
shared parental leave, adoption leave);
Private medical cover;
Income protection insurance;
Critical illness cover;
Life assurance;
Electric car scheme;
› Discounts on products and services;
›
›
›
Personal development budget to learn new skills not
related to work;
Cycle to work scheme; and
Sharesave scheme.
We make sure the pay we offer to all our people is fair and
competitive by conducting rigorous annual benchmarking
and having a clear understanding of the contribution each
of our people makes. New roles are benchmarked as they
come up, and salaries and total compensation for all roles are
benchmarked as part of our annual pay review process.
Our discretionary bonus scheme plays a key role in enabling
our business to attract, engage and retain our people. Its
design considers regulatory best practice for firms in our
sector, the financial performance of our business in the year,
our values and guiding principles, and delivering the right
outcomes for our customers.
Alongside our pay and benefits offering, we also foster an
environment in which both individual and team successes
are celebrated, and achievements are recognised.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
59
Corporate responsibility report continued
Our community
Charity
We are committed to supporting the communities that our
customers and people live and work in. This year, the Brooks
Macdonald Charity Committee was set up to focus our
charitable efforts, to help us make a real difference to certain
charities that have a clear link to our guiding principles - to
care, do the right thing, stay connected, and make a difference.
Following personal nominations from employees and a vote
across the Group, the chosen charities for FY23 were The
Trussel Trust and Women’s Aid.
The BM Charity Committee, made up of representatives
from across the Group, meets every month to oversee
BM’s corporate charity donations, and to shape an exciting
calendar of events to help fundraise for our chosen charities.
Recent BM charity fundraising events have included the
Standard Chartered Great City Race and a walk along the
Dorset coast.
In addition, the Group’s employees can donate to charity
through the BM Foundation, which is funded primarily by
employees’ Give-As-You-Earn (“GAYE”) donations through
payroll. Anyone at BM can apply to the BM Foundation for a
one-off donation to a charity of their choice, meaning we can
support all types of amazing causes and organisations. The
BM Foundation was established in 2010, with the entire board
of trustees being employees of the Group. The BM Foundation
has made charitable donations of just over £329,900 since
being founded. The Group also makes ad-hoc donations to
the BM Foundation throughout the year.
You make a difference
Community
We support giving back to causes that are important to our
people. Everyone at Brooks Macdonald can take one paid
day away from work to undertake volunteer work in the
community, or for charity. We can use our day to support
any cause that’s important to us or to take part in a Brooks
Macdonald charities event.
In June, our Guernsey team volunteered with La Société
Guernesiaise, cleaning up their local beach and filling up
multiple bin bags with rubbish.
Our International team also hosted the Cancer Research UK
Jersey annual charity golf day and were overwhelmed by
the support of colleagues, clients and finance industry peers,
with the event raising an amazing £30,000 for charity.
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Brooks Macdonald Group plc Annual Report and Accounts 2023
Diversity, Equity and Inclusion group
The last few years have seen a great
amount of growth and progression,
driven by the Group’s internal
DE&I group.
The working group has seen the
business sign up to a number of
different charters to help aid and
improve inclusion for its employees,
customers, and future recruits. The
DE&I group are pushing forward and
addressing areas of weakness, always
looking to do more and promote
inclusion at the core of the business.
The latest motto reflects this; “Inclusive
by Design”, showing commitment to
placing DE&I as a matter of importance
in all business decisions.
The last 12 months have seen a
number of employee-ran events which
support this. Black History Month has
become a pivotal point in the calendar,
with members of the black, Asian and
minority ethnic (“BAME”) employee
resource group (“ERG”) organising
the theme – ‘Time for Change; Action
Not Words” – which centred around
allyship for the black community.
The DE&I group further brought
people together to learn more during
the year, through social visits and
promotion of available visits to further
education and connection, with the
BAME ERG visiting the Black Cultural
Archives to learn about black heritage
in Britain.
Pride month also holds a prominent
feature, encouraging and supporting
LGBTQ+ persons within our industry.
The Group heard from multiple
speakers during the year, who
proudly represented and explained
the importance of inclusivity within
financial services, and the real-life
benefits of being a front runner in
this area.
Ensuring we encourage participation
and promote inclusion properly –
versus falling foul of performative
allyship – is a hot topic on the DE&I
agenda. We continue to have open and
honest discussions to further improve
on our position within the industry,
and for our employees, the heart of our
business.
Charity event: Jurassic Coastal walk
The Group’s Charity Committee are
always looking at fundraising events
for the Group and the employees,
and one of the events held during the
year was the Jurassic Coastal walk.
There were two options for the walk,
12 or 21 miles and it was a great event
to provide fresh air and exercise,
conversation amongst colleagues
from all locations and take in the
beautiful Dorset coastline – all while
raising money for the Group’s carefully
and thoughtfully selected charities –
The Trussell Trust and Women’s Aid.
During the walk, the BM ramblers
of all abilities faced varying hiking
conditions, with steep climbs, sharp
descents, stream crossings, the
notorious “dancing ledge” and a mix
of weather conditions, from bright
sunshine to thunderstorms. The views
along the walk were breathtaking,
and at times, it was mentally and
physically tough, however, it also
brought to light how much resilience
everyone had, and the brilliant
teamwork resulted in strong new
bonds being built across the Group,
all while raising much needed funds
for the two charities.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
61
Corporate responsibility report continued
Our environment
We are committed to improving our environmental
and social impact and we continue to build our
understanding in this field and to review our methods,
to make sure they are the best they can be. Our focus is
on encouraging emissions reduction and bringing
about behaviour change; we only look to offset
emissions as a last resort.
Our target remains to be net zero across all our operations
by 2030. By the end of 2023, we will set out a clear plan for
how we will achieve this, which will include our short-term
and long-term greenhouse gas (“GHG”) emission reduction
goals. These goals will provide the direction and prioritisation
needed to accurately calculate our emissions.
Our progress toward our GHG reduction targets will be
tracked and communicated through annual public reporting,
aligned with Article 4.9 of the Paris Agreement.
So how are we doing?
Environment enhancements 2021 – 2023
Sustainable procurement
Over the last few years, we have ramped up our efforts to
ensure we can meet our target of 90% renewable energy
by 2024, and we are now scrutinising our supply chain. We
have a choice about the businesses we partner with, and we
choose only to work with suppliers who have ethical business
practices that support ours.
To ensure this is the case, and that we are minimising those
emissions we are indirectly responsible for across our
value chain, we have introduced an enhanced matrix for
all departments to follow as part of the onboarding of new
suppliers or contract renewal of old ones.
Workspace
Engagement
Wellness
Resources
› Holistic, enhanced
workspaces that support
different workstyles.
› Minimised environmental
impact from office
fitouts with solvent free
paints and cradle to
grave furniture; reusing
and repurposing of old
furniture and surplus
donated to charities.
›
Serviced offices for
small teams to provide
a complete working
environment without the
hassle of managing the
office spaces and facilities.
›
›
›
›
›
›
Cycle to work scheme.
Electric car scheme.
Fairtrade and locally
sourced produce.
Sustainable
interest group.
Chemical-free cleaning.
Family day in the office
(launched in 2022).
› We are working with
an external provider to
set out short-term and
long-term greenhouse
gas (“GHG”) emission
reduction targets
by year end 2023,
providing a pathway
to achieving our
operational net zero
target.
›
›
›
›
›
Biophilia to improve the
air and reduce stress in
the workplace.
Contemplation
rooms for relaxation,
meditation, and prayer.
Inclusive office signage
including braille,
pictures, and colours to
assist those with sight
and neurodiversity
challenges.
Twelve trained mental
health first aiders
on hand to support
colleagues across the
Group.
Enhanced air quality
management.
›
›
›
›
›
›
›
Enhanced, measurable
procurement strategy.
Supplier and contract
management.
ESG governance
ongoing.
Printers default double-
sided, black, and white.
Recycling and recycled
products.
Removal of single use
plastic.
Sustainable
merchandising for
clients, which is
proving an enjoyable
conversation starter.
62
Brooks Macdonald Group plc Annual Report and Accounts 2023
Our environment
Our property and workplaces
Our property strategy undergoes an annual review and is
continually updated to safeguard the health, safety, and
welfare of colleagues, as well as considering the bigger picture
and the future view in terms of environmental credentials.
Our office movers and shakers in the last year
›
Cardiff refurbishment – minimised impact on the team,
and 60% of the furniture reused and refurbished.
›
Bury St. Edmunds renewed and reviewed, with excess
furniture transferred to Cardiff.
› Guernsey office relocation to a newly refurbished building
reducing the space by more than 50% with a living wall
and space to relax and come together as a team.
› We welcomed Adroit in Manchester moving them into
our Bream building there. It was great to see them hold an
event in their new space too.
› We also welcomed Integrity, based in Nuneaton, bringing
their office up to our health and safety (“H&S”) and
wellbeing standards, with ergonomic chairs, an efficient,
safe technology upgrade, relaxed spaces with soft
furnishings, and all furniture refurbished or nearly new.
We have grown to 15 offices across the UK and Crown
Dependencies. All our offices are designed to provide
colleagues with a variety of options to match various
work styles and set the stage for higher engagement and
productivity. We want our workplaces to cater to everyone’s
wellbeing, which is why each office includes a choice of
working styles for quiet focused work, collaboration spaces,
biophilia, a space away from the desk to eat, and places to
relax. We have also consciously sought out office spaces that
not only successfully safeguard the health, safety, and welfare
of colleagues, but also cater to potential team expansion and
our environmental goals.
When choosing where our offices should be based, on
top of the office space itself, we also consider other key
requirements such as accessibility, good public transport
links, being at the heart of a community, and options to shop
locally, exercise, and build relationships with local businesses
and the wider community.
Occupying serviced offices has significantly reduced the
amount of moving and clearing out we must do, and we
continue to work with charities and companies to repurpose
any old office furniture, helping to cut down on waste and
giving back to the local community.
Why serviced offices?
Environmentally serviced offices with shared spaces reduce
the built environment impact, and 66% of our office portfolio
space is now in serviced space. Individual businesses with
individual suppliers and services creates more time, travel
and cost and has a direct impact on the total amount of
energy used.
Our colleagues no longer need to navigate areas like
maintenance, reconciling multiple bills, completing
assessments, ordering supplies, cleaning etc. Social
interaction is also a key component as landlords organise
and celebrate special days such as World Earth Day and the
Coronation.
Additional services and facilities offered by serviced offices
include, but not limited to:
›
Shower facilities for cycling to work – high end gym
quality service;
› Gyms;
› Golf simulators;
›
Terraces to relax and provide outside space; and
› Wellbeing talks around topics such as nutrition, designed
to boost employee mental health and wellbeing.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
63
Corporate responsibility report continued
Reduce, reuse, recycle
Traditionally in office refurbishments, office furniture
has often been treated as a short-term disposable item.
However, we are now integrating reuse and recycling into
all office refurbishments to deliver improved working
environments, alongside costs savings. Any budget made or
saved is then diverted to create better meeting, break out or
relaxation areas.
Where possible, we recycle and recirculate office furniture
within our own network. When clearing redundant items
from an office, we prioritise reuse and avoid stripping out
existing finishes and furniture, as this is less wasteful and
contributes towards our environmental goals.
When moving offices, we review all items with a view as to
how they can be reused or repurposed. In recent refits, we
have donated furniture and equipment to schools, charities,
and social enterprises through our partnership with ‘Clear
Environment’. This not only benefits the recipients, but also
contributes to our corporate social responsibility agenda.
For incoming tenants, we negotiate the sale of our existing
furniture and fittings for a donation to our charity – the BM
Foundation. If we must buy new materials, we prioritise
carbon neutrality and make sure we use the most sustainable
products available, with long life cycles, made from reclaimed
and reused materials.
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 Crown
Dependencies, and from employee travel – as we have
come out of the pandemic this has increased but not to pre-
pandemic numbers.
In line with the Streamlined Energy and Carbon Reporting
(“SECR”) legislation, Brooks Macdonald is required to report its
energy consumption and greenhouse gas emissions arising
in the UK. In addition to disclosing mandatory Scope 1 and 2
sources of energy and emissions (those relating to our direct
and indirect emissions), we have also willingly disclosed
some Scope 3 that are related to our value chain.
Energy efficiency
In the last year our overall energy consumption has remained
within a 1% margin, despite our return to work ramping up
and our total greenhouse gas emissions have decreased by
7%. The distribution of the consumption has slightly changed
along with the greening of the national grid resulting in a slight
variation of Carbon Dioxide equivalent. Our Cardiff office
has moved to biogas which is better for the environment
because the carbon in biogas comes from plant matter, so its
production is carbon-neutral and does not add to greenhouse
gas emissions.
We have used the same turnover as last year for reporting
purposes.
You are the largest
company that not
only recycles their
furniture through us
but purchases it from
us – living and breathing
the circular economy.
Richard Ryll
Clear Environment
64
Brooks Macdonald Group plc Annual Report and Accounts 2023
Source of energy and emissions
Measured Scope 1 emissions1
Combustion of natural gas
Combustion of biogas
Scope 1 total
Measured Scope 2 emissions1
Generation of purchased electricity
of which from renewable supplies
Scope 2 total
Measured Scope 3 emissions2
Combustion of fuel in staff vehicles (category 6)
Scope 3 total
Gross total
Carbon offset projects
Renewable supplies
Net total
Energy consumption (MWh) GHG Emissions (tCO2e)
2023
2022
2023
2022
89.6
22.1
111.7
508.5
484.6
508.5
261.8
261.8
90.5
–
90.5
556.0
534.3
556.0
239.2
239.2
16.3
–
16.3
98.3
–
98.3
65.5
65.5
882.0
885.7
180.1
(7.0)
(93.7)
79.4
18.0
0.7
16.6
–
16.6
118.1
–
118.1
58.8
58.8
193.5
(5.9)
(113.4)
74.2
15.5
0.6
Intensity per 1,000 m2 gross floor area
Intensity per £m turnover
200.2
7.2
185.4
7.3
1 The Scope 1 and 2 data shown above is measured through invoices provided by our energy suppliers with minor estimations made due to the availability of data
from a small number of these suppliers.
2 Our Scope 3 data currently depicts the emissions produced as a result of fuel consumption in employee vehicles and as part of our strategy and improving
procurement process, we are considering additional measures in order to capture and monitor data relating to further Scope 3 emissions in categories 3, 5 and 6.
Utility calculation
Where possible, energy consumption expressed in kilowatt-
hours has been taken from suppliers’ invoices, and in the
absence of invoices, estimates have been made. Estimates
used equate to approximately 2,132 kWh less than 1 % of the
total consumption. The electricity supplies that have been
estimated are all from carbon neutral sources and so have no
impact on the Company’s carbon footprint. One natural gas
site has 2,604 consumption data estimated (3% of the total).
Biogas sites also has a minor assumption of 1,755, which is 8%
of that sites total. The energy consumption from electricity
and natural gas consumption has been multiplied by locally
based kgCO2e/kWh conversion factors for the average UK
grid supply to calculate the gross location-based greenhouse
gas emissions. 88% of energy supplied is from carbon neutral
contracts. The emissions from these supplies have been
deducted to show the net market-based emissions.
Transport
Some 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 when submitting the claims enabling 99% accurate
calculations. The kWh/mile and kg CO2e mile conversion
factors form the category ‘Cars (by size)’ have been used
to calculate greenhouse gas emissions and underlying
energy use.
The green car salary sacrifice scheme enables colleagues to
access Ultra Low Emission Vehicles (“ULEVs”), which has had
23 employees take it up since it was launched.
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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
65
Corporate responsibility report continued
Total energy consumption per month (MWh)
100
90
80
70
60
50
40
30
20
10
–
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Jan 23
Feb 23
Mar 23
Apr 23
May 23
Jun 23
Total greenhouse gas emissions per month (tonnes CO2e)
20
15
10
5
–
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Jan 23
Feb 23
Mar 23
Apr 23
May 23
Jun 23
Distribution of monthly emissions by scope
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
–
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Jan 23
Feb 23
Mar 23
Apr 23
May 23
Jun 23
One
Two
Three
66
Brooks Macdonald Group plc Annual Report and Accounts 2023
Distribution of annual energy
consumption by fuel
Distribution of annual emissions
by fuel
56.8%
10.2%
16.5%
12.8%
0.8%
0.4%
2.5%
20.6%
14.9%
0.8%
0.8%
9.1%
53.8%
Natural gas
Diesel
Petrol
Electric
Petrol
Electric
Hybrid
Electricity
Hybrid
Biogas
Electricity
Natural gas
Diesel
Distribution of annual emissions
by scope
Distribution of annual energy
consumption by scope
9.1%
37.1 %
12.7%
30.5%
53.8%
56.8%
One
Two
Three
One
Two
Three
Annual Report and Accounts 2023 Brooks Macdonald Group plc
67
Task Force on Climate-related Financial
Disclosures report summary
As a Group, we recognise the impact of climate
change on the world around us and are committed to
help tackle climate change, through our investment
management approach, operations and supply chain.
We are supportive of the UK Government’s initiative in
driving net zero requirements for firms such as Brooks
Macdonald. In outlining our commitment to these
requirements we have published our first report in line
with the recommendations from the Task Force on
Climate-related Disclosures (“TCFD”). The Task Force
is a group convened by the Financial Stability Board
with the goal of producing a global framework for
companies to report how climate change will impact
their businesses.
Our inaugural report sets out the Group’s approach to
climate-related governance, including how climate risks
and opportunities are considered in our decision-making
processes. We look at the impact of climate-related risks and
opportunities on our business strategy and outline our risk
management approach, including how we identify, assess
and manage climate-related risks. Lastly we discuss how
we measure and track the carbon footprint of our business,
setting out data on our emissions over the past year. We look
at both our investment activities and our operations, as we
believe that having the right approach in each of these areas is
key to building a sustainable model for the future.
Pillars of the recommended climate-related financial disclosures
Governance
The organisation’s
governance around
climate-rated risks
and opportunities
Risk
management
The processes used
by the organisation
to identify, assess
and manage climate-
related risks
Governance
Strategy
Risk
management
Metrics and
targets
Strategy
The actual and
potential impacts of
climate-related risks
and opportunities
on the organisation’s
businesses, strategy,
and financial planning
Metrics and
targets
The metrics and
targets used to assess
and manage relevant
climate-related risks
and opportunities
68
Brooks Macdonald Group plc Annual Report and Accounts 2023
In each section of the report, we outline our evolving approach to the integration of climate-related risks and opportunities
into our investment and operational processes. We have made progress in understanding and assessing our exposure
to climate-related risks and opportunities, and in developing our climate strategy, and we expect to continue making
enhancements to our approach as we engage with our stakeholders and build our expertise and incorporate advancements in
climate science, disclosure standards and best practice. The information presented in the report will be enhanced in the future
as the quality and completeness of our data and methodologies continue to improve.
We believe that integrating climate considerations into our operations and investment processes is not only necessary
for long-term value creation but also essential in safeguarding the interests of the broader communities in which we operate.
To see our full TCFD report and detailed approach on climate-related matters within the Group, please visit our website. The
standalone detailed report is built around the four key pillars of governance, strategy, risk management and metrics and targets.
The key disclosures and updates from the report are included below.
Governance
Description
Disclose the
organisation’s
governance around
climate-related risks
and opportunities
TCFD recommended
disclosure
a. Describe the Board’s
oversight of climate-related
risks and opportunities.
b. Describe management’s
role in assessing and
managing climate-related
risks and opportunities.
Key information
Further information
TCFD report:
Governance
Board and Committee
structure on pages
78 to 81.
The Board of Directors
and Executive
Committee on pages
82 to 85.
›
›
›
›
›
The Board is ultimately responsible for
identifying and responding to all forms
of climate related risk and opportunities
which may impact the firm’s business
strategy and financial planning.
The Board has delegated overall
responsibility for the delivery of the
Group’s strategy to the Group CEO. The CEO
and Executive Committee are responsible
for the day-to-day management of
Brooks Macdonald and have ultimate
responsibility for the integration of climate
risks and opportunities across the business,
and for bringing climate-related matters to
the Board.
The Executive Risk Management
Committee (“ERMC”) has responsibility for
ensuring the effective management of risk
throughout the group, in line with the risk
appetite and risk management framework
approved by the Board.
The Investment Committee (“IC”)
establishes and oversees the execution
of the firm’s responsible investment
policy, which includes climate-related
considerations and is updated on an
annual basis.
The COO Management and Risk
Committees are responsible for oversight
of ESG and climate-related risks and
opportunities in the Group’s operational
activities. The COO Risk Committee also
maintains oversight of reported incidents
relating to climate and environment.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
69
Task Force on Climate-related Financial
Disclosures report summary continued
Strategy
Description
Disclose the actual
and potential
impacts of climate-
related risks and
opportunities on
the organisation’s
businesses, strategy,
and financial
planning.
TCFD recommended
disclosure
a. Describe the climate-
related risks and
opportunities the
organisation has identified
over the short, medium,
and long term.
b. Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial
planning.
c. Describe the resilience of
the organisation’s strategy,
taking into consideration
different climate-related
scenarios.
Further information
TCFD report: Strategy
Our strategy section on
pages 24 and 25.
Marketplace assessment
on pages 10 to 13.
The Group Centralised
Investment Process on
pages 16 and 17.
Key information
›
›
›
›
›
›
›
The greatest impact to Brooks Macdonald
from climate risks is to our investment
portfolios.
The Group has identified the risks and
opportunities according to TCFD typology,
and has assessed the breakdown of
the risks and opportunities to Brooks
Macdonald, estimated likelihood of them
taking effect, over which time horizons and
the estimated significance to our business.
The climate-related risks identified have
been split into the following two groups:
– Transition risks: policy and
legal, market, technology and
reputational risks.
–
Physical risks: acute and chronic risks.
The climate-related opportunities
considered have been split into five
sources: products and services, resource
efficiency, markets, energy source and
resilience.
Our response to climate-related risks across
our Group operations involves measures to
improve environmental practices.
Our response to climate-related risks and
opportunities in our investments involves
embedding climate-related considerations
into our Centralised Investment Process
and offering a Responsible Investment
Service.
Our approach to net zero is in
development, across our operations and
investments.
› We have conducted initial BM Group
climate scenario analysis, exploring
the potential impacts of three climate
scenarios on our investments.
70
Brooks Macdonald Group plc Annual Report and Accounts 2023
Risk management
Description
Disclose how
the organisation
identifies, assesses,
and manages climate-
related risks
TCFD recommended
disclosure
a. Describe the organisation’s
processes for identifying
and assessing climate-
related risks.
b. Describe the organisation’s
processes for managing
climate-related risks.
c. Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Key information
Further information
TCFD report: Risk
management
Risk management on
pages 42 to 47.
Risk and Compliance
Committee report on
pages 112 to 115.
›
›
›
Progress has been made in embedding
climate risk within our existing risk
management framework, with further
enhancements planned over the next 12
months.
The Group assesses the climate risks faced
by the business on a six-monthly basis
by using our ‘top down’ and ‘bottom up’
risk map (“TDRM” & “BURM”) assessment
process.
Our strategy for managing climate-related
risks within our investment activity centres
around: embedding climate-related risks
into our wider ESG integration approach,
engagement activities and voting activities.
Metrics and targets
Description
Disclose the metrics
and targets used to
assess and manage
relevant climate-
related risks and
opportunities where
such information is
material.
TCFD recommended
disclosure
a. Disclose the metrics used
by the organisation to
assess climate-related risks
and opportunities in line
with its strategy and risk
management process.
b. Disclose Scope 1, Scope
2 and, if appropriate,
Scope 3 greenhouse gas
(“GHG”) emissions and the
related risks.
c. Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
Key information
›
›
The Group uses various metrics to
measure and manage the climate-related
impacts and risks of its investments,
including weighted average carbon
intensity, financed emissions, financed
emissions per M$ invested, fossil-fuel
exposure, temperature alignment and
net zero alignment. These are informing
progress towards setting climate-related
targets.
The Group has also disclosed its emissions
produced through its own operational
activities. These are disclosed in the
full report, as well as our Corporate
responsibility report on pages 65 to 67. This
data will allow us to set emission-based
targets on our journey to achieving net zero
in our operations by 2030.
Further information
TCFD report: Metrics and
targets
Our environmental
impact on pages 62 to 67.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
71
Corporate
governance
An introduction to our Board of Directors, Executive Committee,
and our approach to Corporate governance and remuneration
Introduction to Corporate governance
Board overview
FY23 Company timeline
Consumer Duty project
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
74
75
76
77
78
82
84
86
90
94
112
116
118
120
72
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
73
Introduction to Corporate governance
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 pages 84 and
85 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 relation to the
completion of the transition to SS&C platforms and systems as
part of the digital transformation project.
The Group’s Board and Committee structure is detailed on
pages 78 to 81, together with the biographies of Board and
Committee members on pages 82 and 83.
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 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 that 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
Section of the Code
How Brooks Macdonald have applied the Code
Further information
Board leadership
and company
purpose
Division of
responsibilities
Composition,
succession
and evaluation
Audit, risk and
internal control
Remuneration
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. The 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 that 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.
74
Brooks Macdonald Group plc Annual Report and Accounts 2023
Read more in our Strategic
and Corporate responsibility
report on pages 54 to 67.
Read more in our Board
overview on page 75 and
Committee structure on
page 78, plus reports of the
Committees on pages 86
to 115.
Read more about our Board
composition on page 80 and
Nominations Committee on
pages 90 to 93.
Read more about our Audit
Committee on pages 86
to 89 and our Risk and
Compliance Committee on
pages 112 to 115.
Read more about our
Remuneration Committee
on pages 94 to 111.
Board overview
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 2023, there were eight scheduled Board meetings and details of
attendance at these is shown on page 80. In addition, further unscheduled meetings may be convened where necessary to
consider matters that are time-sensitive in nature and cannot wait until the next scheduled meeting. Historically, subjects have
included acquisitions and the Group’s response to the COVID-19 pandemic.
Matters discussed by the Board in the year
Financials
Projects
› Annual and
Interim Report
and Accounts
› Dividend
payments
recommendations
› Budget and
Medium-Term
Plan
› Acquisitions of
Integrity Wealth
Solutions and
Adroit Financial
Planning
› Partnership
with SS&C
›
Consumer Duty
› TCFD
Regular
updates
› CEO’s report,
including
business
performance
› Chief Financial
Officer’s report
› Chief Investment
Officer’s report
› Chief People
Officer’s report
› Committee
Chairs’ updates
Strategy
› Strategy refresh
› M&A
› Acquisition
integration
Governance
and regulatory
› Reviews of
Committee terms
of reference
› AGM
arrangements
› SMCR regime
› Board
effectiveness
review
› Modern Slavery
statement
›
ICARA review
Assessing and monitoring culture
The Board monitors the Group’s culture through regular reports from the CEO and the Chief People Officer 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 informal meetings with employees from across the business 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 67 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
LLP, 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, among 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 pages 90 to 93.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
75
FY23 Company timeline
Company events
Group Board meetings
and topics
July 2022
›
Transition to SS&C platform
› Q4 trading update
›
Transforming culture
› Announcement of acquisition of
Adroit Financial Planning
›
FY22 results, dividend and
annual report
September 2022
›
Company sports day
› Group AGM
October 2022
December 2022
January 2023
February 2023
›
It was announced that Ben Thorpe,
Chief Financial Officer, and Lynsey
Cross, Chief Operating Officer,
would be leaving the business
› Alan Carruthers resigns as
Chairman of the Group Board.
