Brooks Macdonald Share Discussion Threads

[edmonda] 31/10/2023 08:21

"Tech investments pave way for staff cuts & margin upside"

Brooks Macdonald has announced it intends to reduce staff complement by 55, around 10% of its workforce of just over 500. It expects to save £4m of costs per year from the changes, but it will incur restructuring costs of up to £3.0m, to be recognised in the current FY24.

We update our forecasts and valuation as a result of these changes, primarily:

- Adding ‘one-off’ restructuring charges of £3m to FY24 which reduces statutory profits but not ‘underlying’ profit.
- Reducing staff costs from FY25 onwards, by around £4m per year.

While these adjustments offset each other to a degree, the increase in outer-year profits is the dominant driver of valuation and we increase our fundamental valuation from 3,000p per share to 3,050p per share (71% above the current share price). We also maintain our view that the ‘de-rating’ of investment/wealth managers, especially Brooks Macdonald, has been overdone.

Link to research note & audio summary here:

[maiken] 13/10/2023 07:08

Hi DrDoom,
I can't access the article,so would be grateful for brief details therein

[edmonda] 12/10/2023 07:04

Well-flagged sluggish quarter but price fall looks over-done (new report & audio summary here:

FUM increased marginally over Q1 of FY24 from £16.85bn on 30 Jun 23 to £16.86bn on 30 Sep 23. As flagged in the FY23 results release of 14th Sep 23, net flows were slightly negative for the quarter at -£70m, although BM has indicated it expects positive flows for the whole of FY24.

It’s important to keep this small negative quarterly net flow number in context: it follows nine consecutive quarters of positive flows (achieved despite difficult market conditions) and a period where BM recorded a higher organic growth rate than peers for 6 out of 8 quarters.

We leave our forecasts and our fundamental valuation unchanged at 3,000p per share which, following the recent share price fall of BM (as well as the sector more generally), is now 89% above the current share price.

It is also worth zooming out to look at sector valuations in light of recent falls. Since the end of the bull market at the end of 2021, investment/wealth managers and platforms have ‘de-rated’ significantly with the median PER of a tracked peer group declining 54% from 27.6 to 12.6.

While valuations may well have ‘over-run’ to a degree at the end of the bull market, we certainly see the current median PER of 12.6 as very low (noting that this has dropped 25% in just one month from 17.0 when we published our most recent note on 14th September 2023).

[edmonda] 19/9/2023 14:35

FY Results - Investor Presentation video (15 September 2023)

Brooks Macdonald Group plc, the AIM-listed investment management group, conducted an online presentation for investors following the release of their Full Year results to 30 June 2023.

Andrew Shepherd, CEO and Andrea Montague, CFO took investors through their continuing strategic progress underlined by strong financial performance, despite challenging market conditions. Highlights of the year included positive net flows, an increased dividend and two completed acquisitions. Management also updated investors on the progress of their growth strategy, and answered a range of questions from viewers.

The full video has been divided into chapters as below:
0:00:00 Beginning & Agenda
0:00:19 Highlights of the Financial Year (CEO, Andrew Shepherd)
0:04:00 Financial Results (CFO, Andrea Montague)
0:11:06 Update on strategy delivery
0:26:46 FY guidance & looking ahead
0:29:06 Questions & Answers

See video here:

[edmonda] 13/7/2023 06:51

FUM closed FY23 (30 Jun 23) on £16.9bn, 7.5% up y-o-y (30 Jun 22: £15.7bn) and 0.3% up over Q4 (31 Mar 23: £16.8bn). Q4’s net FUM flow of +£97m continues BM’s impressive run of positive net flows (now spanning nine consecutive quarters) during a period of difficult market conditions and investor nervousness. FY23 net flows totalled +£817m (FY22: +£785m). BM has flagged a healthy pipeline for FY24, although investor sentiment is still subdued.

Andrea Montague has been appointed CFO and Executive Director, effective 1 Aug 23, to replace Ben Thorpe, subject to regulatory approval. Andrea has an impressive executive and board track record in the long-term savings and asset management sector. She leaves Aviva where she was Group Chief Risk Officer, and prior to that, Group Chief Financial Controller.

BM has indicated it expects FY23 results to be in line with forecasts, although we see a slight change in how revenue is made up (FUM ending the year a little below our previous estimate and average revenue yield expected to be a little higher with the continued rise in interest rates). The slightly lower closing FY23 FUM level reduces our FY24 forecasts: revenue from £131.5m to £128.2m and underlying PBT from £34.1m to £31.2m. Our fundamental valuation reduces to 3,100p per share but is still 38% above the current share price.

An additional noteworthy point for investors is the marked uptick in the volume of shares being traded since late 2022, which suggests growing investor interest in BM (see page 2 of the note).

Link to note:

[1c3479z] 11/7/2023 10:48

shares edging up in a market edging down- is someone taking a stake in prep for a bid?

[earwacks] 12/6/2023 07:40

Sheperd ‘senior manager exits dont worry me’.Admits it looks bad. Yes it does. The top two execs seem to spend an awful lot of of time feathering their nests with options and ‘tax efficiency’ schemes of their personal holdings. Perhaps they could dedicate as much time to not loosing key staff and bettering the performance of the company ‘in the interests of their shareholders, not to mention their clients!

[maiken] 08/6/2023 13:49

Can you elaborate please Earwacks ? What caught your eye regarding financial run and star pupil ?

