Trading Update and Quarterly Announcement of FUM

16 July 2020

 

BROOKS MACDONALD GROUP PLC

 

Quarterly Trading Update and Announcement of Funds under Management

 

"Strong investment performance and improving flows driving growth in FUM"

 

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group") today publishes an update on Funds under Management ("FUM") for the fourth quarter of its financial year (ended 30 June 2020), together with a Trading Update for the period.

 

Trading Update

 

The Group had a positive fourth quarter, building on its strong client and adviser relationships despite the market volatility and economic uncertainty caused by the outbreak of COVID-19.  The Group's progress in executing its strategy and ongoing cost discipline have put it on track to meet expectations for the year.  Accordingly, the Group is maintaining the guidance given in its Q3 Trading Update, that it anticipates delivering a good full year result, ahead of last year's in terms of both underlying profit and underlying profit margin.

 

In the period, the Group was successful in transitioning rapidly to a new operating model based on remote working following the outbreak of COVID-19.  Brooks Macdonald was able to continue to support clients and advisers through volatile markets while ensuring the safety and wellbeing of its staff.

 

In June, the Group announced the acquisition of Lloyds Bank International's Channel Islands wealth management and funds business adding up to c.£1.0 billion in FUM to the International business.  The acquisition is expected to complete during the first half of the current financial year and represents another significant step forward for the Group in achieving its growth ambitions.  Integration of the Cornelian business, whose acquisition by the Group completed in February, is progressing to plan with the business now successfully embedded into Brooks Macdonald, and the target FY21 cost synergies of £3.75 million expected to be met in full.

 

Funds under Management

 

Total Group FUM finished the quarter at £13.7 billion (31 March 2020: £12.2 billion), an overall increase of £1.5 billion or 12.0%.  This was mostly due to strong investment performance, adding just over £1.5 billion, supported by higher gross inflows than prior quarters resulting in reduced net outflows of £0.1 billion.

 

Highlights for the fourth quarter included:

 

·   Overall investment performance for the period was strong at 12.5%, ahead of the MSCI PIMFA Private Investor Balanced Index which was up by 10.6%.

 

·   UKIM discretionary FUM had improving net flows and robust investment performance, driving growth of 12.5%.  Within that:

 

-     FUM in the Bespoke Portfolio Service ("BPS") increased by 11.4% to £8.2 billion largely due to investment performance of £0.9 billion; and

 

-     The Managed Portfolio Service ("MPS") grew by 17.6% to £1.8 billion due to net new business of £0.1 billion, with particularly strong flows from the Platform MPS product, and favourable investment performance of £0.2 billion.

 

·   The UKIM Funds business saw net outflows of £0.1 billion, or 3.5%, during the quarter.  This was more than offset by investment performance of £0.3 billion, taking the closing value of the Funds business to over £2.0 billion, an increase of 10.1%.

 

·   The International business recorded improved flows during the quarter and enjoyed investment performance of £0.2 billion (11.1%), taking the closing FUM position to £1.6 billion.  This is further evidence of the continued reinvigoration of the business which is being augmented by the recently announced acquisition of Lloyds Bank International's Channel Islands wealth management and funds business.

 

Over the course of the full financial year, FUM increased by £0.5 billion or 4.1%.  This reflects the assets acquired from Cornelian in February 2020 of £1.2 billion and positive investment performance of £0.1 billion, partly offset by organic net outflows of £0.8 billion.  The latter reflected the effect of outflows of mainly lower margin business as a result of the Group's focus on efficiency and business quality over volume and the actions taken to support medium term value creation.

 

Overall investment performance for the financial year to June of 1.0% was well ahead of the MSCI PIMFA Private Investor Balanced Index which declined by 3.5% over the same period.

 

 

 

Caroline Connellan, CEO of Brooks Macdonald commented:

 

"I am pleased by our results for the fourth quarter.  We achieved strong investment performance in difficult, volatile markets, protecting our clients' wealth.  We also delivered improved net flows in our core discretionary business in the UK and continued to reinvigorate International.  I am impressed by, and grateful for, our people's response to the current challenges.  They have adapted seamlessly to the remote working environment of the COVID-19 lockdown, while further reinforcing the strong relationships we have with advisers and clients.

 

"Overall the year has been one of significant progress, despite macroeconomic and political uncertainty in the first half of the year and COVID-19 related market volatility and economic concerns in the second.  We have delivered strong commercial results and are on track to meet profit expectations.  We have made significant steps forward in achieving our growth ambitions, including two high quality acquisitions, while also continuing to take the necessary actions to set the business up for further success."