Senior Independent Director
Richard Price is appointed
Acting Chairman
March 2023
›
James Rawlingson is appointed as
Non-Executive Director
› AGM arrangements
› Operational resilience
›
›
›
Insurance
ICARA
Consumer Duty
›
ICARA
› Modern Slavery statement
› Q2 trading update
›
›
›
›
Interim Report and Accounts
International strategy
Consumer Duty
Strategy
April 2023
May 2023
June 2023
›
›
Jurassic Coast walk for
BM charities
The appointment of Andrea
Montague as Executive Director
and Chief Financial Officer
is announced, effective 1
August 2023
› Medium-Term Plan
›
TCFD
76
Brooks Macdonald Group plc Annual Report and Accounts 2023
Consumer Duty project
In July 2022, the FCA set out the final rules and guidance for a new Consumer Duty, which sets clearer and higher standards
of consumer protection across financial services. In order to develop the necessary robust governance framework for the
implementation of the new Duty and to embed the standards and expectations required, the Group appointed a Consumer
Duty Champion and established a project steering committee to coordinate and deliver the project objectives across the
business and drive a consistent approach. Regular reports were provided to the Board so that they could give their input and
guidance, as well as providing any necessary approvals.
31 October 2022
The FCA set out the expectation
that by the end of October 2022, the
Board should have agreed its plans
for implementing the Duty and be
able to evidence that the plans have
been scrutinised and challenged to
ensure that they were deliverable
and robust enough to meet the new
standards of the Duty.
On 27 October 2022, an
implementation plan was
presented to the Board for review
and challenge to ensure that the
implementation work was being
appropriately prioritised and that
the new, substantive requirements
were being embedded. It was noted
that a gap analysis had been carried
out against each new rule under
the Duty. Key workstreams and
milestones were identified, and
internal and external dependencies
set out. It was proposed that a Board
champion be appointed to support
the Chair and CEO in raising the
Duty in all relevant discussions to
challenge the Group’s management
of the implementation of the Duty.
John Linwood was nominated as
the Board champion.
30 April 2023
By 30 April 2023, manufacturers
needed to have completed all the
reviews necessary to meet the
outcome rules for their existing
open products and services so
they could share with distributors
to meet their obligations under the
Duty and identify where changes
needed to be made. As part of this,
the Group developed a new due
diligence toolkit, including a value
assessment report, satisfying the
requirement to share the necessary
information with distributors. Drafts
of these documents were provided
to the Board in April for their
comment. The Board commended
those involved in the project for
their endeavours, noting that their
high-quality output would be
beneficial for all of the Company’s
stakeholders.
31 July 2023
On 31 July 2023, for new and existing
products or services that are open
to sale or renewal, the Duty came
into effect and became enforceable.
Prior to this deadline, the project
established six workstreams
to ensure that each of the four
outcome areas of the Duty was
addressed, that the Group could
identify, monitor and evidence
client outcomes and experiences,
that the Group’s culture and people
strategies focused on delivering
good consumer outcomes, and
that all staff understood their
responsibilities under the Duty.
Again, the Board were asked for
their input and approval prior to
the Duty coming into effect. As
well as complimenting the team
for their work up to this point, the
Board highlighted the importance
of continuing efforts post
implementation to further embed
the Duty across the business.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
77
Board and Committee structure
The 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 responsibilities to the Committees shown below.
Risk and
Compliance
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.
Audit
Committee
Nominations
Committee
Remuneration
Committee
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
recommendations
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.
78
Brooks Macdonald Group plc Annual Report and Accounts 2023
Brooks Macdonald Group Board
Current
Richard Price (Acting Chairman)1
Non-Current
Alan Carruthers (Chairman)4
Ben Thorpe5
Lynsey Cross5
Andrew Shepherd
Andrea Montague2
John Linwood
Dagmar Kershaw
Robert Burgess
James Rawlingson3
Audit
Committee
Nominations
Committee
Remuneration
Committee
1 Appointed as Acting Chairman
on 7 February 2023
2 Appointed as Executive Director
on 1 August 2023
3 Appointed as Non-Executive Director
on 2 March 2023
4 Resigned as Chairman
on 7 February 2023
5 Resigned as Executive Director
on 19 January 2023
Risk and
Compliance
Committee
›
›
›
Robert Burgess
(Chair)
Richard Price
John Linwood
›
›
›
James Rawlingson
(Chair)6
Richard Price
John Linwood
› Dagmar Kershaw
›
Robert Burgess
›
›
Richard Price
(Chair)
John Linwood
›
›
John Linwood
(Chair)
Richard Price
› Dagmar Kershaw
› Dagmar Kershaw
›
›
Robert Burgess
James Rawlingson7
›
›
Robert Burgess
› Dagmar Kershaw
James Rawlingson7
›
James Rawlingson7
6 Appointed as Non-Executive Director on 2 March 2023 and Chair of the Audit Committee on 3 May 2023
7 Appointed as Non-Executive Director on 2 March 2023
Executive Committee
Andrew Shepherd (Chair)
Caroline Abbondanza
Sarah Ackland8
Simon Broomfield
Robin Eggar
8 Appointed 5 September 2022
9 Appointed 1 August 2023
10 Appointed 4 September 2023
Richard Hughes
Alick Mackay
Andrea Montague9
Edward Park
Louis Petherick10
Annual Report and Accounts 2023 Brooks Macdonald Group plc
79
Board and Committee structure continued
List of Board meetings and attendance
Position
Acting Chair
Richard Price
Non-Executive Directors
John Linwood
Dagmar Kershaw
Robert Burgess
James Rawlingson1
Executive Director
Andrew Shepherd
Former Directors
Alan Carruthers2
Ben Thorpe3
Lynsey Cross3
Board
Audit
Nominations
Remuneration
Risk and
Compliance
Disclosure
(Max 8 Meetings)
(Max 6 Meetings)
(Max 1 Meeting)
(Max 4 Meetings)
(Max 5 Meetings)
(Max 1 Meeting)
8
8
8
8
8
2
8
8
8
2
8
8
5 6
5
3
5
5
6
6
6
6
6
6
6
6
1
1
–
–
–
–
1
1
1
1
1
1
1
1
1
1
–
–
–
–
4
4
4
4
4
4
3 4
1
1
–
–
–
–
5
5
5
5
5
1
5
5
5
1
–
–
–
–
1
1
1
1
1
1
1
1
–
–
–
–
–
1 Appointed as Non-Executive Director on 2 March 2023
Attended
Meetings
2 Resigned as Chairman on 7 February 2023
3 Resigned as Executive Director on 19 January 2023
Board composition statistics as at 13 September 2023
Gender diversity
Independence
Board tenure
2
Male
Female
5
4
1
2
2
2
3
Acting Chairman
Executive Directors
Non-Executive Directors
< 2 years
2–4 years
>4 years
80
Brooks Macdonald Group plc Annual Report and Accounts 2023
Board of Directors
Chair of the Board
Role and responsibilities
›
Leading and managing the Board and is
responsible for its overall effectiveness.
›
›
›
›
Setting the agenda, including discussion of issues
of strategy, performance, accountability and risk.
Providing and promoting constructive challenge
to management and facilitating the contribution
of the Non-Executive Directors.
Setting clear expectations on culture, values and
behaviours.
Performance evaluation of the Board and CEO.
Senior Independent Director
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 and day-to-day responsibility
for running the Group’s business.
Independent Non-Executive Directors
Role and responsibilities
›
Contributing independent oversight and
constructive, rigorous challenge.
› Developing, recommending and executing
› Assisting in the development of the Company’s
strategies and strategic priorities.
strategy.
› Maintaining relationships with shareholders and
other stakeholders.
› Developing the Group’s executive management
capability.
› Overall development of Group policies and
communicating the Company’s values.
›
›
›
Ensuring the integrity of financial information,
controls and risk management processes.
Scrutinising the performance of the Executive
Directors against agreed goals and objectives.
Serving on Board Committees.
Chief Financial Officer
Role and responsibilities
›
Supporting the CEO in developing and
implementing strategy.
›
Providing strategic financial leadership.
› With the CEO, explaining performance to
shareholders.
›
Responsibility and oversight for the Group’s
finance and company secretarial function.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
81
Board of Directors
Acting Chairman
Richard
Price
Acting Chairman
Key skills and experience
›
›
Appointment as Acting Chairman reflects his deep
understanding of the Group’s history and strategy.
Big Four accounting experience brings financial rigour to the role
of Acting Chairman.
Richard joined Brooks Macdonald in 2014 as a Non-Executive
Director. He is a member of the Risk and Compliance, Remuneration,
Nominations and Audit Committees, having previously chaired the
latter.
Prior to joining Brooks Macdonald, Richard was a partner at KPMG for
17 years, where he had considerable exposure to financial services
clients, holding a number of roles, including the UK Head of KPMG’s
Financial Sector Transaction Services practice.
Richard is also a Non-Executive Director of Hampshire Trust Bank plc.
Executive Directors
Read more about our Audit Committee’s activities over
the year on pages 86 to 89
Read more about our Nominations Committee’s
activities over the year on pages 90 to 93
Read more about our Remuneration Committee’s
activities over the year on pages 94 to 111
Read more about our Risk and Compliance
Committee’s activities over the year on pages 112 to 115
Andrew
Shepherd
CEO
Andrea
Montague
Chief Financial Officer
Key skills and experience
Key skills and experience
›
›
›
Distinctive people leader.
Unrivalled experience of the industry.
Deep affinity with the Brooks Macdonald culture.
Andrew joined Brooks Macdonald in 2002 and was appointed CEO in
2021. He has held numerous roles across the Group, including Group
Deputy CEO since 2015, and most recently CEO of the International
business since 2019.
Andrew has worked in investment management and financial
services since 1994. Prior to joining Brooks Macdonald, Andrew
worked at Shepherd Associates Financial Management, holding the
position of investment director.
Andrew is also a Member of the Board of the Personal Investment
Management & Financial Advice Association (“PIMFA”).
›
›
Commercial drive and a depth of M&A and integration
experience.
Substantial experience of transformation and leading finance
and risk functions in a highly regulated environment.
Andrea joined Brooks Macdonald in August 2023 as Chief Financial
Officer, bringing an impressive track record across the UK long-term
savings and asset management sector.
Most recently, Andrea was Group Chief Risk Officer at Aviva, where
she had previously been Group Chief Financial Controller. Prior to
that, Andrea held senior leadership roles including Deputy Group
CFO at Royal London and Group Chief Internal Auditor at Standard
Life plc. Her formative years were spent at PricewaterhouseCoopers,
where she qualified as a chartered accountant before taking her first
industry role with Scottish & Newcastle plc.
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Brooks Macdonald Group plc Annual Report and Accounts 2023
Non-Executive Directors
Robert
Burgess
Senior Independent
Non-Executive Director
Dagmar
Kershaw
Independent
Non-Executive Director
Key skills and experience
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.
Robert was appointed Senior Independent Director in May 2023.
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 of 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.
›
›
Senior financial services professional with broad experience,
particularly in business development.
Significant expertise across the investment management sector.
Dagmar joined Brooks Macdonald as a Non-Executive Director
in July 2020. She is a member of the Audit, Risk and Compliance,
Remuneration and Nominations Committees.
Currently a senior adviser to Strategic Value Partners and Non-
Executive Chair of both Volta Finance and Aberdeen Smaller
Companies Income Trust plc, 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 10 years in senior positions at
M&G Investments.
Dagmar is a Trustee of Laurus Trust.
John
Linwood
Independent
Non-Executive Director
James
Rawlingson
Independent
Non-Executive Director
Key skills and experience
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 Chair of the Remuneration Committee and is a member of the
Audit, Risk and Compliance and Nominations 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 and Intercede Group plc.
›
Deep financial services experience specialising in Wealth
Management.
› Wide governance expertise including public and regulated
entities in the UK and internationally.
›
Broad experience in driving transformational growth.
James joined Brooks Macdonald as a Non-Executive Director in
March 2023, becoming Chair of the Audit Committee in May 2023.
He is also a member of the Risk and Compliance, Remuneration, and
Nominations Committees.
James is currently a non-executive director on the boards of Citibank
UK and Wilton Park which is an arm’s length body of the British
Foreign Office. He is also Chairman of Novai Ltd.
Previously he has enjoyed a long executive and non-executive career
featuring Board level roles at Coutts, Charles Stanley plc, Adam &
Co and UBS Wealth. He is a Chartered Accountant and a Chartered
Member of the Chartered Institute for Securities and Investments.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
83
Executive Committee
Executive Committee Members
Caroline
Abbondanza
Chief Operating Officer
Sarah Ackland
Global Head of
Distribution & Marketing
Simon Broomfield
General Counsel &
Chief People Officer
Sarah Ackland is Global Head of
Distribution and Marketing for
the Brooks Macdonald Group,
and a member of the Executive
Committee. Joining Brooks
Macdonald in 2022, Sarah leads
the distribution, marketing and
product strategy teams across the
UK and International markets.
Sarah has spent more than 25
years in investment management
and has a deep knowledge and
understanding of distribution
and marketing in the sector. She
joined Brooks Macdonald from
Liontrust, where she was Head
of Multi-Asset Business. She was
previously Head of UK Funds
at the Architas UK Investment
Business, prior to its purchase by
Liontrust.
Sarah has a BA in Psychology and
Art from Liverpool University and
is IMC qualified.
Caroline Abbondanza is the Chief
Operating Officer of the Brooks
Macdonald Group and a member
of the Executive Committee.
Caroline is responsible for
advancing how the Group serves
its advisers and clients and
leads the Group’s investment
in technology, systems and
processes.
Caroline joined Brooks
Macdonald in 2019. Prior to her
current role, she was Brooks
Macdonald’s Chief Technology
Officer, where she owned
all areas of the technology,
digital and cyber strategy and
delivery agenda. Caroline has
25 years’ experience working in
technology in financial services,
previously holding group
executive committee positions
at FNZ and Travelex. She also
chairs the Investment Association
Technology Forum.
Caroline has a degree in social
anthropology and politics and
has completed the executive
leadership programme at the
University of Cambridge.
Simon Broomfield joined Brooks
Macdonald in 2008 and he is the
Group’s General Counsel and
Chief People Officer.
As CPO, Simon is responsible for
building and leading our people
strategy, and is responsible for all
aspects of HR, including talent
recruitment and development. In
his General Counsel role, Simon
advises the Group Directors
and employees on all legal
matters affecting the Group
in all jurisdictions. He is also
responsible for managing the
Group legal team and acts as the
Company’s data protection officer.
Simon was called to the Bar of
England & Wales in 2002 and
admitted as a Solicitor of the
Senior Courts of England &
Wales in 2009. He has significant
experience in civil litigation,
corporate and commercial law,
banking and financial services
law, M&A, consumer credit, and
data protection.
Simon has an MBA from Imperial
College and is Vice President
and former Chair of the Bar
Association for Commerce,
Finance and Industry. He is
a Chartered Member of the
Chartered Institute of Securities
and Investments.
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
Chartered Institute for Securities
& Investment (“CISI”).
84
Brooks Macdonald Group plc Annual Report and Accounts 2023
Richard Hughes
CEO International
Alick Mackay
Strategy & Corporate
Development Director
Edward Park
Chief Investment Officer
Louis Petherick
Chief Risk Officer
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 CISI and the Institute of
Directors (“IoD”).
Richard is Chairman of Cancer
Research UK Jersey, a voluntary
position.
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 the 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 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.
Louis joined Brooks Macdonald
in September 2023 and is the
Chief Risk Officer and a member
of the Executive Committee.
Louis is responsible for the
Group Risk, Investment Risk,
Compliance and Financial Crime
functions and has day-to-day
oversight of the outsourced
internal audit relationship.
Louis has 30 years’ experience in
financial services, predominantly
overseeing risk, compliance and
conduct across insurance, wealth
management, retail banking,
investment management
and, most recently for FNZ,
a technology and outsource
service provider, as the
UKMEA CRO.
Louis has delivered multiple
risk and regulatory projects
throughout his career and
has extensive experience in
interacting with regulators.
Executive Directors
Andrew Shepherd
CEO
Andrea Montague
Chief Financial Officer
Annual Report and Accounts 2023 Brooks Macdonald Group plc
85
Audit Committee report
I am pleased to join a
very strong Committee,
where we placed
additional emphasis
on control oversight in
the year as a result of
the migration to SS&C’s
operating platform.
James Rawlingson
Audit Committee Chair
86
Brooks Macdonald Group plc Annual Report and Accounts 2023
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 Audit 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; and
To work in conjunction with the Risk
and Compliance Committee to review
the effectiveness of 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
Richard Price was the Chair of the Audit
Committee until 3 May 2023, at which
point James Rawlingson was appointed as
Chair, following regulatory approval. James
Rawlingson was appointed as a Non-Executive
Director to the Company on 2 March 2023
and possesses recent and relevant financial
experience to support his appointment as Chair
of the Audit Committee. Richard Price continues
to be a member of the Audit Committee, along
with John Linwood, Dagmar Kershaw and
Robert Burgess. 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. The Company believes that the
Audit 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 2023 is set out in the
summary table on page 80.
The Audit Committee’s areas of focus
Financial
reporting
External audit
Internal audit
Control
oversight
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
›
Reviewed the Interim and Annual Report and Accounts, ensuring these are fair, balanced and
understandable for shareholders and other end users;
Reviewed the policies, 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 the acquisition accounting, assumptions and judgements applied and disclosures in the
Interim and Annual Report and Accounts in respect of the Integrity Wealth Solutions and Adroit Financial
Planning businesses acquired during the year;
Reviewed the accounting, judgements applied and presentation of the costs and capital expenditure
incurred by the Group in connection with the transition to the new operating platform and the SS&C
technology suite;
Reviewed the overall presentation of alternative performance measures (“APMs”) to ensure they are not
given undue prominence, reviewed the nature of the adjusting items excluded from the statutory results
and evaluated the clarity and explanations of APM reconciliations;
Reviewed the key reporting considerations for the Group’s Interim and Annual Report and Accounts
presented by management with reference to the Financial Reporting Council thematic reviews issued
during the year on judgement and estimates; earnings per share; deferred tax assets and business
combinations;
Reviewed the key reporting considerations and the first-year disclosures in the Annual Report and
Accounts on the Task Force on Climate-Related Financial Disclosures (“TCFD”); and
Reviewed the Group’s going concern assumptions and the Viability statement.
Approved the annual external audit plan, the terms of reappointment, remuneration, and Terms of
Engagement;
Provided oversight of the Group’s external auditors, PricewaterhouseCoopers LLP (“PwC”), 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.
Developed an internal audit plan alongside the Group’s internal auditors, 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.
In conjunction with the Risk and Compliance Committee, reviewed the adequacy and effectiveness of the
Group’s internal financial controls;
› Monitored and reviewed the migration of the Group’s custody assets to the SS&C Technologies’ operating
platform and systems at the beginning of the financial year;
›
›
›
Reviewed and considered CASS-related matters, including PwC’s CASS audit findings;
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
› Welcomed the appointment of new Audit Committee Chair, James Rawlingson on 3 May 2023;
›
Reviewed and updated the Committee’s Terms of Reference in line with the Chartered Governance
Institute UK & Ireland published guidance to reflect changes to legislation and regulation and
developments in the UK Corporate Governance Code and changes to good practice; and
›
Reviewed the Committee’s composition and minutes of prior meetings.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
87
Audit Committee report continued
Internal audit
The Group has outsourced its internal audit function to
KPMG since September 2018. KPMG formally report to James
Rawlingson, Chair of the Audit Committee, with the Chief Risk
Officer, being the principal point of day-to-day contact.
A risk-based audit plan is developed by the Audit Committee
and KPMG, with input from the Risk and Compliance
Committee, the CEO and the Chief Risk Officer, seeking to
provide assurance in areas of high risk and of importance
across the industry. The plan is reviewed by the Audit
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”), who have been appointed since 2011. Jeremy
Jensen is the audit partner in charge of the Group’s audit, with
the current year being his third year. As an AIM-listed company,
Brooks Macdonald is not required to rotate its audit firm after 10
years, although the Group will 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 2023.
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 reviewed by the Committee during the year,
and any non-audit services provided to the Group reviewed
in line with this Policy.
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 2023. 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 those of the auditors.
Goodwill
(see Note 14)
Amortisation
of client
relationships
(see Note 14)
Acquisition
accounting
(see Note 11)
The Committee reviewed the output of 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 relationship intangible assets, the
Committee reviewed relevant analysis presented by management. The Committee was in
agreement and satisfied that the client relationship intangible assets are adequately supported by
the respective impairment tests and reviews.
The Committee reviewed management’s accounting of the Integrity and Adroit acquisitions,
including the methodology for valuing the intangible assets, and concluded that the recognition
was appropriate.
New operating
platform
transition costs
The Committee reviewed management’s accounting of the costs incurred in connection with the
transition to the new operating platform and is in agreement with the treatment of the capitalised
costs on the balance sheet and the dual running costs excluded from the Group’s underlying profit
as an APM recognised 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:
James Rawlingson
Audit Committee Chair
13 September 2023
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Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
Annual Report and Accounts 2023 Brooks Macdonald Group plc
89
89
Nominations
Committee report
The Committee has
overseen a number
of changes during the
year and I take great
pleasure in welcoming
Andrea Montague and
James Rawlingson to
the Board.
Richard Price
Nominations
Committee Chair
90
Brooks Macdonald Group plc Annual Report and Accounts 2023
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 Richard Price (Chair),
John Linwood, Dagmar Kershaw, Robert Burgess
and James Rawlingson. Only members of the
Committee may vote on Committee business
but other members of the Board and the General
Counsel and Chief People Officer may attend
all, or part, of a meeting by invitation. The
attendance of each Committee member during
the year is shown on page 80.
Main activities during the year
The Nominations Committee has overseen a
number of Board changes during the last year. In
January, it was announced that both Ben Thorpe,
Chief Financial Officer, and Lynsey Cross, Chief
Operating Officer, would be leaving the business.
With the re-platforming of the business to SS&C
Technologies, much of the operation of the
business is now outsourced and the Directors
agreed that a Board-level replacement for
Lynsey was not required. A search for a suitable
candidate to replace Ben, however, began
immediately and in June, we were delighted to
announce the appointment of Andrea Montague
as our new Chief Financial Officer with effect
from 1 August. A full description of Andrea’s
recruitment process accompanies this report on
page 92.
In February we announced that our Chairman, Alan
Carruthers, was leaving the Board due to ill health. After
discussions amongst the Board, it was agreed that Richard
Price, the Company’s Senior Independent Director, should
assume the role of Acting Chairman until such time as a
permanent Chair could be recruited. Robert Burgess took on
the role of Senior Independent Director in Richard’s place.
Richard joined the Board in 2014 and has chaired the Audit
Committee for most of his time with the Company. Under
the UK Corporate Governance Code, Directors are no longer
deemed to be independent after serving on the Board for
nine years. With Richard’s period of independence expiring,
the Company had already commenced a formal process to
appoint a new Non-Executive Director who could replace
Richard as Chair of the Audit Committee. The Company
had engaged Nurole to assist with this search, an agency
that had been used previously in recruiting Non-Executive
Directors for the Group. Nurole had been instructed to look for
a diverse list of candidates with recent and relevant financial
experience, who could chair the Audit Committee effectively.
The search had been led by the Company’s former Chairman,
who interviewed a number of candidates, with a short list also
meeting the then CFO and outgoing Chairman of the Audit
Committee. The preferred candidate then met with other
members of the Board and, on 16 February, the Company
announced that James Rawlingson had been appointed as
a Non-Executive Director of the Company with effect from
2 March. James subsequently received FCA consent to take
on the responsibility of Chair of the Audit Committee on
3 May. The Company arranged an induction programme
for James, which involved a variety of presentations and
meetings with people 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’ SMCR and other
regulatory responsibilities, together with a briefing from the
Company’s NOMAD giving a market overview and explaining
AIM requirements. Subsequent to the formal induction
programme, management remained available to answer any
questions about the business that James had.
The search for a permanent Chair is currently ongoing, with
the focus being on securing a top-quality appointment. The
Company have engaged the services of an external search
agency, Spencer Stuart, to lead the selection process. The
Company has not previously used the services of Spencer
Stuart. The Board were asked to provide input on the qualities
and attributes they would want to see in the new Chair and
their responses were used to shape the profile of candidate
being sought.
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. Last year’s report
highlighted the elevation of Simon Broomfield and Caroline
Abbondanza to the Executive Committee. Since joining
the Executive Committee, both have seen their roles and
responsibilities further expanded. Following the departure
of our previous Chief People Officer, Simon has taken on that
role in addition to his responsibilities as General Counsel and
Caroline’s role has grown to become that of Chief Operating
Officer.
The Committee is also committed to maintaining an
appropriate balance of skills, experience, independence and
diversity across the wider Group. Further information on the
Group’s approach to succession planning and leadership
development can be found in the Corporate responsibility
report on page 57.
Diversity, equity and inclusion
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, understanding, skills, experience and
expertise of directors from a range of backgrounds. The
Committee will also 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. The Committee strongly
supports management’s efforts to nurture an inclusive culture
within the Group. Diverse perspectives, experiences and
backgrounds across our workforce help us better understand
the needs of our clients and, therefore, to grow the business.
Further details on the Group’s approach to diversity are
included in the Corporate responsibility report on page 58,
with details of the gender balance of the Company’s senior
management also shown on that page.
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. This year’s
Board evaluation was carried out internally in June and July
2023. A secure, online questionnaire was employed, which
ensured the anonymity of responses received.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
91
Nominations
Committee report continued
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 are keen to see a greater use of data when
shaping and justifying strategy
› More deep dives on topics of interest
›
Earlier circulation of meeting minutes
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.
› Directors would like more information on competitors
and market intelligence - A structured market study was
produced by KPMG to assist with the formation of the
Company’s International strategy, In addition, analysts’
note on the wealth management sector have been
provided to the Board as well as information on market
trends to assist with the discussion around the Company’s
medium-term plan.
› Greater use of NED-only sessions and informal Board
meetings to allow wider discussion and the socialisation
of ideas and observations – A NED-only session was held
with the Interim Chief Risk Officer in order to gain his
views on the Company’s risk governance. In addition,
a dinner in December and regular Board lunches have
been held where Directors were able to discuss matters of
interest in an informal setting.
›
Earlier NED involvement in some business decisions -
M&A opportunities, in particular, are raised by the CEO
in his regular reports to the Board even when they are at
initial stages.
