Wealth management group Brooks Macdonald (BRK) reported solid full-year results against a backdrop of significant regulatory change in its industry. Discretionary funds under management rose 45 per cent to £5.11bn, driven by positive market movement and the acquisition of Channel Islands fund management business Spearpoint, but also by impressive organic growth of 15 per cent.
Adjusted pre-tax profit rose by 47 per cent to £13.2m - a solid performance given the extra costs that resulted from the introduction of the Retail Distribution Review in January. "Regulatory costs have shot up," says chief executive Chris Macdonald. He believes that costs have probably peaked in terms of percentage of revenue, but for now at least the company will have to live with this higher cost base as there is no sign that the industry is passing these costs on to customers.
The regulatory environment is expected to be more stable in the coming year, but the company still faces headwinds. Mr Macdonald says those entrenched, higher regulatory costs, as well as lower fees for its non-bespoke managed portfolio service and investments in training and technology will weigh on margins. On the plus side, the company does see an opportunity to win new Sipps business on the back of auto enrolment legislation, which requires companies to offer employees pensions.
Broker Peel Hunt says adjusted profit before tax is likely to be broadly flat next year at around £13m, which would give adjusted EPS of 79.5p.
BROOKS MACDONALD (BRK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,392p | MARKET VALUE: | £187m | |
| TOUCH: | 1360p-1425p | 12-MONTH HIGH: | 1,500p | LOW: 1,140p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 430p* | NET CASH: | £18.4m | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 21.8 | 3.19 | 22.6 | 5.5 |
| 2010 | 35.1 | 5.68 | 38.1 | 9.0 |
| 2011 | 52.2 | 7.29 | 51.9 | 15.0 |
| 2012 | 53.3 | 8.52 | 57.4 | 18.5 |
| 2013 | 63.2 | 10.40 | 65.8 | 22.5 |
| % change | +19 | +22 | +15 | +22 |
Ex-div: 18 Sep Payment: 18 Oct *Includes intangible assets of £44.6m, or 333p a share | ||||
