Brooks Macdonald Group H1 2025 Earnings Report

Brooks Macdonald Group EPS Results

• Actual EPS: GBX 69.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Brooks Macdonald Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Brooks Macdonald Group Announcement Details

• Quarter: H1 2025
• Date: 2/27/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 27, 2025
• Conference Call Time: 2:00AM ET

Brooks Macdonald Group (LON:BRK), through its subsidiaries, provides a range of investment and wealth management services to private clients, pension funds, professional intermediaries, and trustees in the United Kingdom, Isle of Man, and the Channel Islands. It operates through two segments, UK Investment Management and International. The company offers financial planning advisory services to high-net-worth individuals and families; and multi-asset and specialist fund products to the retail sector, as well as investment options. Brooks Macdonald Group plc was founded in 1991 and is headquartered in London, the United Kingdom.

Brooks Macdonald Group H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Brooks has been reshaped into a U.K.-focused wealth manager through the sale of BMI and acquisitions of LIFT-Financial, Lucas Fettes and CFT Wealth, growing the client base ~15% to ~23,000 and raising assets under advice/management in financial planning to £6.4bn.
• Positive Sentiment: Reported H1 results show funds under management of £15.7bn, an underlying PBT of £15.5m and an underlying profit margin of 29.9%, with an interim dividend up 3.4% to £0.30 per share.
• Neutral Sentiment: Net flows were negative in H1 (£1.1bn gross inflows offset by £1.4bn gross outflows) but Platform MPS delivered strong net flows (equivalent to 13% annualized) and management expects to return to net inflows later in the year.
• Positive Sentiment: Cost discipline continues to drive efficiency: underlying costs fell 4% in H1 (pre-acquisitions) and the group targets annual underlying cost growth below 5%, with announced synergies and stranded-cost savings to further reduce the run rate.
• Positive Sentiment: Balance sheet and capital are robust with £59.5m cash/liquids and £69.1m capital resources (£39.5m excess), enabling a share buyback, continued M&A and increased CAPEX guidance to ~£10m to support growth and technology investment.

Presentation

[Andrea Montague, CEO at Brooks Macdonald]

Good morning and welcome to Brooks Macdonald's half-year results. I took the role of CEO on the 1st of October and have hit the ground running. Over the last 100 working days, we've made significant progress to reshape the group to be a U.K.-focused wealth manager with strong capability in advisor distribution and financial planning. I'm confident we're setting this business up for success. I believe we have the best executive team in the sector. We've got the breadth and depth of proposition to meet client needs, and we're delivering on our strategic priorities. Before I tell you more about the progress we've made on strategy, Katherine, please take us through the financials.

[Katherine Jones, CFO at Brooks Macdonald]

Thank you, Andrea. I'm delighted to present my first set of results as CFO of Brooks Macdonald. This is a fantastic business, and I strongly believe in our strategy to reignite growth. As you heard from Andrea, we're making good progress to deliver on our ambitious growth plans, and there is lots more to go for. The results we have reported today are on a continuing operations basis. They reflect the changes in the business in the last six months and therefore exclude DCF and BMI, our international business, the sale of which completed on the 21st of February, and include two months of financials for CFT and one month for Lucas Fettes. Today, we present solid results for the six-month period to 31st December. Funds under management increased to GBP 15.7 billion, supported by strong investment performance and platform MPS net flows.

[Katherine Jones, CFO at Brooks Macdonald]

Despite revenues being impacted by lower interest income, strong cost control resulted in an underlying profit margin of 29.9%, an underlying PBT of GBP 15.5 million. And we announced another increase in our interim dividend per share to GBP 0.30, up 3.4%. Next, moving on to an overview of flows from an AUA. We saw strong gross inflows of GBP 1.1 billion in the first half. However, this was more than offset by GBP 1.4 billion of gross outflows, reflecting the prevailing backdrop of market volatility and uncertainty, in particular leading up to and around the budget in October. Looking at this in a little more detail, platform MPS performed strongly, with net flows equivalent to 13% of opening FUM on an annualized basis.

[Katherine Jones, CFO at Brooks Macdonald]

We continue to see meaningful gross inflows into BPS, albeit offset by elevated outflows and strong investment performance, increased by GBP 0.4 billion in the first half, more than offsetting the impact of overall net outflows. Taking into account the acquisitions of LIFT-Financial, Lucas Fettes, and CFT Wealth, assets under advice or management within our financial planning businesses increased to GBP 6.4 billion, an increase of almost 75% versus the pre-acquisition AUA. My next slide looks at our revenue in more detail. Total revenue was down 2.6% year on year. This was largely driven by a reduction in interest income as market interest rates fell, and as discussed at the full year, we increased the share of interest paid away to clients. This was offset by a 24% increase in the revenue generated by our financial planning businesses.