Corporate governance
The Company has chosen to follow the Corporate
Governance Code and this is the third 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:
Richard Price
Nominations Committee Chair
13 September 2023
Recruitment of New CFO
On 19 January 2023, it was announced that Ben Thorpe,
the Company’s existing Chief Financial Officer, would
be leaving the Company. The Company then began a
search process to identity a suitable replacement.
Commencement of Search
Through a process of direct introductions, the Company
began to put together a diverse list of potential
candidates. In addition, Redgrave, an executive search
firm, were engaged to assist with the search. This is
the first time the Company has used the services of
Redgrave.
Potential Candidates
This initial search produced around 30-40 potential
candidates. Redgrave held conversations with some
of these in order to reduce the list of candidates down
to a more manageable number. This narrowing down
process resulted in a long list of candidates who were
invited to meet with the Company’s CEO, Andrew
Shepherd.
Long List
Andrew Shepherd met with more than a dozen
candidates in order to assess their suitability for the role,
both in terms of their expertise and background but also
how well they would align with the Company’s values.
Those individuals who he felt were best matched for
the position were then invited to further meetings with
members of the Company’s Executive Committee.
Short List
The three candidates who emerged from this process
next met with the Acting Chairman and the Chair of
the Audit Committee. As a result of these meetings, a
preferred candidate emerged, Andrea Montague. The
Company then engaged an external consultant to
perform a leadership assessment on Andrea, gauging
her leadership capability against the role requirements.
Nominations Committee Meeting
On 6 June the Company’s Nominations Committee met
to consider the preferred candidate. The Committee
discussed her skills and experience, as well as her likely
cultural fit. Following the discussion, it was agreed to
offer Andrea the role, subject to satisfactory references.
Appointment of Andrea Montague
On 15 June 2023 the Company announced the
appointment of Andrea Montague as Executive Director
and Chief Financial Officer effective 1 August, subject to
regulatory approval.
92
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
Annual Report and Accounts 2023 Brooks Macdonald Group plc
93
93
Remuneration
Committee report
In navigating a year of
challenging conditions
and markets, our
remuneration policy has
ensured an appropriate
alignment between
the reward given to our
people and returns to
our shareholders.
John Linwood
Remuneration
Committee Chair
94
Brooks Macdonald Group plc Annual Report and Accounts 2023
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 2023, which contains the
Annual Remuneration Report (describing both
the remuneration paid to directors during the
year ended 30 June 2023, and the intended
implementation of the policy for the year ending
30 June 2024, including the remuneration
arrangements for the Group’s incoming
Chief Financial Officer) and the Directors’
Remuneration Policy.
The Annual Remuneration Report describes
how the policy has been put into practice over
the past year, providing a detailed account
of each Director’s total remuneration and
explaining how these outcomes appropriately
align to the Group’s pay for performance
philosophy. The Directors’ Remuneration Policy
sets out the framework within which Executive
Directors are paid.
Activities of the Committee
During the reporting period the Remuneration
Committee continued to monitor and oversee
the effective implementation of the Group’s
remuneration policies, ensuring they supported
the attraction and retention of new executive
leaders and the wider workforce, maintained
their underpins of the Group’s risk culture,
and delivered outcomes at all levels that fairly
reflected the returns received by shareholders
and that would reinforce the long-term interests
of the Group and its customers.
Key activities of the Committee during the year
have included:
› Oversight and approval of remuneration
arrangements for senior leaders joining the
Group in the reporting period, including the
Global Head of Distribution and Marketing
and Chief Risk Officer roles as members of
the Group’s Executive Committee, and also
the Executive Director appointment of the
new Chief Financial Officer.
›
Reviewing the effective implementation
and first year outcomes of the Group’s new
performance management approach; ‘At Our
Best’ and evidencing of pay for performance
relationships and appropriate risk outcome-
alignments across the wider workforce.
› Oversight and approval of variable pay
arrangements for the legal entities acquired
by the Group in the reporting period.
›
›
›
Ensuring the effective coordination of Executive Director
fixed and variable pay planning and approval with
that of the all-employee population to ensure fair and
proportionate outcomes across the whole Group.
Regulatory governance activities including oversight
of the evolution of the Group’s remuneration policies
to consider new MIFIDPRU Remuneration Code and
Consumer Duty requirements, such as the establishment
of the Group’s maximum variable to fixed pay ratio,
re-testing of its Material Risk Taker identification
criteria, incorporation of additional customer outcome
information into variable pay decisions, as well as the
effective execution and embedding of the Group’s
risk adjustment principles at both bonus pool and the
employee level for variable pay.
Examination of the attribution factors behind the Group’s
sixth annual gender pay gap statistics and support for
further Diversity, Equity and Inclusion strategic planning
to be conducted.
› Oversight of all long-term and short-term variable pay
funding and guaranteed variable pay commitments
against affordability and remuneration policy principles
and share plan rules requirements.
› Agreeing the remuneration terms for Executive Directors
leaving the Group during the year.
›
The appointment of Korn Ferry (UK) Limited as advisers
to the Remuneration Committee.
Leaving arrangements for departing
Executive Directors
Lynsey Cross – Chief Operating Officer
In view of the material changes to the Chief Operating Officer
role brought about by the migration of the Group’s operations
platform to a third party in early FY23, Lynsey Cross stepped
down from Executive Director responsibilities on 19 January
2023 with the agreement of the Board, and left employment
with the Group at 30 June 2023. The Remuneration
Committee determined that Lynsey be treated as a Good
Leaver, and her entitlement to incentives be treated in line
with the remuneration policy.
Lynsey was paid salary in lieu of notice of £176,167 for the
unworked portion of her notice period, together with an
amount of £95,000 to cover legal expenses and related
risks to the Group, as provided for under the remuneration
policy. Her Executive Director annual bonus opportunity was
pro-rated for her period of Executive Director service, and
assessed in line with the performance targets that were set at
the start of the year. The bonus was paid in a mix of cash and
deferred shares as set out within the remuneration policy.
Lynsey’s outstanding LTIP awards will be treated in
accordance with the remuneration policy. A time pro-rata
reduction has been applied to the awards, and the balance
will vest on their normal vesting dates, subject to the
performance assessment.
Ben Thorpe – Chief Financial Officer
Ben Thorpe resigned as an Executive Director
on 19 January 2023. He remained in employment with
the Group until 30 June 2023 and was paid salary, pension
and benefits for the duration of his period of service only,
with no payment in lieu of notice following cessation of
his employment.
The Remuneration Committee determined that his
entitlement to annual bonus for the year ended 30 June 2023
would be forfeited. He also forfeited all outstanding LTIP
awards and outstanding deferred share awards connected to
bonuses earned in previous years. Vested shares that remain
subject to holding periods will continue to require to be held
until the end of their holding periods.
Incentive outcomes for the year
The Group delivered a solid financial performance in FY23,
in line with market expectations. This was accomplished
against a challenging commercial and macro-economic
circumstances, with declining markets and higher interest
rates, leading investor sentiment to seek higher cash holdings,
debt repayment and short-term investment in money market
funds. Contrary to these constraints, the Group produced
net organic growth in funds under management of 5.2% (and
overall growth in funds under management of 7.5%), using this
platform to make steady and encouraging progress against
the expansion of its high-quality financial advice proposition
and other key strategic and transformational priorities.
In the prior FY22 reporting period, the Board comprised three
Executive Directors (CEO, Chief Financial Officer and Chief
Operating Officer). With the Chief Financial Officer and Chief
Operating Officer stepping down from the Board mid-way
through FY23 in January, only the CEO remained as an
Executive director at the close of the FY23 reporting period.
As such, the CEO is eligible for a full-year annual bonus, the
Chief Operating Officer a pro-rata consideration for Executive
Director service during the reporting period and the Chief
Financial Officer is not eligible for bonus.
In continuing to be relevant to assessing the financial
performance of the Group, the same financial measures were
applied to the Executive Director bonuses as in the previous
year, comprising 60% of overall opportunity, these being net
organic growth in funds under management, underlying
profit before tax, and underlying profit before tax margin.
Similarly, the strategic and personal objective categories of
strategy, people, client and risk, comprising 40% of overall
opportunity, were also retained. The relative weightings of
the financial metrics remained the same as previous years
with each metric comprising one third of overall financial
performance opportunity.
The challenging market conditions meant that the Group
was unable to deliver the same absolute level of underlying
profit before tax and underlying profit before tax margin as
was delivered for FY22, albeit the delivery of £30.3 million
underlying profit before tax and underlying profit before
tax margin of 24.5% achieved the returns expected by
the market.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
95
Remuneration
Committee report continued
The realisation of net organic growth in funds under
management of 5.2% was however a significant achievement
and exceeded the growth attained in FY22 of 4.8%. The
blended outturns of these three financial measures achieved
70.1% of maximum financial measure bonus opportunity,
equivalent to 63.1% of Executive Director salary, a reduction
of 7.8 percentage points or 11.0% change on the 70.9% of
Executive salary awarded for FY22 financial performance.
The CEO was awarded 63.8% of maximum non-financial
measure opportunity, equivalent to 38.2% of salary, a full
description of which is made available later in this report.
The overall annual bonus outturn for FY23 for the CEO was
therefore 67.5% of maximum bonus opportunity or 101.3%
of salary, a reduction of 29.6 percentage points, or 22.6%
reduction in realised bonus opportunity year on year.
This decrease is consistent with the level of change to
bonuses being awarded to strong performers across the
wider workforce.
The Remuneration Committee is satisfied that the CEO’s
FY23 bonus outcome appropriately reflects the holistic
performance of the Group over the reporting period and
correctly balances the long-term interests of all the Group’s
stakeholders. This award is subject to the Group’s malus and
clawback policy and one third of its value will continue to
be awarded in deferred share options, providing ongoing
alignment of interests between senior leadership and
shareholders.
The CEO and Chief Operating Officer had no Long-Term
Incentive Plan (“LTIP”) awards scheduled to vest in the FY23
reporting period.
The conditional award over 7,001 shares, granted in 2019
under the 2018 Long-Term Incentive Plan to the former Chief
Financial Officer Ben Thorpe, vested in full on 30 September
2022, following the Remuneration Committee’s assessment
of the award’s performance underpins. The vesting of this
award occurred prior to the former Chief Financial Officer’s
resignation. In line with the remuneration policy, Ben Thorpe
is required to retain the shares for two years following vesting,
even though he is no longer employed.
In determining the pay-out values of either bonus awards
being made in respect of the reporting period, or LTIP awards
vesting within the reporting period, the Remuneration
Committee has not applied any discretion, or made any
amendment to, the calculated financial metric outturns.
Long-term incentive awards granted during
the year
In the first half of the FY23 reporting period, performance
share awards were made to the Executive Directors under
the 2018 Long-Term Incentive Plan. The grant occurred on
31 October 2022, prior to the Chief Operating Officer and
former Chief Financial Officer stepping down from Executive
Director responsibilities.
The performance measures for the awards granted were
based on underlying, diluted earnings per share (“EPS”) and
a basket of ESG metrics, with 90% of overall opportunity
relating to EPS performance and 10% to ESG performance.
In accordance with the Directors’ Remuneration Policy, the
grant levels for the CEO and former Chief Financial Officer
were 200% of base salary and the Chief Operating Officer
receiving 100% of base salary. Stretch targets, subject to
Remuneration Committee assessment prior to vesting
in October 2025, were established for both performance
measures. As explained above, the award for the former
Chief Financial Officer has now lapsed in full and the award
for the Chief Operating Officer has partially lapsed.
Workforce engagement
During FY23, John Linwood continued to be the designated
Non-Executive Director to lead the Board’s engagement
with our people. Throughout the year, a number of the
Non-Executive Directors participated in ‘skip-level’
discussions, providing an opportunity for members of the
Board to hear feedback, discuss ideas and better understand
the experience and expectations, including those around
executive pay, of employees outside of the Group’s senior
leadership cohort. In FY23, the Group also revised its
employee engagement survey, ‘Speak Up’, to give more
opportunities for employees to give their views and collect
more detailed feedback, leading to changes in family friendly
benefits and a clearer understanding of employee opinion
on individual components of pay and benefits. Executive
Directors regularly meet with employees and answer
employee questions at the series of monthly town halls
webinars, as well as at focus groups, during regional office
visits and team meeting drop-ins. The lifting of COVID-19
restrictions has also enabled Executive Director sponsored
all-Group team-building activities, such as the Brooks
Macdonald Sports Day, in partnership with the Dame Kelly
Holmes Trust (“DKHT”).
Approach to executive remuneration in FY24
In July 2023, following a review of workforce fixed pay
changes and aligned executive compensation benchmarks,
the Remuneration Committee undertook a review of the
CEO’s salary. This review resulted in the approval of a 4%
increase, raising his salary from £416,000 to £432,640 with
effect from 1 July 2023. This percentage increase is in line with
the average increase made to the wider workforce over the
same review period. The Remuneration Committee considers
this salary level to be both affordable and commensurate
with the skills, competencies and experience necessary to
successfully lead an organisation of the Group’s commercial
and regulatory complexity and strategic ambition.
The implementation of the Executive Director annual
bonus plan for FY24 will see no change to the maximum
opportunity for both eligible Executive Directors, which
will remain at 150% of base salary, or base salary earnings,
where the full reporting period is not served. At the present
time of writing, the Remuneration Committee is finalising its
review of annual bonus performance measures with a view
96
Brooks Macdonald Group plc Annual Report and Accounts 2023
Remuneration arrangements for the incoming
Chief Financial Officer
Following Ben Thorpe’s resignation as an Executive Director
of the Group on 19 January 2023, the Group undertook
an extensive search to find a candidate with the requisite
leadership, experience and skills to drive forward the
Group’s ambitious growth strategy. Amongst an exceptional
field, Andrea Montague was identified as the outstanding
candidate, and in June 2023 the Group announced her
appointment from 1 August 2023 as Chief Financial Officer
and Executive Director of the Company.
The Chief Financial Officer was appointed on a base salary
of £375,000, broadly equivalent to the salary trajectory of her
predecessor, with variable pay opportunities in accordance
with the current Directors’ Remuneration Policy. Pension
benefits for the new Chief Financial Officer are aligned
with the wider workforce and no guaranteed variable
remuneration or prior employers buy-out commitments
were offered or made.
The Chief Financial Officer will be eligible for consideration for
an LTIP grant in September/October 2023 as part of the regular
annual cadence. As noted above, this policy opportunity is
200% of salary.
Our upcoming AGM
This report will be presented to shareholders at the upcoming
Annual General Meeting in October 2023 and I hope that you
will join the Board in supporting this non-binding resolution.
to selecting the measures that are most closely aligned to the
Group’s identified priorities within the next operating cycle.
Notwithstanding any changes to individual measures, the
annual bonus structure will continue to operate a majority
weighting of financial measures, enabling a continued focus
on the delivery of a strong financial return to investors.
These financial measures will be complemented by targeted
non-financial objectives, which will underpin and measure
the necessary transformations identified in the Group’s
strategy. These measures, along with their performance
outturns, will be disclosed in next year’s report.
In FY24, in seeking to align long-term incentive outcomes
with those experienced by shareholders and customers,
the Group will continue to operate a performance share
approach at the existing percentage of salary opportunity
levels of 200% of base salary, for both the CEO and incoming
Chief Financial Officer.
With the long-term delivery of strong earnings and the Group’s
ESG-offering remaining central to its continuing success, the
measures used to assess performance for long-term awards
will continue to be underlying, diluted EPS, complimented
by a basket of ESG-based metrics. The relative weightings of
the performance measures will remain the same with 90%
of overall opportunity being aligned to EPS performance and
10% to ESG. These awards will only vest if challenging targets,
as set by the Remuneration Committee prior to grant, are
achieved. Vesting occurs on a graduated basis from threshold
performance (at which 25% of the award vests), rising to full
vesting only in the event significant over-performance is
delivered. Formulaic adjustments for actual dilution and
effective tax rates operate within the underlying, diluted EPS
performance assessment to ensure the final outturn reflects
executive management contribution and performance.
At present, no changes are proposed to key benefits in
FY24. However, the Group will continue to review levels of
retirement benefits it currently offers. In the event any future
changes are approved by the Remuneration Committee,
they would apply to the Executive Directors and the wider
workforce alike.
The Committee believes that the Policy’s performance-based
principles, in tandem with its overall opportunity level, will not
only be effective in retaining and appropriately incentivising
the CEO and Chief Financial Officer, but will deliver outcomes
that balance the interests of all stakeholders and drive the
Group’s long-term success.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
97
Remuneration
Committee report continued
Annual report on remuneration
Total remuneration for the financial year ended 30 June 2023
Salary
and
fees1
Ben Thorpe7
£’000
Executive Directors
Andrew Shepherd 2023
416
400
2022
201
2023
350
2022
167
2023
290
2022
2023
784
202212 1,040
Lynsey Cross6,8
John Linwood
Dagmar Kershaw
Non-Executive Directors
Richard Price9
2023
135
2022
(Acting Chairman)
84
Robert Burgess
2023
77
2022
74
2023
67
2022
64
2023
77
2022
74
James Rawlingson10 2023
24
2022
–
2023
124
200
2022
2023 504
2022 496
Total remuneration 2023 1,288
2022 1,536
Alan Carruthers11
Pension-
related
benefits
Taxable
benefits2
Annual
bonus3
Long-term
incentives4 Sharesave5
Other6
Total
Total fixed
remuner-
ation
Total
variable
remuner-
ation
23
28
12
25
10
20
45
73
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
73
3
3
1
2
1
3
5
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
8
421
524
–
458
206
380
627
1,362
–
–
–
–
–
–
–
–
–
–
–
–
–
–
627
1,362
–
469
132
576
–
–
132
1,045
–
–
–
–
–
–
–
–
–
–
–
–
–
–
132
1,045
15
–
–
–
–
–
15
–
–
–
–
–
271
–
271
–
878
1,424
346
1,411
655
693
1,879
3,528
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
271
–
135
84
77
74
67
64
77
74
24
–
124
200
504
496
2,383
4,024
442
431
214
377
178
313
834
1,121
135
84
77
74
67
64
77
74
24
–
124
200
504
496
1,338
1,617
436
993
132
1,034
477
380
1,045
2,407
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,045
2,407
Notes to the total remuneration table
1 The salary and fee amounts shown reflect the value paid for Executive Director/Non-Executive Director service within the relevant financial year.
2 Taxable benefits relate to the provision of medical insurance and company car (electric vehicle) benefit.
3 The annual bonus amounts shown reflect the value awarded for Executive Director service within the relevant financial year, comprising both cash and
share-based components. For both FY22 and FY23, the cash payment comprised 66.7% of total annual bonus value and the deferred share award comprised
33.3%. Ongoing tenure and malus and clawback provisions apply to deferred share awards.
4 Represents the market value of the LTIP award on the LTIP vesting date where LTIP vesting date is within the relevant financial year.
5 Reflects the value of the gain of the Sharesave contract calculated related to the discount price for the 2020 Sharesave contract that matured in the FY23
financial year.
6 Other values reported reflect the total of payments to Lynsey Cross in relation to her stepping down from Executive Director responsibilities as described earlier
in this report.
7 Ben Thorpe resigned as an Executive Director on 19 January 2023.
8 Lynsey Cross resigned as an Executive Director on 19 January 2023.
9 Richard Price was appointed Acting Chairman in February 2023 and his fees reflect a blend of Acting Chairman’s fee and Senior Independent Director’s fees over
the FY23 financial year.
10 James Rawlinson was appointed as a Non-Executive Director on 2 March 2023.
11 Alan Carruthers resigned as Chairman on 7 February 2023.
12 A variance of £12,000 operates against the total (£3,516,000) and total fixed pay (£1,109,000) values reported in the table last year for FY22. This variation relates to
company car lease deductions no longer being reported as deductions to fixed pay.
98
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual variable pay outcomes for financial year ended 30 June 2023
FY23 bonus outcomes for Executive Directors were determined by performance against a balanced scorecard of performance
measures and target range sliding scales designed to achieve an appropriate relationship between holistic and sustainable
performance delivered by the Executive Directors and the value of incentives delivered to them. Under the existing Directors’
Remuneration Policy, a maximum bonus opportunity of 150% of base salary applies to each Executive Director.
Annual bonus performance targets
For the financial year ended 30 June 2023, the 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 deliverables.
Performance against financial criteria
Financial performance delivery was consistent across all measures, with near or above target performance being delivered for
each measure.
% of
salary at
Weighting
20.0%
20.0%
maximum Threshold1
£25.7m
2.5%
30.0%
30.0%
Target1 Maximum1
£37.0m
£29.4m
7.5%
5.0%
% of
maximum
awarded
for criteria
70.7%
69.4%
Actual for
FY23
£30.3m
5.2%
% of base
salary
awarded
for these
criteria
21.2%
20.8%
20.0%
60.0%
30.0%
90.0%
22.0%
24.1%
28.0%
24.5%
70.1%
70.1%
21.0%
63.1%
Underlying PBT
Net flows
Underlying PBT
margin (%)
Total
1 33.3% of maximum is payable for Threshold performance, 66.7% of maximum for Target performance and 100% of maximum for Maximum performance.
Whilst the Committee has the discretion to adjust the final outcome to take account of overall performance and exceptional
events, no discretion has been applied to the outturns of the financial metric calculations. The Committee considers that
the Remuneration Policy has operated as intended in delivering appropriate incentive compensation relative to Company
performance and 70.1% of maximum opportunity was approved as the financial outturn for both the CEO and the Chief
Operating Officer.
The award of 63.1% of base salary for financial objectives, reflects a reduction of 7.8 percentage points or 11.0% change on the
70.9% of Executive salary awarded for FY22 financial performance. This rate of reduction is highly correlated to the year-on-year
rate of change in underlying profit before tax delivered of 12.1%.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
99
Remuneration
Committee report continued
Performance against non-financial criteria
The CEO’s non-financial objectives and assessment are as follows:
Strategic
objective
Strategy
People
Client
Risk
Objective
Performance in FY23
Performance
assessment
against
objective
Continued delivery of organic
growth strategy including
successful implementation
of business transformation
initiatives, complemented
by selective high-quality
acquisitions and successful
integration of previous
acquisitions.
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
and digital improvements,
making us easier to do business
with. Continued focus on
proposition development
to meet client needs and
support IFAs
Ongoing evolution and
embedding of risk management
framework and supporting
culture and mitigating risk
appropriately. Maintain
a positive and proactive
relationship with regulators and
high standards in managing
regulatory matters.
›
›
›
›
›
›
›
›
›
›
›
Successful expansion of Group wealth adviser capability through
the successful acquisition and integration of Integrity Wealth
Solutions and Adroit Financial Planning during reporting period.
Good
Strong organic FUM inflows resulting from effective design and
execution of multi-asset product sub-strategies.
Effective reorganisation of the Group’s Private Client strategy via
the implementation of an appropriate platform. Now positioned
for growth and improved client outcomes.
Ongoing review of the Group’s operating model.
Successful re-organisation of Executive Committee roles and
responsibilities following changes to operating model and
departures of CPO and COO incumbents in the year.
Strong
Oversaw improvement in employee engagement score as
measured by the Group’s all employee ‘Speak Up’ survey
and by falling levels of voluntary employee turnover.
Played critical role in external CFO, CRO and Non-Executive
appointments in FY23.
Continued focus on delivery of high-quality client and IFA
experience, leveraging process improvements and digital
capabilities to make the Group easier to do business with.
Good
Improvements delivered in client portal performance and
client digital experience since operational platform migration
in July 2023.
Further development of multi-asset propositions (BMIS and BPS)
with improved collateral and debt product investment options.
Ongoing evolution and embedding of the Group’s risk
management framework.
Satisfactory
› Maintained active regulatory engagement in both the UK and
Crown Dependencies to support regulatory requirements and
business objectives.
›
Strong leadership of UK Regulator relationship following dialogue
arising from migration of operational platform in July 2023 and
oversight of regulatory responses across the Group.
The CEO was awarded 63.8% of maximum non-financial bonus opportunity, equivalent to 38.2% of salary for performance
against strategic and personal objectives, which were assessed across the spectrum of the objectives as being achieved at close
to on-target performance. For the portion of the reporting period that the Chief Operating Officer performed Executive Director
responsibilities, she was assessed to have achieved all her personal and strategic objectives and was awarded the maximum
non-financial bonus opportunity, equivalent to 60% of base salary.
In addition to the Remuneration Committee’s assessment of financial and non-financial performance, an additional risk
adjustment review was also conducted by the Remuneration Committee to consider if any adjustments to bonus were
appropriate to reflect crystallised or emerging material risks. No risk adjustment recommendations were presented or
made for any Executive Director.
100 Brooks Macdonald Group plc Annual Report and Accounts 2023
Overall outcome of the FY23 bonus
The final overall bonus award values that are payable, are detailed in the table below:
% of max
financial
performance
achieved
70.1%
70.1%
% of max
non-financial
performance
achieved
63.8%
100.0%
Overall
% of max
achieved
67.5%
82.0%
Total
FY23
bonus
award
payable
£’0001
421
206
Cash
portion
(2/3)
£’000
281
137
Deferred
shares
portion
(1/3)
£’000
140
69
% of base
salary (on
annualised
basis)2
101.3%
123.1%
Name
Role
Andrew Shepherd CEO
Lynsey Cross
Chief Operating Officer
1 Base salary of the CEO (£416,000) and the Chief Operating Officer (£302,000) respectively.
2 Shows bonus value payable, reflecting the portion of reporting period the Chief Operating Officer served as an Executive Director.
A third of the overall bonus value is payable in deferred shares (nil price options) for Executive Directors. These vest in three
equally weighted tranches over three years to encourage further alignment with our shareholders’ interests and support the
Group’s minimum shareholding requirements. Both cash and share portions are subject to malus and clawback provisions.
Face value of awards made under LTIP and deferred element of annual bonus during FY23
Name
Andrew Shepherd
Ben Thorpe
Lynsey Cross
Total
FY22
deferred
bonus
£’000
175
153
127
455
FY23
LTIPs
£’0001
832
728
302
1,862
One-off
award
£’000
–
–
–
–
Total
£’000
1,007
881
429
2,317
1 Value shown reflects the maximum opportunity. The number of shares delivered, and realised value of the award, will be determined by performance delivered
against the performance metrics.
Deferred bonus share awards granted during the year
One-third of the FY22 bonus was awarded to the Executive Director in the form of deferred nil price share options. These awards
will vest over three years in three equal tranches at 12, 24 and 36 months from date of award.
