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Brooks takes £2.5m hit on 'obsolete' tech as compliance costs climb

Brooks takes £2.5m hit on 'obsolete' tech as compliance costs climb

Brooks Macdonald has written down the value of its IT systems by £2.5 million following a review of the company’s infrastructure this summer, finding the adoption of a single platform had made a chunk of its proprietary tech ‘obsolete’.

Alongside a previously planned increase in the level of cash put aside in provision against long-running Spearpoint liabilities, and an amortization of client relationships, that cut the company’s statutory profit before tax 16%, from £8 million in 2017 to £6.7 million.

On an underlying basis pre-tax profits rose from £17 million to £18 million with earnings per share 12% higher at 117p, with revenue 14% higher at £101 million. The company upped its dividend 14.6p to a total 47p.

At the market open shares in Brooks Macdonald were 2.4% higher at £21.14p.

Profits were hit by a £4 million provision on risk management, half of which is expected to be recurring,

Chief executive Caroline Connellan (pictured), celebrating her first full-year period at the head of the company, said: ‘During the year, we have also invested to support future growth, driven a renewed focus on cost discipline and taken steps to ensure a strong pipeline of growth opportunities.

‘We have taken the first steps to achieve our medium-term goal of increasing margins through cost discipline, made progress in addressing the Channel Islands legacy matters and upgraded the group's functional capabilities, both through senior appointments and the investment in our risk and operational framework.’

Total underlying costs during the year rose 16% to a total £83.7 million. Alongside higher spending on GDPR and Mifid II compliance, staff expenditure was the largest contributor to the increase with company headcount rising from 450 to 482 over the year.

It additionally took on higher temporary staffing costs as the business ramped up systems development and IT expenditure.  

Connellan added:  ‘We are now moving to develop our operating model to make Brooks Macdonald easier to deal with for both clients and advisers, make it easier for our people to perform their roles efficiently and effectively, and deliver increased value from our growth.

‘We recognise that what we have achieved this year is only a first step and there is some way to go - but we have made a good start and we are confident of delivering the full potential inherent in the Brooks Macdonald business over the coming years.’

Total discretionary funds under management at the company rose 18.7% to £12.4 billion on net new client commitments of £1.3 billion. Investment performance added £600 million, equivalent to 5.7% of starting assets under management, ahead of the MSCI WMA Balanced index return of 4.2%.

Company chair Christopher Knight warned that macro jitters were beginning to weigh on client sentiment. ‘There is material uncertainty in the UK's macroeconomic outlook, especially given that the nature of the UK's future relationship with the EU remains unclear with only six months left before Brexit.

‘Further, global geopolitical risks, in particular the emerging risk of trade wars, are weighing on market sentiment, and we remain cautious in our external outlook.’

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