[earwacks] 08/6/2023 08:32

Looks like another financial run for the benefit of the directors rather than shareholders. See they lost their star pupil recently

[maiken] 27/4/2023 18:02

BRK one of Investors Chronicle tips of the week this week

[edmonda] 13/4/2023 06:44

"Impressive consistency in strength of net flows" (new note from Equity Development)

BM has recorded yet another quarter of positive net flows: +£373m in Q3 of FY23 (to 31 Mar 23), its eighth in succession. This is a hugely impressive achievement considering the last five of these quarters was a period characterised by market falls, economic uncertainty, and investor nervousness – an environment more typically associated with depressed flows. BM’s net flows have now been above peer group median levels since calendar Q4 of 2021.

Our fundamental valuation remains at 3150p per share, 77% above the current share price. We also flag that BM’s P/E ratio of 11.9x is 30% below a peer group median of 17.0, despite its organic growth rate being higher than most peers. We see potential for a re-rating.

See link with audio summary here:

[edmonda] 02/3/2023 10:51

"Forecasts up on positive outlook, dividend +8%"

New research report & audio summary here:

Brooks Macdonald (BM) recorded a solid H1-23 (to 31 Dec 22) with FUM up 4% to £16.2bn, from £15.7bn on 30 Jun 22. Net inflows totalled +£347m and investment performance +£212m (+1.4% compared to -0.3% of the benchmark MSCI PIMFA Private Investor Balanced Index).

A 7th consecutive quarter of positive net flows was recorded, with impressive resilience through the 2022 bear market, pointing to very strong fundamentals when it comes to attracting and retaining client assets. In calendar-2022, BM’s net inflow rate was one of the highest among a London-listed peer group of wealth managers and platforms.

We have upgraded our FY23 and FY24 FUM forecasts on a more positive net flow outlook than we originally assumed, and on a mark to market adjustment of FUM levels. We now forecast £17.4bn FUM at end-FY23 (previously £17.0bn). Our revenue forecast increases from £119.5m to £122.8m on the FUM upgrade, current yields being slightly higher than our original assumptions, and on contributions from acquisitions. Our underlying PBT forecast increases from £31.7m to £34.1m.

Our fundamental valuation increases to 3,150p per share, 57% above the current share price. We also flag that BM’s PER of 13.5 is 36% below a peer group median of 21.2, which doesn’t look justified.

[edmonda] 12/1/2023 07:47

Another solid quarter, guidance confirmed (link to new research note:

Brooks Macdonald (BM) continued to build momentum in Q2 of FY23 (to 31 Dec 22), with FUM increasing by 4.5% (+£0.7bn) over the quarter to £16.2bn (end of Q1: £15.5bn). BM chalked up its 7th consecutive quarter of positive net flows of £156m, an annualised rate of 4% of opening FUM. Investment performance contributed £546m to the FUM increase (3.5% of opening FUM, in line with the benchmark MSCI PIMFA Private Investor Balanced Index - capital only).

Management have confirmed that underlying profit and margin are running in line with expectations, and our forecasts remain unchanged, although our fundamental valuation ticks up to 3000p per share, which is 44% above the current share price, with the increase due to a reduction in the UK 10-year gilt yield (the risk-free rate used in our DCF valuation). We also highlight that BM’s PER of 14.0 is significantly below a peer group median of 17.3 which doesn’t look justified. We will revisit our forecasts & valuation when H1 results are released on 2 March 2023.

[kalai1] 16/9/2022 10:27

Brooks McDonald posted FY results for the year ended 30th June 2022 yesterday. Group Funds Under Management closed at £15.7 billion down 4.8% on FY21 as positive net flows were offset by the impact of declining markets on asset values. Net flows for the FY were up 4.8%, representing a £1.1 billion improvement on FY21. Group revenue was up 3.4% to £122.2 million, underlying profit margin was up by 2.3% to 28.2%, in line with the Group's commitment to deliver top quartile margin over the medium term. But investment performance across the range of services was down 9.6% for the year, driven by declining and volatile markets. FY23 underlying profitability is in line with current market expectations, the Group’s medium-term ambition is for net flows around 8-10% p.a. Valuation is average with forward PE ratio around 14.1x, PS ratio at 2.9x. Share price remains in a shallow 12 month correction and lacks momentum. BRK is another solid, small asset manager and well worth monitoring, but there is no rush to buy...

...from WealthOracle

hxxps://wealthoracle.co.uk/detailed-result-full/BRK/557

[edmonda] 31/8/2022 09:56

FY Results presentation - 20th September - sign up here!

Brooks Macdonald Group plc, the AIM-listed investment management group, will be conducting an online presentation for investors following the release of their Full Year results.

The event will take place at 12.00pm on Tuesday 20th September.

Andrew Shepherd, CEO and Ben Thorpe, CFO will be hosting the presentation and answering questions submitted by investors.

This is open to all existing and potential shareholders - you can sign up to register here:

[edmonda] 14/7/2022 07:03

Two themes jump out at us at the close of FY22 (to 30 Jun 22). First, in the first full FY of CEO Andrew Shepherd’s tenure it has been a year of strategic strengthening, characterised by a return to consistent net inflows, following the ‘restructuring’ years of FY20 and FY21, which suffered net outflows. Most impressive now are the net inflows in Q3 and Q4, periods of sharp market falls, which can coincide with net outflows for investment managers.

Second, in absolute terms, investment performance saw gains in Q1 and Q2 (+£227m & +£317m), and sharp declines in Q3 and Q4 (-£850m & -£1,271m) as markets fell.

Our fundamental value reduces from 3,200p per share to 2,900p (also impacted by a slight increase in the discount rate used in our DCF model due to the increase in the 10yr gilt yield). However, with the recent share price fall to 2,160p it stands at a discount to our fundamental value of 34%. With such a strong franchise, evidenced by consistent net inflows in turbulent markets, we think the medium to long term prospects of Brooks Macdonald remain very strong and see potential for a re-rating.