Name
Andrew Shepherd
Ben Thorpe
Lynsey Cross
Basis of award
1/3 of annual bonus
1/3 of annual bonus
1/3 of annual bonus
Date of
award
30 Sep 2022
30 Sep 2022
30 Sep 2022
No. of
awards
8,905
7,792
6,456
Face value
of awards
£’0001
175
153
127
Vesting date
30 Sept 2023/2024/2025
Now lapsed
30 Sept 2023/2024/2025
1 Based on a share price of £19.60, being the average mid-market closing price over the five-day period prior to 30 September 2022.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
101
Remuneration
Committee report continued
LTIP awards granted during the year
Name
Andrew Shepherd
Ben Thorpe
Lynsey Cross
Basis of award
200% of salary
200% of salary
100% of salary
Date of
award
17 Oct 2022
17 Oct 2022
17 Oct 2022
No. of
awards
43,413
37,986
15,758
End of
Face value
holding
of awards
period
£’000
832
17 Oct 2027
728 Now lapsed Now lapsed
17 Oct 2027
302
Vesting
date
17 Oct 2025
17 Oct 2025
A performance share award under the LTIP was granted to the Executive Directors in October 2022 with a face value of 100%
of base salary (Lynsey Cross) or 200% of base salary (Andrew Shepherd and Ben Thorpe) based on a share price of £19.17, being
the average mid-market closing price over the five-day period prior to grant date. The performance period for the awards is the
three reporting periods FY23, FY24 and FY25, with vesting occurring in October 2025 and the awards being subject to a further
two-year, post-vesting holding period.
The LTIP awards are subject to continued service and performance conditions relating to:
›
›
underlying diluted earnings per share (90% weighting); and
a basket of ESG metrics (10% weighting).
The EPS measure is structured as an absolute target value for the third year of vesting (FY25 underlying diluted EPS) and the
targets set will be disclosed when the awards vest.
The awards will also be subject to the following underpin:
›
›
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), error in the calculation of the awards and personal misconduct. 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.
The LTIP award made to Ben Thorpe has lapsed following him leaving the Group and the LTIP award made to Lynsey Cross will
be subject to service-based pro-rata in accordance with the plan rules, as detailed earlier in this report.
To the extent that they vest, the awards for Andrew Shepherd and Lynsey Cross will be reported in the total remuneration table
for the financial year ending 30 June 2026.
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 on 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.
102
Brooks Macdonald Group plc Annual Report and Accounts 2023
Directors’ share interests
At 30 June 2023, active Directors’ shareholdings were as set out below
Minimum
shareholding
requirement
(% of salary)
Beneficially
owned
shares
200%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
51,997
N/A
N/A
1,450
3,044
840
300
500
N/A
58,131
Unvested
qualifying
shares
(deferred
bonus
shares) net
of tax
Shares
vested
but not
exercised
net of tax
7,428
N/A
N/A
–
–
–
–
–
N/A
7,428
13,027
N/A
N/A
–
–
–
–
–
N/A
13,027
Value at
30 June
20231
£’000
Shareholding
as % of base
salary
1,565
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1,565
368%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Executives
Andrew Shepherd
Ben Thorpe2
Lynsey Cross2
Non-Executives
Richard Price (Acting Chairman)
Robert Burgess
Dagmar Kershaw
John Linwood
James Rawlingson
Alan Carruthers2
Total
1 Value based on mid-market close average share price on 30 June 2023 of £21.60.
2
Individuals no longer Directors as at 30 June 2023.
Vesting profile of all share awards
The following tables set out details of the Directors’ share awards and their vesting profile.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
103
Remuneration
Committee report continued
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.
A Shepherd
Exercise
price (p)
–
–
–
–
–
–
–
–
–
Options at
1 July 2022
1,120
1,122
1,289
1,289
1,290
1,415
1,415
1,417
–
–
–
–
–
10,357
Granted
during
year
–
–
–
–
–
–
–
2,968
2,968
2,969
8,905
Exercised
during
year
(1,120)
–
(1,289)
–
–
–
–
–
–
–
–
(2,409)
Market
value of
exercises
(£’000)
24
–
28
–
–
–
–
–
–
–
–
52
Lapsed
during
year
–
–
–
–
–
–
–
–
–
Forfeited
during
year
–
–
–
–
–
–
–
–
–
Options
at
30 June
2023
Vesting
date
Expiry
date
– 30/09/2021 30/09/2029
1,122 30/09/2022 30/09/2029
– 30/09/2021 30/09/2030
1,289 30/09/2022 30/09/2030
1,290 30/09/2023 30/09/2030
1,415 30/09/2022 30/09/2031
1,415 30/09/2023 30/09/2031
1,417 30/09/2024 30/09/2031
2,968 30/09/2023 30/09/2032
–
–
–
–
–
–
2,968 30/09/2024 30/09/2032
2,969 30/09/2025 30/09/2032
16,853
Exercise
price (p)
–
–
–
–
–
–
–
Options at
1 July 2022
1,589
1,829
1,831
1,825
1,825
1,826
–
Granted
during
year
–
–
–
–
–
–
2,597
Exercised
during
year
(1,589)
(1,829)
–
(1,825)
–
–
–
Market
value of
exercises
(£’000)
31
35
–
35
–
–
–
–
–
–
–
10,725
2,597
2,598
7,792
–
–
(5,243)
–
–
101
Lapsed
during
year
–
–
–
–
–
–
–
–
–
–
Forfeited
during
year
–
–
(1,831)
–
(1,825)
(1,826)
(2,597)
(2,597)
(2,598)
(13,274)
Options
at
30 June
2023
Vesting
date
Expiry
date
– 30/09/2022 30/09/2029
– 30/09/2022 30/09/2030
– 30/09/2023 30/09/2030
– 30/09/2022 30/09/2031
– 30/09/2023 30/09/2031
– 30/09/2024 30/09/2031
– 30/09/2023 30/09/2032
– 30/09/2024 30/09/2032
– 30/09/2025 30/09/2032
–
Exercise
price (p)
–
–
–
–
Options at
1 July 2022
1,323
1,323
1,325
–
Granted
during
year
–
–
–
2,152
Exercised
during
year
–
–
–
–
Market
value of
exercises
(£’000)
–
–
–
–
Lapsed
during
year
–
–
–
–
Forfeited
during
year
–
–
–
–
–
–
–
–
3,971
2,152
2,152
6,456
–
–
–
–
–
–
–
–
–
–
–
–
Options
at
Expiry
Vesting
30 June
2023
date
date
1,323 30/09/2022 30/09/2031
1,323 30/09/2023 30/09/2031
1,325 30/09/2024 30/09/2031
2,152 30/09/2023 30/09/2032
2,152 30/09/2024 30/09/2032
2,152 30/09/2025 30/09/2032
10,427
Grant date
31/10/2019
31/10/2019
30/09/2020
30/09/2020
30/09/2020
30/09/2021
30/09/2021
30/09/2021
30/09/2022
30/09/2022
30/09/2022
Total
B Thorpe
Grant date
31/10/2019
30/09/2020
30/09/2020
30/09/2021
30/09/2021
30/09/2021
30/09/2022
30/09/2022
30/09/2022
Total
L Cross
Grant date
30/09/2021
30/09/2021
30/09/2021
30/09/2022
30/09/2022
30/09/2022
Total
104
Brooks Macdonald Group plc Annual Report and Accounts 2023
Long-Term Incentive Plan (“LTIP”) Conditional Awards
The Long-Term Incentive Plan conditional awards are discretionary awards subject to the performance conditions as
determined by the Remuneration Committee (specific conditions for FY23 awards are detailed earlier in this report) and
continued employment with the Group. All LTIP awards are subject to a two-year holding period post vest date.
Other than the exceptional award in 2020, awards made prior to 2021 were granted as Restricted Shares, without performance
conditions. Awards granted under the LTIP in 2021 onwards are Performance Shares and vest subject to performance conditions
as detailed above. The first vesting of Performance Shares will be in respect of the year ending 30 June 2024.
A Shepherd
Exercise
price (p)
–
–
–
Conditional
shares at
1 July 2022
5,727
2,040
8,715
Granted
during
year
–
–
–
Exercised
during
year
(5,727)
–
–
Market
value of
exercises
(£’000)
123
–
–
Lapsed
during
year
–
–
–
Forfeited
during
year
–
–
–
Conditional
shares at
30 June
2023
Vesting
date
– 30/06/2022
Holding
period
None
2,040 30/09/2023 24 months
8,715 09/06/2024 24 months
–
–
33,086
–
49,568
–
43,413
43,413
–
–
(5,727)
–
–
123
–
–
–
–
–
–
33,086 30/09/2024 24 months
43,413
17/10/2025 24 months
87,254
Grant date
01/04/20201
24/11/2020
09/06/2021
30/09/2021
17/10/2022
Total
1 Exceptional long-term incentive award with specific performance conditions relating to the growth of the International business.
B Thorpe
Grant date
31/10/2019
30/09/2020
09/06/2021
30/09/2021
17/10/2022
Total
L Cross
Grant date
30/09/2020
09/06/2021
30/09/2021
17/10/2022
Total
Exercise
price (p)
–
–
–
Conditional
shares at
1 July 2022
7,001
7,870
7,626
Granted
during
year
–
–
–
Exercised
during
year
(7,001)
–
–
Market
value of
exercises
(£’000)
132
–
–
Lapsed
during
year
–
–
–
Forfeited
during
year
–
(7,870)
(7,626)
Conditional
shares at
30 June
2023
Vesting
date
Holding
period
– 30/09/2022 24 months
– 30/09/2023 24 months
– 09/06/2024 24 months
–
–
28,950
–
51,447
–
37,986
37,986
–
–
(7,001)
–
–
132
–
–
–
(28,950)
(37,986)
(82,432)
– 30/09/2024 24 months
–
17/10/2025 24 months
–
Exercise
price (p)
–
–
Conditional
shares at
1 July 2022
4,466
6,319
Granted
during
year
–
–
Exercised
during
year
–
–
Market
value of
exercises
(£’000)
–
–
Lapsed
during
year
–
–
Forfeited
during
year
(375)
(1,989)
Conditional
shares at
Holding
Vesting
30 June
2023
period
date
4,091 30/09/2023 24 months
4,330 09/06/2024 24 months
–
–
11,994
–
22,779
–
15,758
15,758
–
–
–
–
–
–
–
–
–
(5,012)
(12,077)
(19,453)
6,982 30/09/2024 24 months
3,681
17/10/2025 24 months
19,084
Annual Report and Accounts 2023 Brooks Macdonald Group plc
105
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 FY23.
A Shepherd
Grant date
21/11/2013
Total
Exercise
price (p)
1,452.0
Options at
1 July 2022
2,067
2,067
Granted
during year
–
–
Exercised
during year
–
–
Lapsed
during year
–
–
Options at
30 June
2023
2,067
2,067
Vesting
date
21/11/2016
Expiry
date
21/11/2023
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.
A Shepherd
Grant date
13/05/2020
12/05/2023
Total
B Thorpe
Grant date
13/05/2020
Total
L Cross
Grant date
11/05/2021
Total
Exercise
price (p)
1,172.0
1,434.0
Options at
1 July 2022
1,535
–
1,535
Granted
during year
–
1,255
1,255
Exercised
during year
–
–
–
Forfeited
during year
–
–
–
Options at
Expiry
Vesting
30 June
2023
date
date
1,535 01/06/2023 01/12/2023
1,255 01/06/2026 01/12/2026
2,790
Exercise
price (p)
1,172.0
Options at
1 July 2022
1,535
1,535
Granted
during year
–
–
Exercised
during year
–
–
Forfeited
during year
(1,535)
(1,535)
Options at
30 June
2023
Vesting
date
Expiry
date
– 01/06/2023 01/12/2023
–
Exercise
price (p)
1,704.0
Options at
1 July 2022
1,056
1,056
Granted
during year
–
–
Exercised
during year
–
–
Forfeited
during year
–
–
Options at
Expiry
Vesting
30 June
2023
date
date
1,056 01/06/2024 01/12/2024
1,056
Departure of Executive Directors in FY23
Ben Thorpe and Lynsey Cross both stepped down from Executive Director responsibilities on 19 January 2023 and left the
Group on 30 June 2023. Full details of their leaving arrangements can be found in my letter earlier in this report.
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.
106 Brooks Macdonald Group plc Annual Report and Accounts 2023
Remuneration Committee
James Rawlingson became a member of the Remuneration Committee following his appointment to the Board on 2 March 2023.
The other members of the Remuneration Committee as at the end of the FY23 reporting period are me as Chair, Richard Price,
Dagmar Kershaw and Robert Burgess.
There were four scheduled Remuneration Committee meetings during FY23, with members also attending a number of
additional ad hoc meetings. Member’s attendance of schedule meetings is set out in the summary table on page 80.
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 mitigates identified conflicts of interest and is consistent with the risk appetite of the Group and supports
the delivery of 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.
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 Remuneration Committee received independent advice from Korn Ferry (UK) Limited (Korn Ferry). Korn
Ferry were appointed by the Remuneration Committee in FY23 and provided advice in relation to executive long-term incentive
design and director market benchmarking. Fees were charged on a time and materials basis; the total fees paid to Korn Ferry
in respect of its services to the Remuneration Committee were £12,500 + VAT. No other services were provided by Korn Ferry
during the year, and the Committee is satisfied that the advice received is objective and independent.
Non-Executive Directors’ fees
Following a market-based review, the Chairman’s fee and the Non-Executive Director base fee were increased in FY23. No
changes were made to the Senior Independent Director fee or the Committee Chair fee.
Confirmation of the change in fee structure between FY22 and FY23 is shown in the below table.
Chairman fee1
Non-Executive Director base fee
Senior Independent Director fee
Committee Chair fee
1 The Chairman fee is also payable to the Acting Chair.
FY23
£’000
210
67.5
10
10
FY22
£’000
200
65
10
10
Change
in fees
5.0%
3.8%
–
–
Annual Report and Accounts 2023 Brooks Macdonald Group plc
107
Remuneration
Committee report continued
How the policy will be applied to Executive Director remuneration for the financial year
ending 30 June 2024
Base salary review
The Committee undertook a review of the CEO’s base salary in July 2023 and approved a salary increase of 4% for the FY24
reporting period, effective from 1 July 2023. This uplift is aligned to the average remuneration increase of the wider workforce.
The Remuneration Committee considers the new salary level to be commensurate with the contribution, experience and
calibre of the CEO and is supported by executive pay market data.
The base salaries of the Executive Directors for the year ending 30 June 2024 are £432,640 for the CEO, and £375,000 for the
Chief Financial Officer.
Performance targets for the FY24 annual bonus
As mentioned earlier in this report, at the present time of writing the Remuneration Committee is finalising its review of
FY24 annual bonus performance measures. With the Group’s evolving strategy, it is essential that the balance of financial and
non-financial measures reflects this. Notwithstanding any changes to the component metrics, the annual bonus structure will
continue to operate a majority weighting of financial measures, enabling a continued focus on the delivery of a strong financial
return to investors. These financial measures will be complemented by targeted non-financial objectives, which will help target
the necessary milestones required to achieve an effective transition to the next level of the Group’s success for its customers,
workforce, and shareholders.
These measures and their weightings, along with their performance outturns, will be disclosed in next year’s report.
LTIP
The Group will continue to operate the performance share approach to long-term incentive awards in FY24 that operated
in FY23. The metrics for the award to be granted in FY24 will again be based on underlying diluted EPS as well as a basket
of ESG-based metrics. The proportional weightings of the measures will be 90% for EPS performance and 10% for ESG
performance. The EPS target is considered by the Remuneration Committee to be market sensitive and will be disclosed
in the Annual Report and Accounts in September 2026. The grant levels for both the CEO and the Chief Financial Officer will
be 200% of base salary, in accordance with the current Directors’ Remuneration Policy. These awards will only vest based on
achieving significantly challenging targets. We believe that continuing to use performance shares will promote engagement
from the Executive Directors and fully align their long-term remuneration arrangements with shareholder and broader
stakeholder outcomes.
Award payout (% of LTIP award)
LTIP Performance metric
Absolute underlying diluted EPS
Weighting
90%
Threshold
22.5%
Target Maximum Measurement period
45%
5%
90% Measured in the third year of
the vesting period (FY26)
10%
10%
2.5%
ESG outcomes aligned to the following
policy areas :
– 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
25%
50%
25%
50%
100%
100%
200%
50%
100%
108 Brooks Macdonald Group plc Annual Report and Accounts 2023
Non-Executive Director remuneration for the financial year ending 30 June 2024
Following the annual review of Non-Executive Director fees to be paid for the FY24 reporting period it was agreed that no
changes would be made to the Chairman Fee and the Non-Executive Director base fee at this time. Increases to the Senior
Independent Director fee and Committee Chair fee of £2,500 per annum each, were supported on the basis of evidence for the
sector-based premiums observed for these roles, and a further fee of £5,000 per annum was made available to compensate
Non-Executive time and effort in supporting the Group’s Investment Committee. One Non-Executive is expected to be eligible
for the Investment Committee fee in FY24.
Confirmation of the change in fee structure between FY23 and FY24 is shown in the below table.
Chairman fee1
Non-Executive Director base fee
Senior Independent Director fee
Committee Chair fee
Investment Committee attendance fee
1 The Chairman fee is also payable to the Acting Chair.
FY24
£’000
210
67.5
12.5
12.5
5
FY23
£’000
210
67.5
10
10
–
Change
in fees
0.0%
0.0%
25.0%
25.0%
N/A
Pension
All Executive Directors and employees of the Group currently receive the same employer pension benefit of 6% of base salary.
The Group regularly reviews the competitive positioning of the pension benefit it offers. In the event any change is made to the
level of pension benefit offered, the new rate of benefit would apply to both Executive Directors and all employees.
Compliance with the FCA Remuneration Code (SYSC19.G)
The Remuneration Committee reviews the Group’s remuneration policies and practices against the requirements of the
MIFIDPRU Remuneration Code on an annual basis to ensure that the policies and the way in which they are implemented
remain appropriate and proportionate to the nature, scale and complexity of the risks that exist in the Group’s business model
and activities.
Votes received on the Directors’ Remuneration Report at the 2022 AGM
Approval of the Directors’ Remuneration report
Votes for
9,988,501
%
96.2%
Votes
against
396,719
%
3.8%
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (the “Policy”) is determined by the Committee.
Remuneration Policy principles
The Policy is designed to:
›
›
›
›
provide a ‘pay for performance’ framework to attract, motivate, retain and reward employees;
align remuneration outcomes with the delivery of our business strategy, objectives, Guiding Principles and long-term
interests and outcomes of the Group’s employees, customers 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;
› manage and mitigate any identified conflict of interest;
›
›
be consistent with and promote sound and effective risk management; and
comply with all regulatory requirements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
109
Remuneration
Committee report continued
Summary of remuneration elements for Executive Directors for FY4
Element
Base
salary
Purpose
Detail
Provides fixed remuneration at
an appropriate level to attract
and retain talent.
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.
Pension
To aid retention of key talent.
Executive Directors receive a pension contribution from the
Company equal to 6% 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).
Benefits
To provide valued benefits to
the individual.
Executive Directors receive benefits including private medical
insurance, income protection insurance, life assurance, critical
illness insurance, as well as an annual health assessment.
Annual
bonus
Rewards annual Group and
personal performance and
aligns reward with longer-term
performance and shareholder
outcomes through deferral into
shares.
Award value determined by performance achieved against
financial and non-financial performance measures agreed by the
Remuneration Committee.
One-third of annual bonus is deferred into parent company
shares which vest in three equal portions at 12, 24 and 36 months
from grant.
Malus and clawback provisions apply to annual bonus awards
under the Group’s malus and clawback policy.
Maximum
opportunity
Benchmarked
against
relevant
market levels.
6% of base
salary.
In line with
Group Policy.
150% of base
salary.
LTIP
Rewards performance over the
long term.
Executive Directors may be considered for performance-based LTIP
awards.
Up to 200% of
base salary
Awards vest after three years subject to meeting performance
targets determined at grant. The performance metrics applicable to
awards proposed to be granted in Q1 of FY24, are:
(£ face value
of shares at
grant).
FY26 underlying diluted EPS – 90% of overall opportunity
ESG-related performance metrics – 10% of overall opportunity
The Remuneration Committee may apply different measures and
weightings for future awards under the plan.
Post-vesting, recipients are required to hold the shares, net of any
sales to settle income tax and National Insurance contributions
that may be 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 provisions apply under the Group’s malus and
clawback policy.
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 risks and potential
conflicts of interest 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.
110
Brooks Macdonald Group plc Annual Report and Accounts 2023
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 has been considered with it being concluded that this was not appropriate for the Group at present. 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 took 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 ended 30 June 2023,
all employees continue to be eligible for discretionary performance-related annual bonus based on a balanced scorecard of
financial and non-financial objectives. The principle of mandatory bonus deferral applies to all MRTs and to 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 Chief People Officer 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 Chief People Officer 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.
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. 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
13 September 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
111
Risk and Compliance
Committee report
The Committee
continued to focus
on the resilience of
the firm following
significant operational
changes, whilst also
addressing the broader
macroeconomic
challenges brought
about by geopolitical
events, and both rising
inflation and interest
rates.
Our risk governance and risk processes are
designed to enable our firm to manage risk
effectively and support the delivery of our
strategic objectives. Over the past year, the
Risk and Compliance Committee (“RCC”) has
supported this through its continued focus on
the ongoing geopolitical challenges and the
uncertain macroeconomic climate brought
about by rising inflation and the subsequent
increases in interest rate. The Risk and
Compliance Committee has also focused on the
UK’s regulatory agenda, notably Consumer Duty
and TCFD, which comes into force this year, as
well as the Group’s changing idiosyncratic risks,
particularly as the firm continues to embed a
new operating model.
Role and responsibilities
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 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 risks.
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 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.
Robert Burgess
Risk and Compliance
Committee Chair
112
Brooks Macdonald Group plc Annual Report and Accounts 2023
Composition and meetings
The Committee comprises only independent Non-Executive
Directors. The members include Robert Burgess, John
Linwood, Richard Price, Dagmar Kershaw, and James
Rawlingson. Robert Burgess was the Chair of the Committee
during the year.
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, legal, and cyber
and resilience experience.
The Committee’s attendance during the year ended 30 June
2023 is set out in the summary table on page 80.
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 limits
and policies for controlling risk within the Board’s stated appetite;
›
Reviewing any red-rated risks and assessing the adequacy of mitigating or remedial actions;
› Monitoring steps taken by management to bring red-rated risks 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 assessment of risks undertaken by the
Executive Committee and independent challenge provided by the CRO and the Group
Risk team.
› Overseeing the Group’s 2022/23 Internal Capital Adequacy and Risk Assessment (“ICARA”)
process and its compliance with regulatory capital and liquidity requirements;
›
›
›
Recommending the harm scenarios to be considered and stress tested in the 2022/23 ICARA,
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
› Monitoring external developments, for example competition, market conditions,
macroeconomic and regulatory environment, taxation and legal developments, in order to
assess 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
113
Risk and Compliance
Committee report continued
The Committee’s areas of focus
Risk
management
framework
Overseeing
regulatory
compliance
Oversight of the
effectiveness
of the Risk and
Compliance
functions
›
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;
› Overseeing the scope and effectiveness of second line assurance work, whilst considering
the results of work undertaken by the third line insofar as it affects the Committee’s areas of
responsibilities; and
›
›
›
Ensuring that the second line assurance programme is adequate in view of the complexity
and risk profile of the Group, whilst monitoring completion of its work and overseeing
remedial actions arising as appropriate.
Considering regulatory developments and the potential impact on the Group;
Reviewing key regulatory topics through reports prepared by second line 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 second-line 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 cooperation and
compliance.
114
Brooks Macdonald Group plc Annual Report and Accounts 2023
Some of the Committee’s key considerations are outlined in the table below:
Main activities during the year
Key risks against
risk appetite
Reviewed key risks faced by the Group, including emerging risks with particular focus on
operational, investment, resilience, outsourcing and suitability risks that could impact the
business strategy and operational model.
Third-party risk
management
Regulatory
development
Reviewed the third-party outsourcing oversight process by the first and second line, particularly
the impact to the firm as it embeds a new operating model.
Reviewed key risks in relation to regulatory change with specific focus on Consumer Duty
and TCFD.
Cybercrime and
resilience
Reviewed activities undertaken by the Cyber Security function and the ongoing programme of
enhancements made in response to current geopolitical events, including heightened attacks
from Russia.
Supervised the 2022/23 ICARA process undertaken in the year, including the development
of harm scenarios and stress tests, and reporting to the Board the level of capital and liquidity
resources required.
ICARA,
Liquidity Risk
Management
Framework
(“LRMF”) and
Wind-Down Plan
(“WDP”)
Extreme market
events
Reviewed the assessment of the continued impact of the Russian invasion of Ukraine on global
markets, the economic environments, and the outcome of continuous monitoring and review
carried out as part of the Centralised Investment Process.
Looking forward
Key priorities for the Committee in the coming year continue to include ensuring business model resilience in the current
challenging geopolitical and economic environment, maintaining a sustained focus on investment and suitability risks, along
with further enhancements to the operational resilience, Consumer Duty, TCFD and third-party oversight frameworks, and
embedding the new operating model.
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
13 September 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
115
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 2023.
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 (“AIM”) 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 8 to 71, 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
decisions 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 62.
Results and dividends
The Group’s statutory profit before taxation for the year
ended 30 June 2023 was £22,239,000 (FY22: £29,546,000)
and the statutory profit after taxation was £18,149,000 (FY22:
£23,411,000).
The Directors recommend a final dividend of 47.0p (FY22:
45.0p) per share subject to approval by the shareholders at the
AGM on 26 October 2023. Once approved, this will be paid on
3 November 2023 to shareholders on the Company’s register
at close of business on 22 September 2023. An interim
dividend of 28.0p (FY21: 26.0p) per share was paid on
6 April 2023. This results in total dividends for the year
ended 30 June 2023 of 75p (FY22: 71.0p) per share,
representing a total estimated distribution to shareholders of
£7,448,000 (FY22: £7,031,000).
Share capital
Details of the Company’s authorised and issued share
capital, and movements thereof, are set out in Note 28 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.
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
Chairman
Alan Carruthers1
Acting Chair
Richard Price
Executives
Andrew Shepherd2
Ben Thorpe3
Lynsey Cross3
Andrea Montague4
Non-Executives
John Linwood
Dagmar Kershaw
Robert Burgess
James Rawlingson5
At 30 June
2023
At 30 June
2022
N/A
1,450
51,997
N/A
N/A
N/A
300
840
3,044
500
1,450
1,450
45,583
21,321
–
N/A
300
840
3,044
N/A
1 Alan Carruthers resigned as a Director of the Company on 7 February 2023.
2 As at 30 June 2023, Andrew Shepherd held 7,428 share options that had
vested, but had not yet been exercised, net of tax.
3 Ben Thorpe and Lynsey Cross resigned as Directors of the Company on 19
January 2023.
4 Andrea Montague was appointed after 30 June 2023.
5 James Rawlingson was appointed as Non-Executive Director on 2 March
2023 and did not have any beneficial interest in the share capital of the
Company on this date.
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 94 to 111.
Employee share plans
Details of employee share plans are outlined in Note 30 to the
Consolidated financial statements. Our Employee Sharesave
Scheme is administered by Morgan Stanley Shareworks. Our
share-based long-term incentive plans are administered by
Investec.
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. JTC
Employer Solutions Trustee Limited act as the trustee of the
EBT. During the year, the EBT purchased 140,495 shares and
sold or transferred out 168,668 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.