[Katherine Jones, CFO at Brooks Macdonald]

Half of this increase came from our existing businesses, and the other half relates to the Lucas Fettes and CFT acquisitions. On an annualized basis, and taking into account LIFT-Financial, which completed in January, based on the first half results, the illustrative revenue across the acquired businesses would have been around GBP 17 million. As previously guided, we continue to expect interest income of GBP 7-8 million for the year. Now turning to look at the fee income in more detail. Overall yields reduced from 58.1 basis points to 54.4 basis points. Of this reduction, as you can see on the top chart here, the biggest driver was the change in mix in FUM towards Platform MPS, which had a yield in the first half of 17.5 basis points.

[Katherine Jones, CFO at Brooks Macdonald]

Platform MPS fund grew from 25% of average fund in the first half of 2024 to 30% of average fund in the first half of 2025, and therefore dampened the yield on the overall portfolio. In addition, we saw the impact of a reduction in the yield on BPS. This reflects the dynamics of products and flows within our bespoke solution, where, for example, we saw a growing proportion of clients using our relatively lower margin gilts service as part of our BPS proposition. Now moving on to costs. Driving efficiency is one of our three strategic objectives, and we remain committed to ensuring we manage costs carefully to achieve our target of underlying cost growth remaining below 5% per annum. I'm pleased to report that through ongoing active cost discipline, underlying costs were down 4% in the first half before taking into account acquisitions.

[Katherine Jones, CFO at Brooks Macdonald]

This reflects the benefit of organizational restructuring and other non-staff cost savings, which more than offset the effects of inflation. You can see on the chart here that the first half results include GBP 0.5 million of costs from our acquired businesses. On an annualized basis, and taking into account LIFT-Financial, based on H1, the illustrative costs across the acquired businesses would have been around GBP 14 million. We remain very focused on costs, including delivery of the synergies from acquisitions of around GBP 1 million, which will reduce the GBP 14 million annualized run rate over time, and savings in full year 2026 to mitigate the stranded costs post the BMI disposal of around GBP 4 million per annum, as discussed at the full year results. Now turning to my penultimate slide on cash and capital.

[Katherine Jones, CFO at Brooks Macdonald]

I'm pleased that our balance sheet remains strong, and we continue to have robust levels of cash and capital. At 31 December, we had cash and liquid assets of GBP 59.5 million after taking into account payments for recent acquisitions, dividends, and planned investment in the business. We also have a strong capital position with GBP 69.1 million of capital resources and an excess over our regulatory requirements and internal buffers of GBP 39.5 million before allowing for the interim dividend of GBP 4.7 million. The cash and capital widgets here show the key movements in the period on each basis. In the second half, in addition to the normal operating and dividend flows, the most material movements will relate to payments in respect of our share buyback program, the acquisition of LIFT-Financial, and ongoing investment in the business.

[Katherine Jones, CFO at Brooks Macdonald]

These outgoings will be offset by the sale proceeds from the disposal of BMI. I expect CapEx to be around GBP 10 million for 2025, compared to GBP 5 million previously guided. This includes investment in the business to deliver on our growth strategy, developing and implementing new operating models to ensure we are best placed to service our clients efficiently, property fit-out costs driven by office relocations, continued investment in our partnership with SS&C, and implementing new finance and HR systems. Reflecting the cash-generative nature of our profits, we have announced an interim dividend of GBP 0.30 per share, up 3.4% on the last interim, and continuing our track record of 19 years of consecutive dividend growth. Now moving on to my final slide. Today, we present a solid set of results. Fund increases have been supported by strong platform MPS flows and investment performance.

[Katherine Jones, CFO at Brooks Macdonald]

Our continued focus on cost management meant we achieved a strong underlying profit margin. The balance sheet, cash, and capital positions remain healthy, and we maintained our progressive dividend policy. Looking ahead, we expect to return to net flows later in the year. We will continue to manage costs tightly, including delivering on previously announced synergies and savings. Our robust balance sheet provides the flexibility to invest organically and inorganically, and we remain committed to our medium-term targets of achieving annualized net flows of 5% and keeping BAU cost growth below 5%. And with that, I will hand you back to Andrea.

[Andrea Montague, CEO at Brooks Macdonald]

In the last five months, I've moved at pace to reposition the group and reignite growth. It was clear to me we needed to do more to focus on our advisers and our clients. Following the sale of BMI and acquisitions of LIFT-Financial, Lucas Fettes, and CFT Wealth, we've reshaped the group to become a U.K.-focused wealth manager. The balance sheet remains strong, enabling us to think differently about our capital allocation, which has included launching a share buyback alongside our dividend payment. Our move to the main market is on track. We believe it'll also increase the opportunity for a broader range of investors to access Brooks Ordinary shares. I'm moving at pace to make the business fit for the future. Our operations were not where I wanted them to be, and despite good progress, more work is needed to get them fighting fit.