 

 

Analysis of fund flows by service over the period

 

Quarter to 30 June 2020
£m	Opening FUM	Organic net new business	Investment performance	Closing FUM	Organic net new business	Total mvmt
BPS	7,402	(90)	935	8,247	(1.2)%	11.4%
MPS	1,538	91	180	1,809	5.9%	17.6%
UKIM discretionary	8,940	1	1,115	10,056	0.0%	12.5%
Funds	1,863	(66)	254	2,051	(3.5)%	10.1%
UKIM total	10,803	(65)	1,369	12,107	(0.6)%	12.1%
International	1,420	1	157	1,578	0.0%	11.1%
Total	12,223	(64)	1,526	13,685	(0.5)%	12.0%
Total investment performance					12.5%
MSCI PIMFA Private Investor Balanced Index2					10.6%

 

Half Year to 30 June 2020
£m	Opening FUM3,4	Organic net new business	FUM acquired in the period1	Investment performance	Closing FUM	Organic net new business	Total mvmt
BPS	8,332	(215)	445	(315)	8,247	(2.6)%	(1.0)%
MPS	1,755	91	-	(37)	1,809	5.2%	3.1%
UKIM discretionary	10,087	(124)	445	(352)	10,056	(1.2)%	(0.3)%
Funds	1,369	(98)	736	44	2,051	(7.2)%	49.8%
UKIM total	11,456	(222)	1,181	(308)	12,107	(1.9)%	(5.7)%
International	1,633	(47)	-	(8)	1,578	(2.9)%	(3.4)%
Total	13,089	(269)	1,181	(316)	13,685	(2.1)%	4.5%
Total investment performance						(3.5)%
MSCI PIMFA Private Investor Balanced Index2						(6.2)%

 

 

Full Year to 30 June 2020
£m	Opening FUM3,4	Organic net new business	FUM acquired in the period1	Investment performance	Closing FUM	Organic net new business	Total mvmt
BPS	8,254	(440)	445	(12)	8,247	(5.3)%	(0.1)%
MPS	1,705	81	-	23	1,809	4.7%	6.0%
UKIM discretionary	9,959	(359)	445	11	10,056	(3.6)%	1.0%
Funds - ongoing	1,354	(111)	736	72	2,051	(8.2)%	51.5%
Funds - Grosvenor	230	(244)	-	14	-	(106)%	(100)%
Funds total	1,584	(355)	736	86	2,051	(22.4)%	29.5%
UKIM total	11,543	(714)	1,181	97	12,107	(6.2)%	4.9%
International	1,604	(60)	-	34	1,578	(3.7)%	(1.6)%
Total	13,147	(774)	1,181	131	13,685	(5.9)%	4.1%
Total investment performance						1.0%
MSCI PIMFA Private Investor Balanced Index2						(3.5)%

 

¹Closing value of Cornelian Asset Managers Limited's FUM as at 31 March 2020 acquired during the period.

²Capital-only index.

³As announced on 24 October 2019, Braemar Group PCC Limited-UK Agricultural Land fund (the "PCC"), to which the Group acts as promoter and distributor, is being wound up following the EGM held on 14 August 2019.  Accordingly, the PCC's assets, which were valued at £4 million as at 30 June 2019, have been excluded from all figures shown in this announcement.

⁴As announced on 24 July 2019, the Group exited from its investment management agreement with the Ground Rents Income Fund plc ("GRIF"), a specialised property fund, on 13 May 2019.  Accordingly, comparative FUM figures shown in this announcement have been restated to exclude GRIF's assets.

 

 

Enquiries to:

Brooks Macdonald Group plc Caroline Connellan, CEO Ben Thorpe, Group Finance Director	www.brooksmacdonald.com 020 7659 3492
Peel Hunt LLP (Nominated Adviser and Broker) James Britton / Rishi Shah / John Welch	020 7418 8900
MHP Communications Reg Hoare / Simon Hockridge / Charlie Barker	020 3128 8540

Notes to editors

Brooks Macdonald Group plc, through its various subsidiaries, provides leading investment management services in the UK and internationally. The Group, which was founded in 1991 and began trading on AIM in 2005, had Discretionary Funds under Management of £13.7 billion as at 30 June 2020.

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 offshore investment management and acts as fund manager to a regulated OEIC providing a range of risk-managed multi-asset funds and a specialised absolute return fund.

The Group has twelve offices across the UK and the Channel Islands including London, East Anglia, Hampshire, Leamington Spa, Leeds, Manchester, Taunton, Tunbridge Wells, Scotland, Wales, Jersey and Guernsey.

 

LEI: 213800WRDF8LB8MIEX37