116
Brooks Macdonald Group plc Annual Report and Accounts 2023
Employees
Details of the Group’s employment practices, and its policies
on diversity and inclusion, are set out in the Corporate
responsibility report on pages 54 to 61.
Financial risk management and policies
Details of the Group’s financial risk management objectives
and policies are set out in Note 31 to the Consolidated financial
statements.
Political donations
The Group did not make any political donations during the
year (FY22: £nil).
Events since the end of the year
Details of events after the reporting date are set out in Note 36
to the Consolidated financial statements.
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, starting on page 42.
Substantial shareholdings
As at 30 June 2023, the Company’s largest shareholders were
as follows :
Liontrust Asset Management
Octopus Investments
Gresham House Asset
Management
Brooks Macdonald Asset
Management
Invesco
Amati Global Investors
Canaccord Genuity Wealth
Management
Chelverton Asset Management
Charles Stanley
Brooks Macdonald Employee
Benefit Trust
Number of
shares
3,101,939
2,644,562
% of total
voting rights
18.91%
16.13%
1,174,281
7.16%
883,615
846,644
780,391
735,961
683,000
620,523
5.39%
5.16%
4.76%
4.49%
4.16%
3.78%
552,633
3.37%
Independent Auditors
The Audit Committee has recommended to the Board that the
incumbent auditors, PricewaterhouseCoopers LLP (“PwC”),
are reappointed for a further term. PwC have expressed their
willingness to continue in office as the Group’s appointed
auditors 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 auditors are
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 auditors are 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, 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.
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 2023 AGM will be held on 26 October 2023 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.
By order of the Board of Directors
Phil Naylor
Company Secretary
13 September 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
117
Statement of
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts and the Financial statements in accordance
with applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have prepared the Group and the parent Company
Financial statements in accordance with UK-adopted
international accounting standards.
Directors’ confirmations
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and parent Company’s position and performance,
business model and strategy.
In the case of each Director in office at the date the Report of
the Directors is approved:
so far as the Director is aware, there is no relevant audit
information of which the Group’s and parent Company’s
auditors are unaware; and
they have taken all the steps that they ought to have taken
as a director to make themselves aware of any relevant
audit information and to establish that the Group’s and
parent Company’s auditors are aware of that information.
The Statement of Directors’ responsibilities has been
approved by the Board of Directors and signed on its
behalf by:
Andrew Shepherd
CEO
13 September 2023
Under company law, 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 the profit or loss of the Group for that period.
In preparing the Financial statements, the Directors are
required to:
›
›
›
›
select suitable accounting policies and then apply them
consistently;
state whether applicable UK-adopted international
accounting standards have been followed, subject to
any material departures disclosed and explained in the
Financial statements;
› make judgements and accounting estimates that are
reasonable and prudent; and
›
prepare the Financial statements on a going concern basis
unless it is inappropriate to presume that the Group and
parent Company will continue in business.
The Directors are responsible for safeguarding the assets
of the Group and parent Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and parent Company’s transactions and disclose
with reasonable accuracy at any time the financial position of
the Group and parent Company and enable them to ensure
that the Financial statements comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and
integrity of the parent Company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
118
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
Annual Report and Accounts 2023 Brooks Macdonald Group plc
119
119
Independent auditors’ report 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 2023 and of the group’s
profit and the group’s and company’s cash flows for the
year then ended;
have been properly prepared in accordance with UK-
adopted international accounting standards; 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 statement of financial position
and Company statement of financial position as at 30 June
2023; the Consolidated statement of comprehensive income,
the Consolidated statement of cash flows and Company
statement of cash flows, the Consolidated statement of
changes in equity and the Company statement 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 other listed entities of public
interest, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in Note 7, we have provided
no non-audit services to the company or its controlled
undertakings in the period under audit.
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. The group comprised 18 legal
entities across the UK and Channel Islands during the
reporting period. We conducted audit testing over 9 legal
entities, including 2 entities in the Channel Islands. Taken
together, our audit work accounted for more than 95% of
group revenues.
Key audit matters
›
Recognition of investment management fees (group)
›
Impairment of investment in subsidiaries (parent)
Materiality
› Overall group materiality: £1,100,000 (FY22: £1,400,000)
based on 5% of profit before tax.
› Overall company materiality: £1,200,000 (FY22:
£1,087,000) based on 1% of net assets.
›
Performance materiality: £825,000 (FY22: £1,050,000)
(group) and £900,000 (FY22: £815,000) (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.
120 Brooks Macdonald Group plc Annual Report and Accounts 2023
The key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Recognition of investment management fees (group)
Investment management fees are generated by Brooks
Macdonald Asset Management Limited (“BMAM”) and
Brooks Macdonald Asset Management (International)
Limited (“BMI”) and are set out in Note 4 to the financial
statements. Investment management fees of £78m represent
approximately 62% of the group’s £124m total revenue.
Recognition of investment management fees is a key audit
matter due to its size and the significant audit effort involved
in testing this revenue stream. Investment management
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 fee rates from client
contracts and the existence and valuation of funds under
management, which could result in errors.
Impairment of investment in subsidiaries (parent)
The Parent company holds investment in subsidiaries of
£111m which is set out in Note 41 of the company financial
statements. The impairment assessment of the investment
in subsidiaries balance is a key audit matter due to the
magnitude of the balance in the context of the net assets
of the company. Management performed an impairment
assessment where judgement is required to be applied in
considering whether an impairment trigger has occurred
utilising a number of assumptions, such as forecast cash
flows, discount rates and long-term growth rates.
We performed the following procedures in relation to
investment management fees:
› 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;
›
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, 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; and
› We tested the accuracy of investment management fees,
by performing a recalculation of fees on a sample basis.
Based on the audit procedures performed and evidence
obtained, our testing did not identify any evidence of material
misstatement.
We performed the following procedures in relation to the
impairment of investment in subsidiaries on a sample basis:
› Obtained and assessed management’s impairment
assessment;
› Assessed the forecast cash flows generated by the
company’s subsidiaries; and
› Assessed the appropriateness of the discount rates and
long-term growth rate assumptions applied.
Based on the audit procedures performed and evidence
obtained, our testing did not identify any evidence of material
misstatement.
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 company, the accounting processes and
controls, and the industry in which they operate.
The group comprised 18 legal entities across the UK and
Channel Islands during the reporting period. We conducted
audit testing over 9 legal entities, including 2 entities in the
Channel Islands, one of which is audited by PwC Channel
Islands under our instruction and oversight. Across these legal
entities, 4 were considered financially significant due to their
contribution to the group’s and company’s results, and were
subject to an audit of their complete financial information.
A further 3 legal entities were scoped in due to a statutory
audit being performed over their financial information
therefore this was leveraged for group coverage. We
performed audit testing on specific FSLIs for two more legal
entities on judgemental risk based criteria. Together with
the audit procedures performed at the group level on the
consolidation, our audit work gave us the evidence we needed
for our opinion on the financial statements as a whole.
A significant proportion of the group’s trading, operational
and financial processes are based in the UK resulting in the
majority of the audit procedures being performed by the
group audit team in the UK. The group audit team issued
instructions to PwC Channel Islands for the legal entity,
Brooks Macdonald International Fund Management Limited
Annual Report and Accounts 2023 Brooks Macdonald Group plc
121
Independent
Auditors’ report continued
to the members of Brooks Macdonald Group plc
(BMIFML), because that entity’s trading, operational and
financial processes are based in the Channel Islands. We
received inter-firm reporting from PwC Channel Islands with
respect to their audit of BMIFML and performed appropriate
oversight of their audit work.
The impact of climate risk on our audit
In planning our audit, we made enquiries with management
to understand the extent of the potential impact of climate
change risk on the financial statements. Management
concluded that there was no material impact on the financial
statements. Our evaluation of this conclusion included
challenging key judgements and estimates in areas where
we considered that there was greatest potential for climate
change impact.
This included evaluating the long-term threats posed
by climate change to some of the Group’s key operating
territories and the impact this may have on the risk of
impairment of the related Goodwill balance.
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
£1,100,000 (FY22: £1,400,000).
£1,200,000 (FY22: £1,087,000).
How we determined it
5% of profit before tax
1% of net assets
Rationale for
benchmark applied
The most appropriate benchmark for
group materiality is profit before tax
on the basis that the group is primarily
measured on its financial performance
via its consolidated statement of
comprehensive income.
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. 1% of
net assets was the benchmark used in the prior year.
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 £9,299 and £1,045,000. 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% (FY22: 75%) of overall materiality,
amounting to £825,000 (FY22: £1,050,000) for the group
financial statements and £900,000 (FY22: £815,000) 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 lower 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 £55,000 (group audit) (FY22: £65,000)
and £60,000 (company audit) (FY22: £54,000) as well as
misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
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’ annual going concern assessment
and challenging the rationale for assumptions including
review of management’s stress testing and scenario
analyses using our knowledge of the business.
› Assessing management’s forecasts for 12 months from the
point of signing the June 2023 year end audit opinion to
determine the adequacy of the going concern basis.
›
›
›
Performing an assessment over the variances between
PY budget and CY actuals in order to conclude over
management’s ability to prepare forecasts.
Reviewing the Group’s latest Internal Capital Adequacy
and Risk Assessment (“ICARA”) document including
the financial forecasts and various stress test scenarios
contained within.
Performing additional sensitivity tests over the stress test
scenarios outlined within the ICARA.
122
Brooks Macdonald Group plc Annual Report and Accounts 2023
Reviewing the company’s minimum capital requirements
and regulatory capital requirements and assessing the net
assets of the company against them.
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.
›
›
Reviewing and challenging the MTP which forms the basis
of trading and profitability forecasts.
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.
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 2023
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, included within the
corporate governance section 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
123
Independent
Auditors’ report continued
to the members of Brooks Macdonald Group plc
Our review of the directors’ statement regarding the
longer-term viability of the group and company 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.
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 through 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 relevant board minutes;
› Designing audit procedures to incorporate
unpredictability around the nature, timing or extent of
our testing;
›
Enquiries with management, risk, 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.
124
Brooks Macdonald Group plc Annual Report and Accounts 2023
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
13 September 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
125
Consolidated
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
128
129
130
131
132
126
Brooks Macdonald Group plc Annual Report and Accounts 2023
Annual Report and Accounts 2023 Brooks Macdonald Group plc
127
Consolidated statement of
comprehensive income
For the year ended 30 June 2023
Revenue
Administrative costs
Gross profit
Other gains/(losses) - net
Operating profit
Finance income
Finance costs
Other non-operating income
Profit before tax
Taxation
Profit for the year 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
8
8
10
2023
£’000
123,777
(102,207)
21,570
2022
£’000
122,210
(95,288)
26,922
(162)
(55)
21,408
26,867
1,127
(296)
–
68
(372)
2,983
22,239
29,546
9
(4,090)
(6,135)
18,149
23,411
–
–
18,149
23,411
12
12
114.7p
112.6p
149.0p
144.4p
The accompanying notes on pages 132 to 169 form an integral part of the Consolidated financial statements.
128
Brooks Macdonald Group plc Annual Report and Accounts 2023
Consolidated statement of
financial position
As at 30 June 2023
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Financial assets at fair value through other comprehensive income
Total non-current assets
Current assets
Financial assets at fair value through profit or loss
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Lease liabilities
Provisions
Net deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities
Lease liabilities
Provisions
Deferred contingent consideration
Trade and other payables
Current tax liabilities
Total current liabilities
Net assets
Equity
Share capital
Share premium account
Other reserves
Retained earnings
Total equity
30 June 2023
£’000
30 June 20221
£’000
Note
14
15
16
17
18
20
21
22
23
19
26
22
23
24
25
28
28
29
29
100,582
2,123
4,329
500
107,534
825
33,542
53,355
87,722
195,256
(3,181)
(322)
(6,033)
(783)
(10,319)
(1,960)
(1,000)
(1,467)
(22,521)
(645)
(27,593)
157,344
164
81,830
9,112
66,238
157,344
85,887
2,202
4,971
500
93,560
784
30,473
61,328
92,585
186,145
(4,075)
(326)
(4,957)
(570)
(9,928)
(1,952)
(819)
(327)
(23,861)
(833)
(27,792)
148,425
162
79,141
9,962
59,160
148,425
1 The Group has reclassified the deferred tax balances to offset deferred tax assets and liabilities and present net deferred tax balances by jurisdiction to ensure
consistent reporting with the current period. In the prior year, the reported deferred tax asset was £3,002,000, which has been netted off in the deferred tax
liabilities balance.
The Consolidated financial statements on pages 128 to 169 were approved by the Board of Directors and authorised for issue on
13 September 2023, and signed on their behalf by:
Andrew Shepherd
CEO
Company registration number: 4402058
Andrea Montague
Chief Financial Officerer
The accompanying notes on pages 132 to 169 form an integral part of the Consolidated financial statements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
129
Consolidated statement of
changes in equity
For the year ended 30 June 2023
Balance at 1 July 2021
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options exercised
Purchase of own shares by Employee Benefit
Trust
Tax on share options
Dividends paid
Total transactions with owners
Balance at 30 June 2022
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options exercised
Purchase of own shares by Employee Benefit
Trust
Tax on share options
Dividends paid
Total transactions with owners
Note
Share capital
£’000
161
Share
premium
account
£’000
78,703
Other
reserves
£’000
8,467
Retained
earnings
£’000
46,672
Total
equity
£’000
134,003
–
–
–
1
–
–
–
–
–
1
–
–
–
438
–
–
–
–
–
438
–
–
–
–
2,779
(2,494)
–
1,210
–
1,495
23,411
–
23,411
–
–
2,494
(3,100)
–
(10,317)
(10,923)
23,411
–
23,411
439
2,779
–
(3,100)
1,210
(10,317)
(8,989)
162
79,141
9,962
59,160
148,425
–
–
–
2
–
–
–
–
–
2
–
–
–
2,689
–
–
–
–
–
2,689
–
–
–
–
2,686
(3,201)
–
(335)
–
(850)
18,149
–
18,149
–
–
3,201
(2,850)
–
(11,422)
(11,071)
18,149
–
18,149
2,691
2,686
–
(2,850)
(335)
(11,422)
(9,230)
28
13
28
13
Balance at 30 June 2023
164
81,830
9,112
66,238
157,344
The accompanying notes on pages 132 to 169 form an integral part of the Consolidated financial statements.
130 Brooks Macdonald Group plc Annual Report and Accounts 2023
Consolidated statement of
cash flows
For the year ended 30 June 2023
Cash flows from operating activities
Cash generated from operations
Corporation Tax paid
Tax refund
Net cash generated from operating activities
Cash flows from investing activities
Purchase of computer software
Purchase of property, plant and equipment
Purchase of financial assets at fair value through profit or loss
Consideration paid
Deferred contingent consideration paid
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of shares
Payment of lease liabilities
Purchase of own shares by Employee Benefit Trust
Dividends paid to shareholders
Net cash used 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
27
10
14
15
18
11
24
8
28
22
28
13
21
2023
£’000
30,093
(5,134)
–
24,959
(2,954)
(745)
(30)
(15,111)
(334)
1,127
(18,047)
1,691
(2,304)
(2,850)
(11,422)
(14,885)
2022
£’000
32,826
(5,269)
2,983
30,540
(2,912)
(289)
(215)
–
(6,000)
68
(9,348)
439
(1,785)
(3,100)
(10,317)
(14,763)
(7,973)
6,429
61,328
53,355
54,899
61,328
The accompanying notes on pages 132 to 169 form an integral part of the Consolidated financial statements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
131
Notes to the consolidated financial
statements
For the year ended 30 June 2023
1. General information
Brooks Macdonald Group plc (“the Company”) is the Parent Company of a group of companies (”the Group”), which offers a
range of investment management services to private high net worth individuals, pension funds, institutions, charities and
trusts. The Group also provides financial planning as well as international investment management, and acts as fund manager
to a range of onshore and international funds.
The Company is a public limited company by shares, incorporated and domiciled in the United Kingdom under the Companies
Act 2006 and listed on AIM. The address of its registered office is 21 Lombard Street, London, EC3V 9AH, England.
2. Principal accounting policies
The general accounting policies applied in the preparation of these Financial statements are set out below. These policies have
been applied consistently to all years presented, unless otherwise stated.
a. Basis of preparation
The Group’s Consolidated financial statements for the year ended 30 June 2023 have been prepared in accordance with
UK-adopted International Accounting Standards (“IAS”) and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards. These Consolidated financial statements have been prepared on a historical
cost basis, except for the revaluation of financial assets at fair value through other comprehensive income, financial assets and
financial liabilities at fair value through profit or loss, and deferred contingent consideration such that they are measured at their
fair value.
At the time of approving the Financial statements, the Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Financial statements. For further details on the Group’s going concern assessment, see the
Viability statement on page 48 and Audit Committee report on pages 86 to 89. There have been no post balance sheet events
that have materially impacted the Group’s liquidity headroom and going concern assessment.
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 28). 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 repayment of any borrowings (Note 35). 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 2022, except as explained below.
New accounting standards, amendments and interpretations adopted in the year
In the year ended 30 June 2023, the Group did not adopt any new standards or amendments issued by the International
Accounting Standards Board (“IASB”) or interpretations by the International Financial Reporting Standards Interpretations
Committee (“IFRS IC”) that have had a material impact on the Consolidated financial statements.
Certain new accounting standards, amendments to accounting standards, and interpretations have been published that are not
mandatory for 30 June 2023 reporting periods and have not been early adopted by the Group. These standards, amendments
or interpretations are not expected to have a material impact on the Group in the current or future reporting periods or on
foreseeable future transactions.
Standard, Amendment or Interpretation
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (amendments to IFRS 4)
COVID-19-Related rent concessions beyond 30 June 2021 (amendment to IFRS 16)
Reference to the conceptual framework (amendments to IFRS 3)
Property, Plant and Equipment — proceeds before intended use (amendments to IAS 16)
Onerous Contracts — cost of fulfilling a contract (amendments to IAS 37)
Annual improvements to IFRS Standards 2018–2020
Effective date
1 January 2018
1 April 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2022
132
Brooks Macdonald Group plc Annual Report and Accounts 2023
2. Principal accounting policies continued
d. Critical accounting estimates and significant judgements
The preparation of financial information requires the use of assumptions, estimates and judgements about future
conditions. Use of currently available information and application of judgement are inherent in the formation of estimates.
Actual results in the future may differ from those reported. In this regard, the Directors believe that the accounting policies,
where important estimations are used, relate to the measurement of intangible assets and the estimation of the fair value of
share-based payments.
The preparation of the Group’s Consolidated financial statements includes the use of estimates and assumptions. The
significant accounting estimates, being those with a significant risk of a material change to the carrying value of assets and
liabilities within the next year in terms of IAS 1, ‘Presentation of Financial Statements’, are the useful economic life estimates for
property, plant and equipment, computer software and acquired client-relationship contracts, additionally the pre-tax discount
rate and perpetuity growth rate used to calculate the International cash-generating unit (“CGU”) goodwill impairment review
(Note 14).
The Consolidated financial statements include other areas of judgement and accounting estimates. While these areas do not
meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and
measurement of certain material assets and liabilities are based on assumptions and/or are subject to longer-term uncertainties.
The other areas of judgement and accounting estimates are the pre-tax discount rate and perpetuity growth rate used within the
Braemar and Cornelian CGU goodwill impairment reviews (Note 14), additionally the inputs into the Black-Scholes model used
to value the Group’s equity-settled share-based payments (Note 30).
The underlying assumptions and estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the year in which the estimate is revised only if the revision affects both current and future periods.
Further information about key assumptions and sources of estimation uncertainty are set out below.
Intangible assets
The Group has acquired client relationships and the associated investment management and financial advice contracts as part
of business combinations, through separate purchase or with newly employed teams of fund managers, as described in Note 14.
In assessing the fair value of these assets, the Group has estimated their finite life based on information about the typical length
of existing client relationships. Acquired client relationship contracts are amortised on a straight-line basis over their estimated
useful lives, ranging from 6 to 20 years.
Of the client relationship intangible assets held by the Group at 30 June 2023, the expected amortisation charge for the
year ending 30 June 2024 is £5,808,000. If the useful economic lives were to reduce by one year, the estimated charge would
increase by £2,033,000.
Goodwill recognised as part of a business combination is reviewed annually for impairment, or when a change in circumstances
indicates that it might be impaired. The recoverable amounts of CGUs are determined by value-in-use calculations, which
require the use of estimates to derive the projected future cash flows attributable to each unit. Details of the more significant
assumptions and sensitivity analysis are given in Note 14.
In assessing the value of client relationships and the associated investment management and financial advice contracts and
goodwill ,or gain on bargain purchase arising as part of a business combination, the Group prepares forecasts for the cash flows
acquired and discounts to a net present value. The Group uses a pre-tax discount rate, adjusting from a post-tax discount rate
calculated by the Group’s weighted average cost of capital (“WACC”), adjusted for any specific risks for the relevant CGU. The
Group uses the capital asset pricing model (“CAPM”) to estimate the WACC, which is calculated at the point of acquisition for
a business combination, or the relevant reporting period date. The key inputs are the risk-free rate, market risk premium, the
Group’s adjusted beta with reference to beta data from peer-listed companies, small company premium and any risk-adjusted
premium for the relevant CGU. See Note 14 for further details on the discount rate for the various CGUs.
Share-based payments
The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating
the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the
inputs to that model (Note 30). The charge to the Consolidated statement of comprehensive income in respect of share-based
payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of
employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly. A decrease of 10% in
the total options would decrease the estimated share-based payment charge and the associated national insurance charge in
the Consolidated statement of comprehensive income for the year by £591,000 and £121,000, respectively. The key inputs into
the fair value calculations for the options granted during the year are disclosed in Note 30.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
133
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
2. Principal accounting policies continued
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 and integration-related 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 credited or charged to the Consolidated statement of comprehensive income.
Identifiable assets and liabilities assumed on acquisition are recognised in the Consolidated statement of financial position at
their fair value at the date of acquisition.
Any deferred contingent 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 contingent 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 in full 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.
f. Revenue
Investment management fees
Investment management fees are earned for the management services provided to clients. Fees are billed quarterly in arrears,
but are recognised over the period the service is provided. Fees are calculated based on a percentage of the value of the portfolio
at the billing date. 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 it is virtually certain that it will be received.
Fund management fees
Fund management fees are earned for the management services provided to several open-ended investment companies
(“OEICs”). Fees are billed monthly in arrears, but are recognised over the period the service is provided. Fees are calculated daily
based on a percentage of the value of each fund. 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.
Transactional income and foreign exchange trading
Transactional income is earned through dealing and admin charges levied on trades at the time a deal is placed for a client.
Revenue is recognised at the point of the trade being placed.
Foreign exchange trading fees are charged on client trades placed in non-base currencies, which therefore require a foreign
currency exchange to action the trade. Revenue is recognised at the point of the trade being placed.
Financial planning
Financial planning income relates to fees for the provision of financial advice. Fees are charged to clients using an hourly rate, by
a fixed fee arrangement, or by a fund-based arrangement, whereby fees are calculated based on a percentage of the value of the
portfolio at the billing date. All fees are recognised over the period the service is provided. Commissions receivable and payable
are accounted for in the period in which they are earned.
134
Brooks Macdonald Group plc Annual Report and Accounts 2023
2. Principal accounting policies continued
Interest income
Interest income is bank interest earned on client cash deposits. Income is recognised over the period for which the deposit is
held with the bank. Amounts shown are net of any interest passed on to clients.
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.
Provision is made for depreciation to write off the cost less estimated residual value of each asset, and is charged to
administrative expenses in the Consolidated statement of comprehensive income using a straight-line method, over its
expected useful life as follows:
Leasehold improvements – over the lease term
Fixtures, fittings and office equipment – five years
IT equipment – four or five 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.
l. Intangible assets
Amortisation of intangible assets is charged to administrative expenses in the Consolidated statement of comprehensive
income on a straight-line basis over the estimated useful lives of the assets (4 to 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 five 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
135
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
2. Principal accounting policies continued
Goodwill
Goodwill arising as part of a business combination is initially measured at cost, being the excess of the fair value of the
consideration transferred over the Group’s interest in the net fair value of the separately identifiable assets, liabilities and
contingent liabilities of the subsidiary at the date of acquisition. In accordance with IFRS 3 ‘Business Combinations’, goodwill is
not amortised, but is reviewed annually for impairment and is therefore stated at cost less any provision for impairment of value.
Any impairment is recognised immediately in the Consolidated statement of comprehensive income and is not subsequently
reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. On
acquisition, any goodwill acquired is allocated to 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 as a gain on bargain purchase.
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
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 regulated OEICs, which are managed and evaluated on
a fair value basis in line with the market value.
Fair value through other comprehensive income
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 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 represent solely payment of principal and interest.
n. Foreign currency translation
The Group’s functional and presentational currency is 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.
136
Brooks Macdonald Group plc Annual Report and Accounts 2023
2. Principal accounting policies continued
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.
Deferred tax balances are presented on the Consolidated statement of financial position as the net deferred tax balance by each
jurisdiction the Group operates within. The gross deferred tax assets and liabilities are disclosed within the deferred tax Note 19.
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. 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. Employee Benefit Trust (“EBT”)
The Company provides finance to an EBT to purchase the Company’s shares on the open market in order to meet its
obligation to provide shares when an employee exercises certain options or awards made under the Group’s share-based
payment schemes. The administration and finance costs connected with the EBT are charged to the Consolidated statement
of comprehensive income. The cost of the shares held by the EBT is deducted from equity. A transfer is made between other
reserves and retained earnings over the vesting periods of the related share options or awards to reflect the ultimate proceeds
receivable from employees on exercise. The trustees have waived their rights to receive dividends on the shares held by the EBT.
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.
t. 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.
u. 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.
v. Other non-operating income
Other non-operating income is that which, in the opinion of the Board, is material by size and irregular in nature and therefore
requires separate disclosure within the Consolidated statement of comprehensive income in order to assist the users of the
Consolidated financial statements in understanding the underlying business performance of the Group.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
137
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
3. Segmental information
For management purposes, the Group’s activities are organised into two operating divisions: UK Investment Management and
International. The Group’s other activity, offering nominee and custody services to clients, is included within UK Investment
Management. These divisions are the basis on which the Group reports its primary segmental information to the Group Board of
Directors, which is the Group’s chief operating decision-maker. In accordance with IFRS 8 ‘Operating Segments’, disclosures are
required to reflect the information which the Board of Directors uses internally for evaluating the performance of its operating
segments and allocating resources to those segments. The information presented in this Note is consistent with the presentation
for internal reporting.
The UK Investment Management segment offers a range of investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts, as well as wealth management services to high net worth
individuals and families, giving independent ‘whole of market’ financial advice, enabling clients to build, manage and
protect their wealth. The International segment is based in the Channel Islands and the Isle of Man, offering a similar range of
investment management and wealth management services as the UK Investment Management segment. The Group segment
principally comprises the Group Board’s management and associated costs, along with the consolidation adjustments.