[Andrea Montague, CEO at Brooks Macdonald]

To realize that, I've recruited a new executive team, all come with relevant experience, high energy, and they've been tasked with fundamentally improving the business for the benefit of the advisors, clients, our people, and our shareholders. Specifically in distribution, the team now includes two respected industry figures, Mike Holden, who has a track record of leading a successful advisory business and recognizes the opportunity in financial advice, and Neil Cowell, former head of distribution at Vanguard, has joined us this week. His knowledge, experience, and relationships in the IFA market substantially strengthen the expertise and experience around the executive table. We've reviewed all our core marketing and communication material and made it more client-friendly. Operationally, we've made a number of significant improvements, including simplification and automation, and increasing the effectiveness of our client onboarding. Overall, a busy 100 days, and I look forward to updating you on our progress.

[Andrea Montague, CEO at Brooks Macdonald]

Let's now look at our strategic priorities. The U.K. wealth market is structurally set for success. We're positioning Brooks to realize its true potential and have refreshed our strategy to enable that. Delivering excellent client service is at the core of what we do. It's foundational. We're making significant progress in improving our service. For example, we've recruited new sales leadership to focus on and increase our support for advisors. This involves more targeting, interactions, and understanding what more we can do to improve the service to our IFA partners across the U.K. We've built a reputation for our support for IFAs, and we're going to increase our focus and commitment to them over the next 12 months and beyond. We've been investing in simplification and automation to reduce the number of touches that clients are required to make, making it a smoother and easier process for them.

[Andrea Montague, CEO at Brooks Macdonald]

The creation of digital fact sheets are a prime example of this. We're increasingly becoming more digital, with 45% of clients accessing service through InvestBM. We're also in the final development stages of launching an app, which will be available later in the year. I'm delighted that we've just received the Defaqto Gold Award for discretionary fund management service. We will continue to raise the bar in client service, setting us apart from our competitors. We will also broaden and deepen our client reach. Our acquisitions of LIFT-Financial, Lucas Fettes, and CFT Wealth have done much to accelerate our client base, which has increased by 15%, taking us to around 23,000 clients. We continue to develop our product propositions and meet our clients' evolving needs. We're in advanced piloting of our retirement income solution, as well as a new MPS fund.

[Andrea Montague, CEO at Brooks Macdonald]

Retention is a cornerstone in broadening and deepening client reach, and a retention program has been initiated to improve it. This covers all aspects from price, performance, relationship, service, and brand. It's already led to improved segmentation and targeted support for advisors. Intergenerational wealth is a huge opportunity for us, as is the demand from female clients. With a diverse pool of financial planners, we're now able to meet that demand effectively. Meeting advisors face-to-face is critical in this business, and since the beginning of this year, we've held advisor roadshows, meeting with around 250 IFAs across the U.K. Exco and I have attended the roadshows and have enjoyed hearing from them firsthand about the elements of our service they value. In our efforts to drive scale and efficiency, we've made meaningful savings over the last 18 months by simplifying the way we work.

[Andrea Montague, CEO at Brooks Macdonald]

This is the new normal, and this is how we'll deliver our medium-term commitment of no more than 5% growth in underlying cost per annum. So why Brooks? Well, we operate in a highly attractive market with structural growth drivers and increasing demand for trusted, independent financial advice. Our strengths are clear. Fundamentally, we have at our core an investment proposition with an unparalleled breadth of products underpinned by consistently strong investment performance. This is evident when we consider, for example, MPS performance, where we are top four among our peers over one, five, and ten years. There is a need now more than ever for trusted, independent advice. Brooks was founded in service to our IFA partners across the U.K., and we're now leveraging our core propositions, having recently scaled our financial planning business. We're creating a leading, independent, chartered financial planning business.

[Andrea Montague, CEO at Brooks Macdonald]

We'll grow the business through the Academy, creating a pipeline of highly qualified financial planners and talented future investment managers. So what am I saying here? I'm saying, yes, we've made significant progress, and yes, we're moving at pace. We're refocusing the group, we're improving our clients' experience, and we're building an industry-leading executive team. These are the building blocks that will provide the momentum to reignite growth, and we're set up to deliver just that.

Participants

Analysts

• Katherine Jones, CFO at Brooks Macdonald
• Andrea Montague, CEO at Brooks Macdonald