Brooks Macdonald reaches record underlying profit margin

Brooks Macdonald Group said in its full-year results on Thursday that group funds under management closed at £15.7bn, down 4.8% year-on-year, as positive net flows were offset by the impact of declining markets on asset values.

The AIM-traded firm said it recorded positive net flows throughout the year, making for five successive quarters, with net flows for the full year of 4.8%, representing a £1.1bn improvement over the prior year.

Flows were “particularly strong” in the fourth quarter to 30 June, with the annualised rate reaching 6.7% and 8.6% for group and UK investment management, respectively.

Group revenue totalled £122.2m for the year, up 3.4% on 2021, which the board said was driven by higher average funds under management and the full-year impact of the group's acquisition of the Lloyds Channel Islands business.

Underlying profit before tax was ahead 12.7% at 34.5m, while underlying basic earnings per share rose to 174.1p from 155.6p a year ago.

Its underlying profit margin improved by 2.3 points to 28.2%, in line with the group's commitment to deliver top-quartile margin over the medium term.

The company said its investment performance across its range of services was -9.6% for the year, driven by declining and volatile markets.

Its board hiked the total dividend by 12.7% to 71p per share, in line with the increase in underlying profit before tax.

Looking ahead, Brooks Macdonald said its long-term opportunity remained “strong”, driven by demographic and policy trends as well as continuing adviser demand for outsourced investment management.

Its medium-term ambition for net flows was 8% to 10% per annum, with the group expecting that flows would remain positive despite ongoing short-term market uncertainty affecting client confidence and conversion times.

The board said underlying profitability for 2023 was set to be in line with current market expectations, adding that the company was “well-positioned to deliver on its ambitious growth strategy.

“This has been another strong year for Brooks Macdonald - we've delivered higher net flows, we've hit another record for underlying profit margin, and we've increased our full year dividend for the seventeenth consecutive year,” said chief executive officer Andrew Shepherd.

“We have made good progress in driving our digital transformation forward, having now gone live with our remaining client- and adviser-facing processes on the SS&C platform.

“This will make Brooks Macdonald increasingly easy to do business with, delivering a best-in-class adviser experience and client service.”

Shepherd said the company’s clients and advisers were facing a “challenging” macroeconomic and market environment.

“Nonetheless, the fundamental long-term opportunity for Brooks Macdonald remains strong despite these challenges.

“We have momentum, we have an ambitious growth strategy and we have a strong team with the capabilities to take full advantage of the opportunities ahead.”

At 1001 BST, shares in Brooks Macdonald Group were up 1.52% at 2,233.34p.

Reporting by Josh White at Sharecast.com.