Following the acquisitions of Integrity and Adroit (Note 11), the activities since the two acquisitions were completed have been
included in the UK Investment Management segment.
Revenues and expenses are allocated to the business segment that originated the transaction. Sales between segments are
carried out at arm’s length. Centrally incurred expenses are allocated to business segments on an appropriate pro rata basis.
Year ended 30 June 2023
Total revenue
Inter segment revenue
External revenue
Underlying administrative costs
Operating contribution
Allocated costs
Net finance income
Underlying profit/(loss) before tax
Amortisation of client relationships
Dual running costs of operating platform
Acquisition and integration related costs
Changes in fair value of deferred contingent consideration
Finance cost of deferred contingent consideration
Profit/(loss) mark-up on Group allocated costs
Total underlying adjustments
UK
Investment
Management
£’000
109,737
(6,279)
103,458
(47,405)
56,053
Group and
consolidation
adjustments
£’000
–
–
–
(33,373)
(33,373)
International
£’000
20,319
–
20,319
(13,576)
6,743
(22,127)
590
34,516
(3,205)
(1,424)
(499)
–
–
299
(4,829)
(6,844)
226
125
(2,465)
(192)
–
–
(7)
(299)
(2,963)
28,971
88
(4,314)
–
–
(69)
(173)
(54)
–
(296)
Total
£’000
130,056
(6,279)
123,777
(94,354)
29,423
–
904
30,327
(5,670)
(1,616)
(568)
(173)
(61)
–
(8,088)
Profit/(loss) before tax
29,687
(2,838)
(4,610)
22,239
Taxation
Profit for the year attributable to equity holders of the Company
Year ended 30 June 2023
Statutory operating costs included the following:
− Amortisation
− Depreciation
− Interest income
138
Brooks Macdonald Group plc Annual Report and Accounts 2023
UK
Investment
Management
£’000
Group and
consolidation
adjustments
£’000
International
£’000
3,429
1,943
762
912
689
279
2,491
17
51
(4,090)
18,149
Total
£’000
6,832
2,649
1,092
3. Segmental information continued
Year ended 30 June 20221
Total revenue
Inter segment revenue
External revenue
Underlying administrative costs
Operating contribution
Allocated costs
Net finance costs
Underlying profit/(loss) before tax
Amortisation of client relationships
Other non-operating income
Dual running costs of operating platform
Finance cost of deferred contingent consideration
Profit/(loss) mark-up on Group allocated costs
Total underlying adjustments
UK
Investment
Management
£’000
105,550
(4,496)
101,054
(43,469)
57,585
Group and
consolidation
adjustments
£’000
–
–
–
(31,165)
(31,165)
International
£’000
21,156
–
21,156
(12,783)
8,373
(21,327)
(254)
36,004
(2,978)
2,983
(2,119)
–
214
(1,900)
(8,187)
(15)
171
(2,465)
–
(309)
(12)
(214)
(3,000)
29,514
–
(1,651)
–
–
–
(78)
–
(78)
Total
£’000
126,706
(4,496)
122,210
(87,417)
34,793
–
(269)
34,524
(5,443)
2,983
(2,428)
(90)
–
(4,978)
Profit/(loss) before tax
34,104
(2,829)
(1,729)
29,546
Taxation
Profit for the year attributable to equity holders of the Company
(6,135)
23,411
1 As discussed in the Financial review within the Strategic report on page 38, the segmental results for the year ended 30 June 2022 have been restated to be
consistent with the current year. For the year ended 30 June 2022, the reported UKIM segment allocated costs have changed from £25,129,000 to £21,327,000,
a movement of £3,802,000, and underlying profit before tax changed from £32,202,000 to £36,004,000, a movement of £3,802,000. The reported International
segment underlying administrative costs changed from £14,016,000 to £12,783,000, a movement of £1,233,000, allocated costs changed from £3,152,000 to
£8,187,000, a movement of £5,035,000, and underlying profit before tax changed from £3,973,000 to £171,000, a movement of £3,802,000. The reported Group
segment underlying administrative costs changed from £29,932,000 to £31,165,000, a movement of £1,233,000, and allocated costs changed from £28,281,000 to
£29,514,000, a movement of £1,233,000.
Year ended 30 June 2022
Statutory operating costs included the following:
− Amortisation
− Depreciation
− Interest income
UK
Investment
Management
£’000
Group and
consolidation
adjustments
£’000
International
£’000
2,888
2,014
20
917
498
23
3,117
–
–
Total
£’000
6,922
2,512
43
Annual Report and Accounts 2023 Brooks Macdonald Group plc
139
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
4. Revenue
Year ended 30 June 2023
Investment management fees
Transactional income and foreign exchange trading fees
Fund management fees
Financial planning income
Interest income
Total revenue
Year ended 30 June 2022
Investment management fees
Transactional income and foreign exchange trading fees
Fund management fees
Financial planning income
Interest income
Other income
Total revenue
UK
Investment
Management
£’000
65,626
10,578
9,983
6,446
10,825
103,458
UK
Investment
Management
£’000
70,161
12,209
13,187
4,082
1,377
38
101,054
International
£’000
12,292
2,704
3,739
–
1,584
20,319
International
£’000
14,014
2,491
4,441
–
210
–
21,156
Total
£’000
77,918
13,282
13,722
6,446
12,409
123,777
Total1
£’000
84,175
14,700
17,628
4,082
1,587
38
122,210
1 The Group has restated the prior year Financial planning income within International to Investment management fees to align to the current reporting period, see
page 35 of the Financial review for further details.
a. Geographic analysis
The Group’s operations are located in the United Kingdom, the Channel Islands and the Isle of Man. The following table presents
external revenue analysed by the geographical location of the Group subsidiary entity providing the service.
United Kingdom
Channel Islands
Isle of Man
Total revenue
b. Major clients
The Group is not reliant on any one client or group of connected clients for the generation of revenues.
2023
£’000
103,458
20,173
146
123,777
2022
£’000
101,054
21,079
77
122,210
140 Brooks Macdonald Group plc Annual Report and Accounts 2023
5. Employee information
Administrative costs are recognised as the services are received. The biggest component of the Group’s administrative costs is
the costs of employee benefits as shown below. Other costs incurred in administrative costs can be seen in Note 7.
a. Payroll costs
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Redundancy costs
Total payroll 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
2023
£’000
44,330
5,419
2,029
1,845
413
54,036
2022
£’000
43,528
5,751
2,303
2,184
104
53,870
2023
Number of
employees
310
199
509
2022
Number of
employees
264
190
454
Details of Directors’ engagement with employees can be found on page 51, and information on how the Directors’ have had
regard to employee interests is detailed within the Corporate responsibility report on pages 54 to 61.
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
2023
£’000
2,065
44
132
2,241
2022
£’000
2,894
73
1,045
4,012
The current year total compensation includes one Executive Director, including bonuses, plus two further Executive Directors
until their resignation during the year. The prior year total compensation includes three Executive Directors.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
141
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
5. Employee information continued
d. Directors’ emoluments
Further details of Directors’ emoluments are included within the Remuneration Committee report on pages 94 to 111.
Salaries and bonuses
Non-Executive Directors’ fees
Other payment
Benefits in kind
Pension contributions
Amounts receivable under long-term incentive schemes
Total Directors’ remuneration
2023
£’000
1,411
504
271
5
2,191
45
147
2,383
2022
£’000
2,390
496
–
8
2,894
73
1,045
4,012
The aggregate amount of gains made by Directors on the exercise of share options during the year was £446,000 (FY22:
£1,045,000). Retirement benefits are accruing to one Director (FY22: three) under a defined contribution pension scheme.
Other payment reflects the total of payments to an Executive Director in relation to stepping down from Executive Director
responsibilities as described in the Remuneration Committee report on pages 94 to 111.
The remuneration of the highest paid Director during the year was as follows:
Remuneration and benefits in kind
Amounts received under long-term incentive schemes
Total remuneration
2023
£’000
841
–
841
2022
£’000
950
469
1,419
The amount of gains made by the highest paid Director on the exercise of share options during the year was £175,000 (FY22:
£469,000).
6. Other gains/(losses) – net
Other (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.
Changes in fair value of deferred contingent consideration (Note 24)
Changes in fair value of financial assets at fair value through profit or loss (Note 18)
Other (losses) – net
7. Operating profit
Operating profit is stated after charging:
Payroll costs (Note 5)
Amortisation of client relationships (Note 14)
Depreciation of right-of-use assets (Note 16)
Dual running costs of operating platform
Auditors’ remuneration (see below)
Amortisation of computer software (Note 14)
Depreciation of property, plant and equipment (Note 15)
Acquisition and integration-related costs (Note 11)
Financial Services Compensation Scheme levy (see below)
142
Brooks Macdonald Group plc Annual Report and Accounts 2023
2023
£’000
(173)
11
(162)
2023
£’000
54,036
5,670
1,825
1,616
1,355
1,162
824
568
458
2022
£’000
–
(55)
(55)
2022
£’000
53,870
5,443
1,669
2,428
995
1,479
843
–
1,234
7. Operating profit continued
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
− Non-audit-related services
Total remuneration
2023
£’000
405
416
532
2
1,355
2022
£’000
267
416
310
2
995
Financial Services Compensation Scheme levies
Administrative costs for the year ended 30 June 2023 include a charge of £458,000 (FY22: £1,234,000) in respect of the Financial
Services Compensation Scheme (“FSCS”) levy, all of which is in respect of the estimated levy for the 2023/24 scheme year.
8. Finance income and finance costs
Finance income
Dividends on preference shares
Bank interest on deposits
Total finance income
Finance costs
Finance cost of lease liabilities (Note 22)
Finance cost of deferred contingent consideration (Note 24)
Total finance costs
9. Taxation
The tax charge on profit for the year was as follows:
UK Corporation Tax at 20.5% (FY22: 19.0%)
Over provision in prior years
Total current tax
Deferred tax credits
Under provision of deferred tax in prior years
Income tax expense
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
2023
£’000
35
1,092
1,127
235
61
296
2023
£’000
5,703
(834)
4,869
(1,189)
410
4,090
2022
£’000
25
43
68
282
90
372
2022
£’000
6,441
(307)
6,134
(211)
212
6,135
Annual Report and Accounts 2023 Brooks Macdonald Group plc
143
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
9. Taxation continued
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, split out between underlying and statutory profits:
Year ended 30 June 2023
Profit before taxation
Profit multiplied by the standard rate of tax in the UK of 20.5%
Tax effect of amounts that are not deductible/(taxable) in calculating taxable
income:
− Depreciation and amortisation
− Non-taxable income
− Overseas tax losses not available for UK tax purposes
− Lower tax rates in other jurisdictions in which the Group operates
− Disallowable expenses
−
Share-based payments
− Over provision in prior years
Income tax expense
Effective tax rate
Year ended 30 June 2022
Profit before taxation
Profit multiplied by the standard rate of tax in the UK of 19.0%
Tax effect of amounts that are not deductible/(taxable) in calculating taxable income:
− Depreciation and amortisation
− Non-taxable income
− Overseas tax losses not available for UK tax purposes
− Lower tax rates in other jurisdictions in which the Group operates
− Disallowable expenses
−
Share-based payments
− Over provision in prior years
Income tax expense
Underlying
profit
£’000
30,327
Underlying
profit
adjustments
£’000
(8,088)
Statutory
profit
£’000
22,239
6,217
(1,658)
4,559
604
(124)
67
(107)
263
(512)
(423)
5,985
(285)
–
–
–
48
–
–
(1,895)
319
(124)
67
(107)
311
(512)
(423)
4,090
19.7%
n/a
18.4%
Underlying
profit
£’000
34,524
Underlying
profit
adjustments
£’000
(4,978)
Statutory
profit
£’000
29,546
6,560
(946)
5,614
609
(8)
(293)
(201)
309
315
(110)
7,181
(207)
–
–
92
15
–
–
(1,046)
402
(8)
(293)
(109)
324
315
(110)
6,135
Effective tax rate
20.8%
n/a
20.8%
It was outlined in the Finance Bill 2021 (11 March 2021) and substantively enacted having received royal assent on the
10 June 2021, that the UK Corporation Tax rate would increase from 19.0% to 25.0% from 1 April 2023. As a result, the effective rate
of Corporation Tax applied to the taxable profit for the year ended 30 June 2023 is 20.5% (FY22: 19.0%). The relevant deferred
tax balances have been remeasured at this increased rate. 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.
144
Brooks Macdonald Group plc Annual Report and Accounts 2023
9. Taxation continued
The deferred tax (credits)/charges for the year arise from:
Share-based payments
Accelerated capital allowances
Accelerated capital allowances on research and development
Dilapidations
Amortisation of acquired client relationship contracts
Trading losses carried forward
Under provision in prior years
Deferred tax (credit)/charge
2023
£’000
(1)
(27)
(117)
(54)
(934)
(56)
410
(779)
2022
£’000
399
73
(63)
12
(880)
248
212
1
10. Other non-operating income
During the prior year ended 30 June 2022, the Group received confirmation from HMRC that the supply of certain group
services were exempt from VAT. As a result, the Group received a refund from HMRC in respect of VAT arising on those services
during the period from 1 July 2017 to 30 June 2020 of £2,983,000. This was treated as non-operating income in view of its
non-recurring nature and given that it is outside the ordinary course of business. This other non-operating income was fully
taxable for Corporation Tax purposes.
11. Business combinations
Integrity
On 31 October 2022, the Group acquired Integrity Wealth Bidco Limited and Integrity Wealth (Holdings) Limited, together
with its subsidiary Integrity Wealth Solutions Limited (“IWS”), (collectively “Integrity”). The acquisition brings a successful and
rapidly growing Independent Financial Adviser (“IFA”) business into the Group and brings scale to the Group’s Private Clients
business, adding distinctive expertise in their specialist area. The acquisition consisted of acquiring 100% of the issued share
capital of Integrity Wealth (Holdings) Limited and Integrity Wealth Bidco Limited (intermediate holding company), which was
funded through existing financial resources. On 14 April 2023, the Group acquired an additional client book, which has been
incorporated into the Integrity business and acquisition accounting.
The acquisition was accounted for using the acquisition method and details of the purchase consideration are as follows:
Initial cash consideration
Shares consideration
Excess for net assets
Deferred contingent consideration at fair value
Total purchase consideration
Note
i
ii
iii
£’000
4,246
1,000
601
1,240
7,087
i.
ii.
The Group issued 52,084 ordinary shares to the previous shareholders of Integrity Wealth (Holdings) Limited and Integrity Wealth Bidco Limited at a price of
£19.20 per share. The amount of shares issued was based on the share price at the completion date to provide the equivalent consideration value of £1,000,000.
In accordance with the Sale and Purchase Agreement (“SPA”), the Group was required to pay the difference between the available capital and the required
regulatory capital for Integrity.
iii. The total estimated cash deferred contingent consideration for the original Integrity acquisition was £1,505,000, payable in a period between one and three
years following completion, based on revenue criteria and client attrition of the acquired business. As outlined in the SPA, the maximum cash deferred
contingent consideration payable was up to £2,746,000 if certain revenue criteria are met.
On 30 June 2023, the Group agreed to renegotiate the deferred contingent consideration, which resulted in the Group
recognising a change in fair value of deferred contingent consideration of £173,000 on 30 June 2023. See Note 24 for further
details.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
145
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
11. Business combinations continued
Client relationship intangible assets of £3,156,000 were recognised on acquisition in respect of the expected cash inflows
and economic benefit from the acquired business. An associated deferred tax liability of £787,000 was recognised in relation
to the expected cash inflows on the acquired client relationship intangible asset. Goodwill of £3,945,000 was recognised on
acquisition in respect of the expected growth in the acquired business and associated cash inflows. The fair value of the assets
acquired were the gross contractual amounts and were all considered to be fully recoverable. The fair value of the identifiable
assets and liabilities acquired, at the date of acquisition, are detailed below.
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
− Deferred tax liabilities
Net identifiable assets
Goodwill
Total purchase consideration
£’000
268
804
(167)
(132)
773
3,156
(787)
2,369
3,945
7,087
The trade and other receivables were recognised at their fair value, being the gross contractual amounts, which were deemed
fully recoverable.
Adroit
On 15 December 2022, the Group acquired Adroit Financial Planning Limited (“Adroit”), a successful and rapidly growing IFA
business. The acquisition brings further scale to the Group’s Private Clients business, adding distinctive expertise in their
specialist area. The acquisition consisted of acquiring 100% of the issued share capital of Adroit Financial Planning Limited,
which was funded through existing financial resources.
The acquisition was accounted for using the acquisition method and details of the purchase consideration are as follows:
Initial cash consideration
Additional consideration
Total purchase consideration
Note
i
£’000
10,991
270
11,261
i.
In accordance with the Sale and Purchase Agreement (“SPA”), the Group was required to pay an additional amount based on the number of days between the
date of exchange and the date of completion.
146
Brooks Macdonald Group plc Annual Report and Accounts 2023
11. Business combinations continued
Client relationship intangible assets of £2,931,000 were recognised on acquisition in respect of the expected cash inflows and
economic benefit from the acquired business. An associated deferred tax liability of £733,000 was recognised in relation to the
expected cash inflows on the acquired client relationship intangible asset. Goodwill of £8,541,000 was recognised on acquisition
in respect of the expected growth in the acquired business and associated cash inflows. The fair value of the assets acquired
were the gross contractual amounts and were all considered to be fully recoverable. The fair value of the identifiable assets and
liabilities acquired, at the date of acquisition, are detailed below.
Net assets acquired through business combination
Trade and other receivables
Cash at bank
Trade and other payables
Total net assets recognised by acquired company
Fair value adjustments:
− Client relationship contracts
− Deferred tax liabilities
Net identifiable assets
Goodwill
Total purchase consideration
£’000
533
193
(204)
522
2,931
(733)
2,198
8,541
11,261
The trade and other receivables were recognised at their fair value, being the gross contractual amounts, which were deemed
fully recoverable.
Acquisition impact on reported results
Directly attributable acquisition and integration-related costs of £568,000 were incurred in relation to the acquisitions, which
were charged to administrative costs in the Consolidated statement of comprehensive income, but excluded from underlying
profit.
In the period from acquisition to 30 June 2023, the two acquisitions earned revenue of £2,484,000 and statutory profit before tax
of £285,000. Had the acquisitions been consolidated from 1 July 2022, the Consolidated statement of comprehensive income
would have included revenue of £4,068,000 and statutory profit before tax of £585,000.
Net cash outflow resulting from business combinations
Total purchase consideration
Less shares issued as consideration
Less deferred cash contingent consideration at fair value
Cash paid to acquire business combinations
Less cash held by acquired entities
Net cash outflow – investing activities
£’000
18,348
(1,000)
(1,240)
16,108
(997)
15,111
Annual Report and Accounts 2023 Brooks Macdonald Group plc
147
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
12. Earnings per share
The Directors believe that underlying earnings per share provides an appropriate reflection of the Group’s performance in the
year. Underlying earnings per share, which is an alternative performance measure (“APM”), is calculated based on ‘underlying
earnings’, which is also an APM. Refer to page 182 for a glossary of the Group’s APMs, their definition and criteria for how
underlying adjustments are considered. The tax effect of the underlying adjustments to statutory earnings has also been
considered, refer to Note 9 for the taxation on underlying and statutory profit.
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
Amortisation of acquired client relationship contracts (Note 14)
Dual running costs of operating platform
Acquisition and integration-related costs (Note 11)
Changes in fair value of deferred contingent consideration (Note 24)
Finance cost of deferred contingent consideration (Note 24)
Other non-operating income (Note 10)
Tax impact of adjustments (Note 9)
Underlying earnings attributable to ordinary shareholders
2023
£’000
18,149
5,670
1,616
568
173
61
–
(1,895)
24,342
2022
£’000
23,411
5,443
2,428
–
–
90
(2,983)
(1,046)
27,343
Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average
number of shares in issue throughout the period. Included in the weighted average number of shares for basic earnings per
share purposes are employee share options at the point all necessary conditions have been satisfied and the options have
vested, even if they have not yet been exercised.
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.
The diluted weighted average number of shares in issue and diluted earnings per share considers the effect of all dilutive
potential shares issuable on exercise of employee share options. The potential shares issuable includes the contingently
issuable shares that have not yet vested and the vested unissued share options that are either nil cost options or have little
or no consideration.
The weighted average number of shares in issue during the year was as follows:
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:
Based on reported earnings:
Basic earnings per share
Diluted earnings per share
Based on underlying earnings:
Basic earnings per share
Diluted earnings per share
2023
Number
of shares
15,825,397
293,992
16,119,389
2022
Number
of shares
15,707,706
502,259
16,209,965
2023
p
114.7
112.6
153.8
151.0
2022
p
149.0
144.4
174.1
168.7
148
Brooks Macdonald Group plc Annual Report and Accounts 2023
13. 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 2022 of 45.0p (FY21: 40.0p) per share
Interim dividend paid for the year ended 30 June 2023 of 28.0p (FY22: 26.0p) per share
Total dividends
2023
£’000
7,021
4,401
11,422
2022
£’000
6,251
4,066
10,317
Final dividend proposed for the year ended 30 June 2023 of 47.0p (FY22: 45.0p) per share
7,448
7,031
The interim dividend of 28.0p (FY22: 26.0p) per share was paid on 6 April 2023.
A final dividend for the year ended 30 June 2023 of 47.0p (FY22: 45.0p) per share was declared by the Board of Directors on
13 September 2023 and is subject to approval by the shareholders at the Company’s Annual General Meeting. It will be paid on
3 November 2023 to shareholders who are on the register at the close of business on 22 September 2023. 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 Consolidated financial statements.
14. Intangible assets
Goodwill
£’000
Computer
software
£’000
Acquired
client
relationship
contracts
£’000
Contracts
acquired with
fund
managers
£’000
Cost
At 1 July 2021
Additions
Disposals
At 30 June 2022
Additions
Disposals
At 30 June 2023
Accumulated amortisation and impairment
At 1 July 2021
Amortisation charge
Accumulated amortisation on disposals
At 30 June 2022
Amortisation charge
Accumulated amortisation on disposals
At 30 June 2023
Net book value
At 1 July 2021
At 30 June 2022
At 30 June 2023
51,887
–
–
51,887
12,486
–
64,373
11,213
–
–
11,213
–
–
11,213
40,674
40,674
53,160
11,398
2,912
(7,380)
6,930
2,954
(1,054)
8,830
6,152
1,479
(7,380)
251
1,162
(1,054)
359
5,246
6,679
8,471
70,011
–
–
70,011
6,087
–
76,098
26,034
5,443
–
31,477
5,670
–
37,147
43,977
38,534
38,951
Total
£’000
136,817
2,912
(7,380)
132,349
21,527
(4,575)
149,301
46,920
6,922
(7,380)
46,462
6,832
(4,575)
48,719
3,521
–
–
3,521
–
(3,521)
–
3,521
–
–
3,521
–
(3,521)
–
–
–
–
89,897
85,887
100,582
The amortisation charge of intangible assets is recognised within administrative costs in the Consolidated statement of
comprehensive income.
At 30 June 2023, intangible assets totalling £87,825,000 are recognised in the United Kingdom and £12,757,000 are recognised in
the Channel Islands.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
149
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
14. 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”)
2023
£’000
2022
£’000
3,320
3,320
International
Brooks Macdonald Asset Management (International) Limited (“Brooks Macdonald International”)
21,243
21,243
Cornelian
Cornelian Asset Managers Group Limited (“Cornelian”)
Integrity
Integrity Wealth (Holdings) Limited (“Integrity”)
Adroit
Adroit Financial Planning Limited (“Adroit”)
Total goodwill
16,111
16,111
3,945
8,541
–
–
53,160
40,674
Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2023 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 2023, and then extrapolated over a longer period for the following 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.
Cornelian
The Cornelian CGU recoverable amount was calculated as £46,836,000 at 30 June 2023 (FY22: £61,502,000), giving a
surplus over the Cornelian CGU carrying amount of £16,468,000, indicating that there is no impairment. The key underlying
assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of
the business. The revenue growth forecasts range between 11% and 13% annually over the five-year period. Revenue growth is
forecast using new business targets, expected outflows and estimated impact of market performance on FUM, multiplied by
estimated fee yields for both the discretionary and fund management business. Expenditure growth is forecast to increase by
up to 7% annually over the five-year period. Both the revenue 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 15% has been used (FY22: 16%), 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.
The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional
analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.
› An increase of the pre-tax discount rate by 6% (FY22: 12%), from 15% to 21%, would result in an impairment.
›
›
The 2% perpetuity growth rate would need to reduce by 10% (FY22: 24%) to -8% to trigger an impairment.
The forecast pre-tax cash inflows would need to reduce by 28% (FY22: 40%) each year to result in an impairment.
150 Brooks Macdonald Group plc Annual Report and Accounts 2023
14. Intangible assets continued
International
Based on a value-in-use calculation, the recoverable amount of the Brooks Macdonald International CGU at 30 June 2023
was £33,642,000 (FY22: £64,453,000), giving a surplus over the Brooks Macdonald International CGU carrying amount of
£4,023,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate,
the medium-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 13% (FY22: 14%)
has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald
International. The key input in forecasting revenue is FUM, which is forecast to grow based on new business targets, attrition,
and estimated impact of market performance. FUM is multiplied by estimated fee yields for the business resulting in annual
revenue growth between 3% and 7% annually over the five-year period. Expenditure growth is forecast to increase by between
4% and 7% annually over the five-year period, which includes consideration for reasonable allocated costs. The underlying
methodology for allocating costs is reviewed by management each year when preparing the value-in-use calculations to ensure
the methodology remains appropriate. In the current year this resulted in a change to the allocation metrics used within the five-
year forecast. The period covered is five years and the forecasts are based on management's growth projections for the business
based on its strategic objectives, taking into account historic performance and prevailing market and economic 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.
The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional
analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.
› An increase of the pre-tax discount rate by 2% (FY22: 10%), from 13% to 15%, would result in an impairment.
The 2% perpetuity growth rate would need to reduce by 2% (FY22: 23%)to nil to trigger an impairment.
›
›
The forecast pre-tax cash inflows would need to reduce by 11% (FY22: 47%) each year to result in an impairment.
Funds
Based on a value-in-use calculation, the recoverable amount of the Braemar CGU at 30 June 2023 was £14,463,000 (FY22:
£17,847,000), giving a surplus over the Braemar CGU carrying amount of £10,243,000 indicating that there is no impairment.
A pre-tax discount rate of 16% (FY22: 17%) 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 11% and 20% 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 at 3% 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.
The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional
analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.
› An increase of the pre-tax discount rate by 28% (FY22: 48%), from 16% to 44%, would result in an impairment.
›
The 2% perpetuity growth rate could reduce by 100% (FY22: 100%) to -98% and an impairment would still not be triggered.
›
The forecast pre-tax cash inflows would need to reduce by 52% (FY22: 83%) each year to result in an impairment.
Integrity
During the year ended 30 June 2023, the Group completed the acquisition of Integrity Wealth Bidco Limited, Integrity Wealth
(Holdings) Limited and Integrity Wealth Solutions Limited, and subsequently recognised goodwill on acquisition of £3,945,000.
See Note 11 for further details.
Adroit
During the year ended 30 June 2023, the Group completed the acquisition of Adroit Financial Planning Limited, and
subsequently recognised goodwill on acquisition of £8,541,000. See Note 11 for further details.
At 30 June 2023, 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 2023.
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, with some specific projects being
given longer UELs based on their size and usability.
During the year ended 30 June 2023, 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 £1,054,000.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
151
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
14. Intangible assets continued
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 ended 30 June 2023, the Group acquired client relationship contracts totalling £3,156,000 and £2,931,000, as part
of the Integrity and Adroit acquisitions, respectively (Note 11), which were recognised as separately identifiable intangible assets
in the Condensed consolidated statement of financial position, with useful economic lives of 15 years.
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.
During the year ended 30 June 2023, the Group conducted a review of the contracts acquired with fund managers assets with
a £nil net book value, and no longer used in the business. This resulted in disposals of contracts acquired with fund managers,
with cost and accumulated amortisation both totalling £3,521,000.
15. Property, plant and equipment
Cost
At 1 July 2021
Additions
Disposals
At 30 June 2022
Additions
Disposals
At 30 June 2023
Accumulated depreciation
At 1 July 2021
Depreciation charge
Depreciation on disposals
At 30 June 2022
Depreciation charge
Depreciation on disposals
At 30 June 2023
Net book value
At 1 July 2021
At 30 June 2022
At 30 June 2023
Leasehold
improvements
£’000
Fixtures,
fittings
and office
equipment
£’000
IT
equipment
£’000
2,630
146
(88)
2,688
477
(19)
3,146
773
446
(88)
1,131
535
(19)
1,647
1,857
1,557
1,499
724
28
(11)
741
74
(173)
642
423
101
(11)
513
102
(173)
442
301
228
200
1,942
115
(811)
1,246
194
(474)
966
1,344
296
(811)
829
187
(474)
542
598
417
424
Total
£’000
5,296
289
(910)
4,675
745
(666)
4,754
2,540
843
(910)
2,473
824
(666)
2,631
2,756
2,202
2,123
During the year ended 30 June 2023, 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 £666,000.
Property, plant and equipment totalling £1,655,000 at 30 June 2023 are recognised in the United Kingdom and £468,000 are
recognised in the Channel Islands.
152
Brooks Macdonald Group plc Annual Report and Accounts 2023
16. Right-of-use assets
Cost
At 1 July 2021
Additions
At 30 June 2022
Additions
At 30 June 2023
Accumulated depreciation
At 1 July 2021
Depreciation charge
At 30 June 2022
Depreciation charge
At 30 June 2023
Net book value
At 1 July 2021
At 30 June 2022
At 30 June 2023
Cars
£’000
Property
£’000
–
328
328
470
798
–
37
37
158
195
–
291
603
9,092
333
9,425
713
10,138
3,113
1,632
4,745
1,667
6,412
5,979
4,680
3,726
Total
£’000
9,092
661
9,753
1,183
10,936
3,113
1,669
4,782
1,825
6,607
5,979
4,971
4,329
The Group offers a car leasing arrangement to provide a salary sacrifice car leasing scheme for employees. Each vehicle leased
to individual employees creates a separate right-of-use asset and lease liability measured at present value of the remaining lease
payments, discounted using the lessee’s estimated incremental borrowing rate (see Note 22).
The property additions relate to three new leases that commenced during the year ended 30 June 2023.
Right-of-use assets totalling £4,039,000 at 30 June 2023 are recognised in the United Kingdom and £290,000 are recognised in
the Channel Islands.
17. Financial assets at fair value through other comprehensive income
At 1 July
Change in fair value
At 30 June
2023
£’000
500
–
500
2022
£’000
500
–
500
At 30 June 2023, the Group held an investment of redeemable £500,000 preference shares in an unlisted company
incorporated in the UK. The preference shares carry an entitlement to a fixed preferential dividend at a rate of 4% per annum.
Unlisted preference shares are classified as financial assets at fair value through other comprehensive income.
The following table 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
153
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
17. Financial assets at fair value through other comprehensive income continued
Financial assets
At 1 July 2022
Additions
Changes in fair value
At 30 June 2023
Comprising:
Financial assets at fair value through other comprehensive income
Financial assets at fair value through profit and loss (Note 18)
Total financial assets
Level 1
£’000
Level 2
£’000
Level 3
£’000
784
30
11
825
–
825
825
–
–
–
–
–
–
–
500
–
–
500
500
–
500
Total
£’000
1,284
30
11
1,325
500
825
1,325
The Level 3 assets include unlisted preference shares, which 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 2022
Finance cost of deferred contingent consideration
Additions
Change in fair value
Payments made
At 30 June 2023
Comprising:
Deferred contingent consideration (Note 24)
Total financial liabilities
Level 1
£’000
Level 2
£’000
Level 3
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
327
61
1,240
173
(334)
1,467
1,467
1,467
Total
£’000
327
61
1,240
173
(334)
1,467
1,467
1,467
The Level 3 financial liabilities consist of deferred contingent 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 contingent consideration to set expectations of future amounts payable. The deferred contingent consideration
is reviewed and revalued at regular intervals over the deferred contingent consideration period (Note 24). 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.
18. Financial assets at fair value through profit or loss
At 1 July
Additions
Changes in fair value
At 30 June
2023
£’000
784
30
11
825
2022
£’000
624
215
(55)
784
The Group holds 500,000 shares in five of the SVS Cornelian Risk Managed Passive Funds. During the year ended 30 June 2023,
the Group recognised a gain on these investments of £4,000. The Group’s holding in the SVS Cornelian Risk Managed Passive
Funds at 30 June 2023 was £593,000.
The Group previously invested £215,000 in the Blueprint Multi Asset Fund range across the various models within the fund
range. During the year ended 30 June 2023, a further £30,000 was invested, and the Group recognised a gain on the total
investments of £7,000. The Group’s holding in the Blueprint Multi Asset Fund range at 30 June 2023 was £232,000.
154
Brooks Macdonald Group plc Annual Report and Accounts 2023
19. 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.
Deferred tax assets
Share based payments
Trading losses carried forward
Dilapidations
Accelerated capital allowances
Total deferred tax assets
Deferred tax liabilities
Intangible asset amortisation
Accelerated capital allowances on research and development
Total deferred tax liabilities
UK
£’000
2,333
–
92
164
2,589
(7,404)
(856)
(8,260)
2023
CI
£’000
–
363
27
–
390
(752)
–
(752)
Total
£’000
2,333
363
119
164
2,979
(8,156)
(856)
(9,012)
Net deferred tax liability
(5,671)
(362)
(6,033)
Deferred tax assets
Share based payments
Trading losses carried forward
Dilapidations
Accelerated capital allowances
Total deferred tax assets
Deferred tax liabilities
Intangible asset amortisation
Accelerated capital allowances on research and development
Total deferred tax liabilities
UK
£’000
2,667
–
56
137
2,860
(6,758)
(389)
(7,147)
2022
CI
£’000
–
133
9
–
142
(812)
–
(812)
Total
£’000
2,667
133
65
137
3,002
(7,570)
(389)
(7,959)
Net deferred tax liability
(4,287)
(670)
(4,957)
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 11)
Credit/(charge) to the Consolidated statement of comprehensive income (Note 9)
(Charge)/credit recognised in equity
At 30 June
2023
£’000
(4,957)
(1,520)
779
(335)
(6,033)
2022
£’000
(6,166)
–
(1)
1,210
(4,957)
Annual Report and Accounts 2023 Brooks Macdonald Group plc
155
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
19. Deferred income tax continued
The change in deferred income tax assets and liabilities during the year was as follows:
Share-based
payments
£’000
Trading
losses carried
forward
£’000
Dilapidations
£’000
Accelerated
capital
allowances
£’000
Deferred tax assets
At 1 July 2021
(Under)/over provision in prior years
Charge to the Consolidated statement of
comprehensive income
Credit to equity
At 30 June 2022
Over provision in prior years
Credit to the Consolidated statement of
comprehensive income
Charge to equity
At 30 June 2023
1,856
–
(399)
1,210
2,667
–
1
(335)
2,333
641
(260)
(248)
–
133
174
56
–
363
29
48
(12)
–
65
–
54
–
119
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
210
–
(73)
–
137
–
27
–
164
2023
£’000
1,198
1,781
2,979
Total
£’000
2,736
(212)
(732)
1,210
3,002
174
138
(335)
2,979
2022
£’000
1,486
1,516
3,002
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. There is an amount of unrecognised
deferred tax in relation to capital losses carried forward at 30 June 2023 of £859,000. A deferred tax asset is not recognised in
these Consolidated financial statements, nor the Parent Company financial statements on the basis that it is not probable that
capital gains will be available against which capital losses can be offset.
The change in deferred income tax liabilities during the year is as follows:
Deferred tax liabilities
At 1 July 2021
Credit to the Consolidated statement of comprehensive income
At 30 June 2022
Additional liability on acquisition of client-relationship intangible assets
Credit to the Consolidated statement of comprehensive income
Over provision in prior years
At 30 June 2023
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
156
Brooks Macdonald Group plc Annual Report and Accounts 2023
Accelerated
capital
allowances on
research and
development
£’000
Intangible
asset
amortisation
£’000
452
(63)
389
–
(117)
584
856
8,450
(880)
7,570
1,520
(934)
–
8,156
2023
£’000
(7,777)
(1,235)
(9,012)
Total
£’000
8,902
(943)
7,959
1,520
(1,051)
584
9,012
2022
£’000
(7,019)
(940)
(7,959)
20. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Total current trade and other receivables
2023
£’000
2,820
1,452
29,270
33,542
2022
£’000
3,690
1,666
25,117
30,473
The credit risk balance is immaterial in relation to trade receivables, refer to Note 31(c) for details on the credit risk assessment.
Accrued income includes portfolio management fee income for the quarter ended 30 June 2023, outstanding at the
Consolidated statement of financial position date.
21. 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.
22. Lease liabilities
At 1 July 2021
Additions
Payments made against lease liabilities
Finance cost of lease liabilities
At 30 June 2022
Additions
Payments made against lease liabilities
Finance cost of lease liabilities
At 30 June 2023
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total lease liabilities
Cars
£’000
–
328
(41)
5
292
470
(169)
18
611
204
407
611
Property
£’000
6,869
333
(1,744)
277
5,735
713
(2,135)
217
4,530
1,756
2,774
4,530
Total
£’000
6,869
661
(1,785)
282
6,027
1,183
(2,304)
235
5,141
1,960
3,181
5,141
The Group offers a car leasing arrangement to provide a salary sacrifice car leasing scheme for employees. Each vehicle leased
to individual employees creates a separate right-of-use asset (Note 16) and lease liability measured at present value of the
remaining lease payments, discounted using the lessee’s estimated incremental borrowing rate.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
157
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
23. Provisions
At 1 July 2021
Charge to the Consolidated statement of
comprehensive income
Transfer from trade and other payables
Utilised during the year
At 30 June 2022
Charge to the Consolidated statement
of comprehensive income
Utilised during the year
At 30 June 2023
Analysed as:
Amounts falling due within one year
Amounts falling due after more than one year
Total provisions
Client
compensation
£’000
600
FSCS levy
£’000
1,245
Leasehold
dilapidations
£’000
413
Tax-related
£’000
–
398
–
(886)
112
579
(441)
250
250
–
250
1,304
–
(2,163)
386
239
(458)
167
167
–
167
126
–
(172)
367
260
(2)
625
303
322
625
162
1,217
(1,099)
280
–
–
280
280
–
280
Total
£’000
2,258
1,990
1,217
(4,320)
1,145
1,078
(901)
1,322
1,000
322
1,322
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. FSCS levy
Following confirmation by the FSCS in July 2023 of its final industry levy for the 2023/24 scheme year, the Group has made a
provision of £167,000 (FY22: £386,000) for its estimated share.
c. 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.
d. Tax-related
Tax-related provisions relate to voluntary disclosures made by the Group to HM Revenue and Customs (“HMRC”) following an
input VAT review carried out by the Group during FY22.
158
Brooks Macdonald Group plc Annual Report and Accounts 2023
24. Deferred contingent consideration
Deferred contingent 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 contingent
consideration is measured at its fair value based on discounted expected future cash flows. The movements in the total deferred
contingent consideration balance during the year were as follows:
At 1 July
Additions
Finance cost of deferred contingent 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
2023
£’000
327
1,240
61
173
(334)
1,467
1,467
–
1,467
2022
£’000
6,237
–
90
–
(6,000)
327
327
–
327
During the year ended 30 June 2023, the Group completed the Integrity Wealth Solutions Limited acquisition, and an
additional client book later in the year, and part of the consideration is to be deferred over a period of one to three years. The
total cash deferred contingent consideration of £1,505,000 was recognised at its fair value of £1,240,000 on acquisition. The
deferred contingent consideration was payable in May 2024 and October 2025 based on the future revenue generated by the
discretionary business acquired. During the year ended 30 June 2023, the Group recognised a finance cost of £54,000 on the
Integrity Wealth Solutions acquisition deferred contingent consideration. The Integrity Wealth Solutions deferred contingent
consideration was renegotiated at 30 June 2023, and it was agreed that £1,250,000 was to be paid to the vendors of Integrity
Wealth Solutions, settled in cash of £625,000 and Brooks Macdonald Group plc shares valued at £625,000. As a result, a change
in fair value of the contingent consideration of £173,000 was recognised for the year ended 30 June 2023. This revised deferred
contingent consideration was settled after the reporting period in July 2023.
During the year ended 30 June 2023, the final payment was made in relation to the acquisition of the Lloyds Channel Islands
business totalling £334,000. Prior to the final payment, £7,000 was recognised as a finance cost of deferred contingent
consideration within FY23. Full details of the Lloyds acquisition are disclosed in Note 10 of the 2021 Annual Report
and Accounts.
Deferred contingent consideration is classified as Level 3 within the fair value hierarchy, as defined in Note 17.
25. Trade and other payables
Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
Total trade and other payables
2023
£’000
4,003
2,741
30
15,747
22,521
2022
£’000
4,668
2,389
326
16,478
23,861
Included within accruals and deferred income is an accrual of £428,000 (FY22: £508,000) in respect of employer’s National
Insurance contributions arising from share option awards under the LTIS (Note 30b). 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 30).
Annual Report and Accounts 2023 Brooks Macdonald Group plc
159
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
26. Other non-current liabilities
At 1 July
Additional liability in respect of share option awards
Transfer to current liabilities
At 30 June
2023
£’000
570
731
(518)
783
2022
£’000
548
299
(277)
570
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 of £731,000 (FY22: £299,000) in respect of
existing awards, granted in previous years, that are expected to vest in the future. During the year, an amount of £518,000 (FY22:
£277,000) was transferred to current liabilities, reflecting awards that are expected to vest within the next 12 months. At 30 June
2023, the non-current liability for employer’s National Insurance contributions arising from share option awards under the LTIS
and LTIP schemes was £783,000 (FY22: £570,000).
27. 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)/gain - net
Increase in receivables
Decrease in payables
Decrease in provisions
Increase in other non-current liabilities
Share-based payments charge
Net cash inflow from operating activities
28. Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
At 1 July 2021
Shares issued:
on exercise of options
to Sharesave Scheme
At 30 June 2022
Shares issued:
on exercise of options
to Sharesave Scheme
of consideration for the acquisition of Integrity
At 30 June 2023
Number of
shares
16,181,138
Exercise
price
p
6,886 2,127.0 – 2,730.0
17,518
1,172.0 – 1,988.0
16,205,542
1,866 1,710.0 – 2,400.0
140,171
1,172.0 – 1,704.0
52,084 1,900.0 – 1,920.0
16,399,663
Share
capital
£’000
161
–
1
162
–
1
1
164
2023
£’000
21,408
6,832
824
1,825
162
(2,215)
(1,526)
(147)
244
2,686
30,093
Share
premium
account
£’000
78,703
120
318
79,141
30
1,660
999
81,830
2022
£’000
26,867
6,922
843
1,669
55
(2,024)
(3,194)
(1,113)
22
2,779
32,826
Total
£’000
78,864
120
319
79,303
30
1,661
1,000
81,994
The total number of ordinary shares issued and fully paid at 30 June 2023 was 16,399,663 (FY22: 16,205,542) with a par value
of 1p per share.
There was £2,691,000 share capital issued on exercise of options and to Sharesave Scheme members in the year ended
30 June 2023 (FY22: £439,000).
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 30(c). At 30 June 2023, the EBT held 552,633
(FY22: 580,806) 1p ordinary shares in the Company, acquired for a total consideration of £16,950,000 (FY22: £14,100,000) with a
market value of £11,633,000, (FY22: £12,923,000). They are classified as treasury shares in the Consolidated statement of financial
position, their cost being deducted from retained earnings within shareholders’ equity.
160 Brooks Macdonald Group plc Annual Report and Accounts 2023
29. Retained earnings and other reserves
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
2023
£’000
59,160
18,149
3,201
(2,850)
(11,422)
66,238
The movements in other reserves during the year were as follows. All movements relate to movement on the share
option reserve:
At beginning of the year
Share-based payments
Transfer to retained earnings
Tax (charge)/credit on share-based payments
At end of the year
Other reserves comprise the following balances:
Share option reserve
Merger reserve
Total other reserves
2023
£’000
9,770
2,686
(3,201)
(335)
8,920
2023
£’000
8,920
192
9,112
2022
£’000
46,672
23,411
2,494
(3,100)
(10,317)
59,160
2022
£’000
8,275
2,779
(2,494)
1,210
9,770
2022
£’000
9,770
192
9,962
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 30.
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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
161
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
30. Equity-settled share-based payments
All share options granted to employees under the Group’s equity-settled share-based payment schemes are valued using the
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 2023
(FY22: 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 £5.29 to £24.67 per share. The charge to the Consolidated statement of comprehensive income for the year in respect of
these was £2,686,000 (FY22: £2,779,000). The weighted average remaining contractual life of all equity-settled share-based
payment schemes at 30 June 2023 was 1.17 years (FY22: 1.04 years). The weighted average share price of all options exercised
during the year was £19.34 (FY22: £14.97).
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
£18.60 – £19.48
27 – 51 months
37.82 – 40.98%
3.65 – 4.21%
3.75 – 4.38%
£16.33 – £18.22
Save As You
Earn (SAYE)
12/05/2023
£19.35
36 months
37.86%
4.05%
3.79%
£6.39
The exercise price and fair value of share options granted during the year were as follows:
Long-Term Incentive Plan
Employee Sharesave Scheme
Exercise price
£
–
19.35
Fair value
£
16.33 - 18.22
6.39
Number of
options
306,603
161,518
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. 1,452 awards expired during the year
(FY22: none).
At 1 July
Awarded in the year
Exercised in the year
Forfeited in the year
At 30 June
2023
2022
Weighted
average
exercise price
£
–
–
–
–
–
Number of
options
711,763
306,603
(168,107)
(162,899)
687,360
Weighted
average
exercise price
£
–
–
–
–
–
Number of
options
806,057
153,726
(112,501)
(135,519)
711,763
162
Brooks Macdonald Group plc Annual Report and Accounts 2023
30. Equity-settled share-based payments continued
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
2021
2022
All years
Exercise
price
£
–
–
–
–
–
Vesting
period
2019 – 2021
2020 – 2022
2021 – 2023
2022 – 2024
2023 – 2025
2023
Number of
options
12,491
13,132
27,689
44,239
78,834
176,385
2022
Number of
options
18,114
30,882
49,120
64,804
–
162,920
ii. Long-Term Incentive Plan (“LTIP”) Awards
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2019
2020
2021
2022
All years
Exercise
price
£
–
–
–
–
Vesting
period
2022
2023
2024
2025
2023
Number of
options
–
10,128
44,619
59,088
113,835
2022
Number of
options
16,292
23,955
81,890
–
122,137
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
2022
2023
All years
Exercise
price
£
–
–
–
–
–
Vesting
period
2019 – 2024
2020 – 2024
2021 – 2024
2022 – 2025
2023 – 2026
2023
Number of
options
130,394
45,419
116,580
7,032
97,715
397,140
2022
Number of
options
185,361
102,524
131,789
7,032
–
426,706
b. Long-Term Incentive Scheme (“LTIS”)
The Group made no new awards under the LTIS during the year. 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.
No awards expired during the year (FY22: none). Off-cycle awards were made in 2017 to senior executives to replace awards
forfeited from previous employers.
At 1 July
Exercised in the year
Forfeited in the year
At 30 June
2023
Number of
options
5,442
–
–
5,442
2022
Number of
options
43,340
(37,898)
–
5,442
Annual Report and Accounts 2023 Brooks Macdonald Group plc
163
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
30. Equity-settled share-based payments continued
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2015
2016
2017 (off-cycle)
All years
Exercise
price
£
–
–
–
Vesting
period
2018
2019
2020
2023
Number of
options
1,077
1,416
2,949
5,442
2022
Number of
options
1,077
1,416
2,949
5,442
At 30 June 2023, options for schemes up to and including the 2017 scheme have vested and are able to be exercised.
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
2023
Number of
shares
580,806
140,495
(168,668)
552,633
2022
Number of
shares
608,683
124,297
(152,174)
580,806
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.
At 1 July
Exercised in the year
Forfeited in the year
At 30 June
2023
2022
Weighted
average
exercise
price
£
16.32
15.89
–
16.37
Number of
options
28,431
(6,886)
(2,724)
18,821
Weighted
average
exercise
price
£
16.67
17.40
17.23
16.32
Number of
options
18,821
(1,866)
–
16,955
164
Brooks Macdonald Group plc Annual Report and Accounts 2023
30. Equity-settled share-based payments continued
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2013
2014
2015
2016
All years
Exercise
price
£
14.52
13.81
17.19
17.25
Vesting
period
2016
2017
2018
2019
2023
Number of
options
2,067
2,537
9,016
3,335
16,955
2022
Number of
options
2,067
3,262
9,596
3,896
18,821
At 30 June 2023, all options for the CSOP schemes have vested and are able to be exercised. No awards expired during the
year under the CSOP schemes (FY22: 1,851).
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.
2023
2022
At 1 July
Granted in the year
Exercised in the year
Forfeited in the year
At 30 June
Number of
options
254,111
161,518
(143,701)
(46,925)
225,003
The number of share options outstanding at the reporting date was as follows:
Scheme year (grant date)
2019
2020
2021
2022
2023
All years
Exercise price
£
14.00
11.72
17.04
19.88
14.34
Weighted
average
exercise
price
£
14.25
19.35
11.85
17.21
15.23
Vesting
period
2022
2023
2024
2025
2026
Weighted
average
exercise
price
£
13.15
19.88
14.02
13.30
14.25
2022
Number of
options
7,207
152,650
50,597
43,657
–
254,111
Number of
options
248,390
44,109
(17,518)
(20,870)
254,111
2023
Number of
options
–
7,611
36,473
21,911
159,008
225,003
At 30 June 2023, options for the 2020 scheme have vested and are able to be exercised. 77 awards under the 2019 scheme
expired during the year (FY22: 761).
Annual Report and Accounts 2023 Brooks Macdonald Group plc
165
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
31. 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 undiscounted cash inflows and outflows from the Group under non-derivative financial assets and
liabilities, together with cash and bank balances available on demand.
On demand
£’000
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
Total
£’000
At 30 June 2023
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
–
–
–
53,355
–
–
53,355
–
–
–
–
–
2,820
30,722
33,542
(4,003)
(20,825)
(24,828)
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,120)
(2,120)
–
(4,286)
(4,286)
500
825
–
–
–
1,325
–
–
–
500
825
53,355
2,820
30,722
88,222
(4,003)
(27,231)
(31,234)
Net liquidity gap
53,355
8,714
(2,120)
(4,286)
1,325
56,988
At 30 June 2022
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
–
–
–
61,328
–
–
61,328
–
–
–
–
–
3,690
26,783
30,473
(4,668)
(19,809)
(24,477)
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,482)
(2,482)
–
(4,971)
(4,971)
500
784
–
–
–
1,284
–
–
–
500
784
61,328
3,690
26,783
93,085
(4,668)
(27,262)
(31,930)
Net liquidity gap
61,328
5,996
(2,482)
(4,971)
1,284
61,155
166
Brooks Macdonald Group plc Annual Report and Accounts 2023
31. 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 £534,000 (FY22: £613,000). 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 17 and 18). A 1% fall in the value of these financial instruments would have the impact of reducing total comprehensive
income by £13,000 (FY22: £13,000). 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. As part of the
Group’s strict due diligence assessment, there is a requirement for all banking counterparties to have a minimum credit rating of
BBB+. At 30 June 2023, there was no significant concentration of credit risk in any particular counterparty (FY22: none).
Assets exposed to credit risk recognised on the Consolidated statement of financial position total £53,355,000 (FY22:
£61,328,000), being the Group’s total cash and cash equivalents.
Trade receivables with a carrying amount of £2,820,000 (FY22: £3,690,000) 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 (FY22:
one year).
32. 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 2023 was £157,344,000 (FY22: £148,425,000). Regulatory capital is derived from the Group’s Internal Capital
Adequacy and Risk Assessment (“ICARA”), previously referred to as Internal Capital Adequacy Assessment (“ICAAP”), which is a
requirement of the Investment Firm Prudential Regime (‘IFPR’). The ICARA 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.
The Group assesses the adequacy of its own funds on a consolidated and legal entity basis on a frequent basis. This includes
continuous monitoring of ‘K-factor’ variables, which captures the variable nature of risk involved in the Group’s business
activities. A regulatory capital update is additionally provided to senior management on a monthly basis alongside a rolling
12-month regulatory capital forecast. In addition to this, the Group has implemented a number of ‘Key Risk Indicators’, which act
as early warning signs with the aim of notifying senior management if own funds misalign with the Group’s risk appetite and
internal thresholds.
Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management. The Group’s 2023 ICARA
will be approved in December 2023. There have been no capital requirement breaches during the year. Brooks Macdonald
Group plc’s IFPR public disclosure is presented on our website at www.brooksmacdonald.com.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
167
Notes to the consolidated financial
statements continued
For the year ended 30 June 2023
33. Contingent liabilities and guarantees
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.
During the year ended 30 June 2020, a small number of clients rejected the goodwill offers made to them by Brooks Macdonald
Asset Management (International) Limited in connection with the exceptional costs of resolving legacy matters, and as of 30
June 2022, one claim had been issued against the company. That claim was resolved during the financial year ended 30 June
2023 with no cash outflow for the Group. While the Group have never accepted, nor been adjudged to have, any legal liability
in relation to the legacy matters, the Group continues to recognise a contingent liability in relation to the possibility that one
or more clients might make new complaints or claims. There are no further claims in issue nor any complaints active as at 30
June 2023.
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.
34. 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 Funds 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
2023
£’000
239
83
–
–
2022
£’000
238
–
–
–
2023
£’000
–
–
900
–
2022
£’000
–
89
–
34
168
Brooks Macdonald Group plc Annual Report and Accounts 2023
35. 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 28.
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 within both the UK Investment Management and
International segments total £2.079 billion (FY22: £2.544 billion). Included in the revenue on the Consolidated statement of
comprehensive income is management fee income of £13,722,000 (FY22: £17,628,000) from unconsolidated structured entities
managed by the Group.
36. Events since the end of the year
No material events have occurred between the reporting date and the date of signing the financial statements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
169
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
172
173
174
175
170 Brooks Macdonald Group plc Annual Report and Accounts 2023
Adobestock
image to replace
Annual Report and Accounts 2023 Brooks Macdonald Group plc
171
Company statement of financial position
As at 30 June 2023
Assets
Non-current 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
Current liabilities
Trade and other payables
Deferred contingent consideration
Corporation tax payable
Total current liabilities
Net assets
Equity
Share capital
Share premium account
Share option reserve
Retained earnings
Total equity
Note
2023
£’000
2022
£’000
41
42
43
45
44
47
47
110,302
500
110,802
354
17,300
17,654
102,011
500
102,511
259
11,540
11,799
128,456
114,310
(2,486)
(1,250)
(2)
(3,738)
(1,598)
–
(113)
(1,711)
124,718
112,599
164
81,830
7,432
35,292
124,718
162
79,141
7,947
25,349
112,599
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 2023 Brooks Macdonald Group plc reported profit after tax for the year
ended 30 June 2023 of £21,014,000 (FY22: £24,111,000).
The Company financial statements were approved by the Board of Directors and authorised for issue on 13 September 2023,
and signed on their behalf by:
Andrew Shepherd
CEO
Company registration number: 4402058
Andrea Montague
Chief Financial Officer
The accompanying notes on pages 175 to 181 form an integral part of the Company financial statements.
172
Brooks Macdonald Group plc Annual Report and Accounts 2023
Company statement of changes in equity
For the year ended 30 June 2023
Balance at 1 July 2021
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options exercised
Purchase of own shares by Employee
Benefit Trust
Dividends paid
Total transactions with owners
Balance at 30 June 2022
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of ordinary shares
Share-based payments
Share options exercised
Purchase of own shares by Employee
Benefit Trust
Dividends paid
Total transactions with owners
Note
Share capital
£’000
161
Share
premium
account
£’000
78,703
Share option
reserve
£’000
7,679
Retained
earnings
£’000
12,161
Total
£’000
98,704
39
40
39
40
–
–
–
1
–
–
–
–
1
–
–
–
438
–
–
–
–
438
–
–
–
–
2,762
(2,494)
–
–
268
24,111
–
24,111
–
–
2,494
24,111
–
24,111
439
2,762
–
(3,100)
(10,317)
(10,923)
(3,100)
(10,317)
(10,216)
162
79,141
7,947
25,349
112,599
–
–
–
2
–
–
–
–
2
–
–
–
2,689
–
–
–
–
2,689
–
–
–
–
2,686
(3,201)
–
–
(515)
21,014
–
21,014
–
–
3,201
(2,850)
(11,422)
(11,071)
21,014
–
21,014
2,691
2,686
–
(2,850)
(11,422)
(8,896)
Balance at 30 June 2023
164
81,830
7,432
35,292
124,718
The accompanying notes on pages 175 to 181 form an integral part of the Company financial statements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
173
Company statement of cash flows
For the year ended 30 June 2023
Cash flow from operating activities
Cash generated from operations
Net cash generated from operating activities
Cash flows from investing activities
Consideration paid on purchase of investment in subsidiaries
Capital contribution from subsidiaries relating to share-based payments
Finance income
Deferred contingent consideration paid
Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of shares
Purchase of own shares by Employee Benefit Trust
Dividends paid to shareholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
46
44
47
40
2023
£’000
27,339
27,339
(15,862)
6,817
47
–
(8,998)
1,691
(2,850)
(11,422)
(12,581)
2022
£’000
22,502
22,502
–
–
20
(6,000)
(5,980)
439
(3,100)
(10,317)
(12,978)
5,760
3,544
11,540
17,300
7,996
11,540
The accompanying notes on pages 175 to 181 form an integral part of the Company financial statements.
174
Brooks Macdonald Group plc Annual Report and Accounts 2023
Notes to the Company
financial statements
For the year ended 30 June 2023
37. Principal accounting policies
General information
Brooks Macdonald Group plc (“the 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, England.
Statement of compliance
The individual Financial statements of the Company have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those
standards. These Financial statements have been prepared on a historical cost basis, except for the revaluation of financial
assets at fair value through other comprehensive income and deferred contingent consideration such that they are measured at
their fair value.
Developments in reporting standards and interpretations
The Company’s accounting policies that have been applied in preparing these Financial statements are consistent with
those disclosed in the Annual Report and Accounts for the year ended 30 June 2022, other than where new policies have
been adopted. Developments in reporting standards and interpretations are set out in Note 2(c) 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 and deferred contingent consideration such that they are measured at their
fair value.
At the time of approving the Financial statements, the Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the Financial statements.
b. Investments in subsidiary companies
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.
c. 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.
d. 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.
e. 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.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
175
Notes to the Company
financial statements continued
For the year ended 30 June 2023
38. 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 important
estimations are used, relate to the measurement of intangible assets and the estimation of the fair value of share-based
payments.
The preparation of the Company’s financial statements includes the use of estimates and assumptions. The significant
accounting estimates with a significant risk of a material change to the carrying value of assets and liabilities within the next
year in terms of IAS 1, ‘Presentation of Financial Statements’, are the pre-tax discount rate and perpetuity growth rate used to
calculate the Brooks Macdonald International net present value, used within the investments within subsidiaries impairment
review.
The consolidated financial statements include other areas of judgement and accounting estimates. While these areas do not
meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and
measurement of certain material assets and liabilities are based on assumptions and/or are subject to longer-term uncertainties.
The other areas of judgement and accounting estimates are the pre-tax discount rate and perpetuity growth rate used within
the investment in subsidiaries impairment reviews, and the inputs into the Black-Scholes model used to value the Company’s
equity-settled share-based payments.
The underlying assumptions and estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the year in which the estimate is revised only if the revision affects both current and future periods.
Further information about key assumptions and sources of estimation uncertainty is set out below.
Investment in subsidiaries
The Company’s investment in subsidiaries is 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.
39. Profit for the year
Brooks Macdonald Group plc reported profit after tax for the year ended 30 June 2023 of £21,014,000 (FY22: £24,111,000).
Auditors’ remuneration is disclosed in Note 7 of the Consolidated financial statements. The average monthly number of
employees during the year was eight (FY22: seven). Directors’ emoluments are set out in Note 5(d) of the Consolidated financial
statements.
40. Dividends
Details of the Company’s dividends paid and proposed, subject to approval at the Annual General Meeting, are set out in Note 13
of the Consolidated financial statements.
41. Investment in subsidiaries
Net book value
At 1 July 2021
Net capital contribution relating to share-based payments
At 30 June 2022
Additions
Impairment in subsidiary
Capital contributions from subsidiaries relating to share-based payments
Capital contributions to subsidiaries relating to share-based payments
At 30 June 2023
Group
undertakings
£’000
99,249
2,762
102,011
17,889
(4,802)
2,686
(7,482)
110,302
During the year, the Company acquired the entire share capital of Integrity Wealth (Holdings) Limited, Integrity Wealth Bidco
Limited and their subsidiary company, Integrity Wealth Solutions Limited at a cost of £7,087,000 and Adroit Financial Planning
Limited at a cost of £11,261,000 (as disclosed in Note 11 of the Consolidated financial statements).
176
Brooks Macdonald Group plc Annual Report and Accounts 2023
41. Investment in subsidiaries continued
During the year the Company provided capital contributions to underlying subsidiaries in relation to share options of
£2,686,000. During the year, the Company received capital contributions from underlying subsidiaries in relation to share
options exercises of £7,482,000 of which £664,000 was outstanding as an amount due from subsidiary undertakings relating
to share-based payments.
During the year the Company recognised an impairment in relation to a subsidiary company, Cornelian Asset Management
Group Limited for £3,203,000, due to a reorganisation of the Group structure and the business transferred to a subsidiary
company within the Brooks Macdonald Group plc group of companies.
During the year the Company recognised an impairment in relation to a subsidiary company, Brooks Macdonald Asset
Management (International) Limited. Based on a value-in-use calculation, the recoverable amount of the International CGU for
investment in subsidiary purposes at 30 June 2023 was £49,866,000. This fell short of the carrying amount of the Company’s
investment in Brooks Macdonald Asset Management (International) Limited by £1,599,000, resulting in an impairment charge
recognised for this amount.
Details of the Company’s subsidiary undertakings at 30 June 2023, all of which were 100% owned and included in the
Consolidated financial statements, are provided below:
Company
Adroit Financial Planning Limited
Braemar Group Limited
Type of shares
and par value
Ordinary 1p
Ordinary 1p
Country of
incorporation
UK
UK
Brooks Macdonald Asset Management Limited
Ordinary £1
UK
Brooks Macdonald Asset Management (International) Limited Ordinary £1
Ordinary 5p
Brooks Macdonald Financial Consulting Limited
Ordinary £1
Brooks Macdonald Funds Limited
Ordinary £1
Brooks Macdonald International Fund Managers Limited
Brooks Macdonald International Nominees (Guernsey) Limited Ordinary £1
Ordinary £1
Brooks Macdonald Nominees Limited
Ordinary 20p
Cornelian Asset Managers Group Limited
Ordinary £1
Cornelian Asset Managers Limited
Ordinary £1
Cornelian Asset Managers Nominees Limited
Ordinary £1
Integrity Wealth (Holdings) Limited
Ordinary £1
Integrity Wealth Bidco Limited
Ordinary £1
Integrity Wealth Solutions Limited
Ordinary £1
Levitas Investment Management Services Limited
Ordinary £1
Secure Nominees Limited
Channel Islands
UK
UK
Channel Islands
Channel Islands
UK
UK
UK
UK
UK
UK
UK
UK
Channel Islands
Nature of business
Wealth management
Parent holding company
Investment and wealth
management
Investment and wealth
management
Non-trading
Non-trading
Fund management
Non-trading
Non-trading
Parent holding company
Fund management
Non-trading
Parent holding company
Non-trading
Wealth management
Fund sponsor
Non-trading
The registered office for all subsidiaries is 21 Lombard Street, London, EC3V 9AH except for the following:
Company
Brooks Macdonald Asset Management (International) Limited
Brooks Macdonald International Fund Managers Limited
Brooks Macdonald International Nominees (Guernsey) Limited
Cornelian Asset Managers Group Limited
Cornelian Asset Managers Limited
Cornelian Asset Managers Nominees Limited
Secure Nominees Limited
Registered office
5 Anley Street, St. Helier, Jersey, JE2 3QE
5 Anley Street, St. Helier, Jersey, JE2 3QE
Ground Floor, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
Hobart House, 80 Hanover Street, Edinburgh, EH2 1EL
Suite 1, Block C, Hirzel Court, St. Peter Port, Guernsey, GY1
2NN
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 2023:
Braemar Group Limited
Brooks Macdonald Funds Limited
Brooks Macdonald Nominees Limited
Cornelian Asset Managers Group Limited
Cornelian Asset Managers Limited
› Adroit Financial Planning 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 2023 were £336,000.
Cornelian Asset Managers Nominees Limited
Integrity Wealth (Holdings) Limited
Integrity Wealth Bidco Limited
Integrity Wealth Solutions Limited
Levitas Investment Management Services Limited
Secure Nominees Limited
›
›
›
›
›
›
Annual Report and Accounts 2023 Brooks Macdonald Group plc
177
Notes to the Company
financial statements continued
For the year ended 30 June 2023
42. Financial assets at fair value through other comprehensive income
At beginning of year
Net changes in fair value
At end of year
2023
£’000
500
–
500
2022
£’000
500
–
500
At 30 June 2023, the Company held an investment of 500,000 redeemable £1 preference shares in an unlisted company
incorporated in the UK. The preference shares carry an entitlement to a fixed preferential dividend at a rate of 4% per annum.
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
2023
£’000
322
32
354
2022
£’000
238
21
259
Amounts owed by subsidiary companies are unsecured, interest-free and repayable on demand.
44. Deferred contingent consideration
Deferred contingent 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 contingent consideration is
measured at its fair value based on discounted expected future cash flows. The movements in the total deferred contingent
consideration balance during the year were as follows:
At beginning of year
Additions
Finance cost of deferred contingent 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 contingent consideration
2023
£’000
–
1,026
51
173
–
1,250
1,250
–
1,250
2022
£’000
5,922
–
78
–
(6,000)
–
–
–
–
During the year ended 30 June 2023, the Company completed the Integrity Wealth Solutions Limited acquisition, and part of
the consideration was to be deferred over a period of three years. The total cash deferred contingent consideration of £1,275,000
was recognised at its fair value of £1,026,000 on acquisition. The deferred contingent consideration was payable in October
2025 based on the future revenue generated by the discretionary business acquired. During the year ended 30 June 2023, the
Group recognised a finance cost of £51,000 on the Integrity Wealth Solutions acquisition deferred contingent consideration.
The Integrity Wealth Solutions deferred contingent consideration was renegotiated at 30 June 2023, and it was agreed that
£1,250,000 was to be paid to the vendors of Integrity Wealth Solutions, settled in cash of £625,000 and Brooks Macdonald Group
plc shares valued at £625,000. As a result, a change in fair value of the contingent consideration of £173,000 was recognised for
the year ended 30 June 2023. This revised deferred contingent consideration was settled after the reporting period in July 2023.
178
Brooks Macdonald Group plc Annual Report and Accounts 2023
45. Trade and other payables
Trade payables
Amounts owed to subsidiary undertakings
Accruals and deferred income
Total trade and other payables
2023
£’000
30
900
1,556
2,486
Amounts owed to subsidiary companies are unsecured, interest-free and repayable on demand.
46. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Increase/(decrease) in payables
Share-based payments
(Increase)/decrease in receivables
Adjustments for:
−
−
−
− Changes in fair value of deferred contingent consideration
−
Net cash inflow from operating activities
Impairment of subsidiary
2023
£’000
21,018
1,123
318
(95)
173
4,802
27,339
2022
£’000
53
123
1,422
1,598
2022
£’000
24,282
(2,002)
211
11
–
–
22,502
Annual Report and Accounts 2023 Brooks Macdonald Group plc
179
Notes to the Company
financial statements continued
For the year ended 30 June 2023
47. Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
At 1 July 2021
Shares issued:
on exercise of options
to Sharesave Scheme
At 30 June 2022
Shares issued:
on exercise of options
to Sharesave Scheme
Of consideration for the acquisition of Integrity
At 30 June 2023
Number of
shares
16,181,138
6,325
18,079
16,205,542
1,866
140,171
52,084
16,399,663
Share
capital
£’000
161
Share
premium
account
£’000
78,703
–
1
162
–
1
1
164
120
318
79,141
30
1,660
999
81,830
Total
£’000
78,864
120
319
79,303
30
1,661
1,000
81,994
The total number of ordinary shares, issued and fully paid at 30 June 2023, was 16,399,663 (FY22: 16,205,542) with a par value of
1p per share. Excluding 552,633 (FY22: 580,806) treasury shares held by the Employee Benefit Trust (see below), the Company
had 15,847,030 (FY22: 15,624,736) ordinary 1p shares in issue as at 30 June 2023. Details of the shares issued are given in Note 28 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 30(c) 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 168,668 (FY22: 152,174) options. The cost of the shares released on
exercise of these options amounted to £3,388,000 (FY22: £2,687,000). At 30 June 2023, the number of shares held by the
EBT was 552,633 (FY22: 580,806) with a market value of £11,633,000 (FY22: £12,923,000) acquired for a total consideration of
£16,950,000 (FY22: £14,100,000). 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.
180 Brooks Macdonald Group plc Annual Report and Accounts 2023
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
2023
£’000
2,191
45
147
2,383
2022
£’000
2,894
73
1,045
4,012
Dividends totalling £51,000 (FY22: £46,000) 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
Cornelian Asset Managers Group Limited
Levitas Investment Management Services Limited
Brooks Macdonald Asset Management (International) Limited
Total transactions with subsidiaries
2023
£’000
22,000
8,253
600
–
30,853
2022
£’000
22,000
2,500
–
3,500
28,000
The Company’s balances with fellow Group companies at 30 June 2023 are set out in Note 34 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 31 to the Consolidated financial statements.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
181
Non-IFRS financial information
Non-IFRS financial information or alternative performance measures (“APMs”) are used as supplemental measures in
monitoring the performance of the Group. The adjustments applied to IFRS measures to compute the Group’s APMs exclude
income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item. The Board considers
the disclosed APMs to be an appropriate reflection of the Group’s performance.
The Group follows a rigorous process in determining whether an adjustment should be made to present an alternative
performance measure compared to IFRS measures. For an adjustment to be excluded from underlying profit as an alternative
performance measure compared to statutory profit, it must initially meet at least one of the following criteria:
›
›
›
It is unusual in nature, e.g. outside the normal course of business and operations.
It is a significant item, which may be recognised in more than one accounting period.
It has been incurred as a result of an acquisition, disposal or a company restructure process.
The Group uses the below APMs:
APM
Underlying profit
before tax
Equivalent IFRS measure Definition and purpose
Statutory profit
before tax
Calculated as profit before tax excluding income and expense categories,
which are deemed of a non-recurring nature or a non-cash operating item.
It is considered by the Board to be an appropriate reflection of the Group’s
performance and considered appropriate for external analyst coverage and peer
group benchmarking. See page 39 for a reconciliation of underlying profit before
tax and statutory profit before tax and an explanation for each item excluded in
underlying profit before tax.
Calculated as the statutory tax charge, excluding the tax impact of the
adjustments excluded from underlying profit. See Note 9 Taxation of the
Consolidated financial statements.
Calculated as underlying profit before tax less the underlying tax charge.
See Note 12 of the Consolidated financial statements for a reconciliation of
underlying profit after tax and statutory profit after tax.
Calculated as underlying profit before tax over revenue for the year. This is
another key metric assessed by the Board and appropriate for external analyst
coverage and peer group benchmarking.
Earnings before interest, tax, depreciation and amortisation (“EBITDA”).
Underlying EBITDA is EBITDA excluding income and expense categories which
are deemed of a non-recurring nature or a non-cash operating item. See page 40
for reconciliation between EBITDA and underlying EBITDA and profit measures.
Calculated as underlying profit after tax divided by the weighted average
number of shares in issue during the year. This is a key management incentive
metric and is a measure used within the Group’s remuneration schemes. See
Note 12 of the Consolidated financial statements for the Earnings per share.
Calculated as underlying profit after tax divided by the weighted average
number of shares in issue during the year, including the dilutive impact of future
share awards. This is a key management incentive metric and is a measure used
within the Group’s remuneration schemes. See Note 12 of the Consolidated
financial statements for the Earnings per share.
Calculated as total administrative expenses, other net gains/(losses), finance
income and finance costs and excluding income and expense categories, which
are deemed of a non-recurring nature or a non-cash operating item, which are
listed on page 39. This is a key measure used in calculating underlying profit
before tax. See page 37 for details on underlying costs.
Calculated as profit before tax, excluding income and expense categories, which
are deemed of a non-recurring nature or a non-cash operating item for each
segment. See Note 3 of the Consolidated financial statements for the Segmental
information.
Calculated as segmental underlying profit before tax over segmental revenue.
Calculated as the Group’s total regulatory resources relative to its Fixed Overhead
requirement.
Underlying tax charge Statutory tax charge
Underlying earnings
/ Underlying profit
after tax
Underlying profit
margin before tax
Total comprehensive
income
Statutory profit margin
before tax
EBITDA/Underlying
EBITDA
N/A
Underlying basic
earnings per share
Statutory basic
earnings per share
Underlying diluted
earnings per share
Statutory diluted
earnings per share
Underlying costs
Statutory costs
Segmental underlying
profit before tax
Segmental statutory
profit before tax
Segmental underlying
profit before tax margin
Own Funds Capital
Adequacy Ratio
Segmental statutory
profit before tax margin
N/A
182
Brooks Macdonald Group plc Annual Report and Accounts 2023
Introduction
Strategic report
Corporate governance
Financial statements
Company information
Company Secretary
Company registration number
Phil Naylor
4402058
Registered office
Website
Financial calendar
21 Lombard Street, London, EC3V 9AH
www.brooksmacdonald.com
Results announcement
14 September 2023
Ex-dividend date for final dividend
21 September 2023
Record date for final dividend
22 September 2023
Annual General Meeting
26 October 2023
Final dividend payment date
3 November 2023
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 Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Annual Report and Accounts 2023 Brooks Macdonald Group plc
183
Glossary
Abbreviation
AGM
AGM
AIM
ANLA
APM
APS
ARC
BAME
BMAM
BMG, Company,
Parent Company
BMI
BMIS
BPS
BR
Braemar
BURM
CAPM
CASS
CEO
CFA
CGU
CIP
CISI
COO
Cornelian
COVID-19
CREST
CRO
CSOP
DBP
DCF
DE&I
DFM
DKHT
EBITDA
EBT
EPS
ERG
ERMC
ESG
ESOA
EU
Definition
Adroit Financial Planning Limited
Annual General Meeting
Alternative Investment Market
Adjusted Net Liquid Asset
Alternative performance measure
AIM Portfolio Service
Asset Risk Consultants
Black, Asian and minority ethnic
Brooks Macdonald Asset Management
Limited
Brooks Macdonald Group plc
Brooks Macdonald Asset Management
(International) Limited
BM Investment Solutions
Bespoke Portfolio Service
Business Relief
Breamar Group Limited CGU
Bottom up risk map
Capital asset pricing model
Client Assets Sourcebook
Chief Executive Officer
Chartered Financial Analyst
Cash-generating unit
Centralised Investment Process
Chartered Institute for Securities &
Investment
Chief Operating Officer
Cornelian Asset Managers Group Limited
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
Deferred Bonus Plan
Defensive Capital Fund
Diversity, equity and inclusion
Discretionary Fund Managers
Dame Kelly Holmes Trust
Earnings before interest, tax, depreciation
and amortisation
Employee Benefit Trust
Earnings per share
Employee resource group
Executive Risk Management Committee
Environmental, social and governance
Exceptional Share Options Awards
European Union
Abbreviation
FCA
FIT
FRC
FSCS
FUM
GAIN
GAYE
GHG
Group
H&S
HMRC
IAS
IASB
IC
ICAAP
ICARA
IFA
IFPRU
IFRS IC
IFRS
IHT
IoD
ISAs (UK)
IT
IWS, Integrity
KPI
LRMF
LTIP
LTIS
M&A
MAF
MPS
MRT
MTP
Net flows
NOMAD
OEIC
ORAS
PBT
PIMFA
PMPS
PRI
PwC
Definition
UK Financial Conduct Authority
FIT Remuneration Consultants LLP
UK Financial Reporting Council
Financial Services Compensation Scheme
Funds under management
Girls Are Investors
Give-As-You-Earn
Greenhouse gas
Brooks Macdonald Group plc and its
controlled entities
Health and safety
HM Revenue and Customs
International Accounting Standard
International Accounting Standards Board
Investment Committee
Internal Capital Adequacy Assessment
process
Internal Capital and Risk Assessment
Independent Financial Advisor
The FCA’s Prudential Sourcebook for
Investment Firms
International Financial Reporting
Standards Interpretations Committee
International Financial Reporting Standard
Inheritance Tax
Institute of Directors
International Standards on Accounting (UK)
Information technology
Integrity Wealth Solutions Limited
Key performance indicator
Liquidity Risk Management Framework
Long-term incentive plan
Long-term incentive scheme
Mergers and acquisitions
Multi-Asset Fund
Managed Portfolio Service
Material Risk Takers
Medium-Term Plan
Net organic growth in FUM
Nominated advisor
Open-Ended Investment Company
Overarching risk appetite statement
Profit before tax
Personal Investment Management and
Financial Advice Association
Platform Managed Portfolio Service
Principles for Responsible Investing
PricewaterhouseCoopers LLP
184
Brooks Macdonald Group plc Annual Report and Accounts 2023
Introduction
Strategic report
Corporate governance
Financial statements
Abbreviation
Definition
Risk and Compliance Committee
Responsible Investment Service
Risk management framework
RCC
RIS
RMF
SAYE, Sharesave Employee Sharesave Scheme, Save As You
SECR
SMCR
SPA
TCFD
TDRM
The Code
UKIM
ULEVs
WACC
WDP
Earn
Streamlined Energy and Carbon Reporting
Senior Managers and Certification Regime
Sale and Purchase Agreement
Task Force on Climate-related Financial
Disclosures
Top down risk map
UK Corporate Governance Code
UK Investment Management
Ultra Low Emission Vehicles
Weighted average cost of capital
Wind Down Plan
Annual Report and Accounts 2023 Brooks Macdonald Group plc
185
Our offices
London –
Head Office
1
21 Lombard Street
London
EC3V 9AH
North
2
3
Manchester
24 Mount Street
Manchester
M2 3NX
Leeds
Yorkshire House
Clockwise
Greek Street
Leeds
LS1 SSH
Scotland
4
2nd Floor Suite
Hobart House
80 Hanover Street
Edinburgh
EH2 1EL
Crown
Dependencies
13
14
Jersey
No. 1 Grenville Street
St. Helier
Jersey
JE2 4UF
Guernsey
Suite 1, Block C
Hirzel Court
St. Peter Port
Guernsey
GY1 2NN
15 Isle of Man
Exchange House
54–62 Athol Street
Douglas
IM1 1JD
Wales
and West
South
East
10
11
12
Southampton
Mountbatten House
1 Grosvenor Square
Southampton
SO15 2JU
Tunbridge Wells
2 Mount Ephraim Road
Tunbridge Wells
Kent
TN1 1EE
East Anglia
Suite 2, Beacon House
4 Kempson Way
Bury St. Edmunds
Suffolk
IP32 7AR
5
6
7
8
9
Birmingham
Somerset House
37 Temple Street
Birmingham
B2 5DP
Nuneaton
4 Barling Way
Nuneaton
CV10 7RH
Exeter
Broadwalk House
Southernhay West
Exeter
EX1 1TS
Wales
3 Ty Nant Court
Morganstown
Cardiff
CF15 8LW
Cheltenham
Festival House
Jessop Avenue
Cheltenham
GL50 3SH
186
Brooks Macdonald Group plc Annual Report and Accounts 2023
4
15
3
2
5
6
9
10
12
11
1
8
7
14
1213
The production of this report supports the work of the Woodland Trust,
the UK’s leading woodland conservation charity. Each tree planted will
grow into a vital carbon store, helping to reduce environmental impact
as well as creating natural havens for wildlife and people.
Annual Report and Accounts 2023 Brooks Macdonald Group plc
C
21 Lombard Street
London
EC3V 9AH
www.brooksmacdonald.com