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Hargreave halves Brooks stake as it launches cost cuts

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Hargreave halves Brooks stake as it launches cost cuts

Citywire AAA-rated Giles Hargreave (pictured) and AA-rated co-manager Eustace Santa Barbara have near halved their stake in Brooks Macdonald as the business embarks on a cost-cutting drive.

The Canaccord small cap duo, which hold the stock largely via the £1.3 billion Marlborough Special Situations fund, slashed their investment in the company from 8.8% of shares to 4.6%, worth £10.2 million at a share price of £15.40.

Canaccord had not responded to a request for comment at the time of publication. Having slumped 40% from a record £25.82 in May 2017, shares in the business are just off a three-year low of £13.67, which they briefly touched last month.

The managers had begun to trim their exposure to the company in the middle of last year as the share price teetered at around £20, having held it for at least six years prior. The size of the sale is a dramatic escalation of their exit, however.

The business last year announced a ‘renewed focus on cost discipline’ as profits slid 16% on provision against a long-term Spearpoint liability and a writedown on ‘obsolete’ tech.

It followed that up last week with news that it would cut 50 tech and administration jobs as it centralised some functions.

In a statement, chief executive Caroline Connellan said: ‘As part of the next phase of our strategy, as outlined at our annual results, we are focussed on driving medium term margin improvement as well as making Brooks Macdonald easier to deal with for both clients and advisers. 

‘The changes we are announcing will make us more responsive to changing client and adviser needs, and help deliver greater value from our future growth.

‘We regret the need to make redundancies and those people who leave the business will do so with both our thanks for their contribution and our best wishes.’

The long equity market boom carried Brooks, as well as its competitors, to a pitch perfect valuation at close to 20 times earnings. That has begun to deflate, and a premium to the market that carried Brooks as much as 50% higher than the peer average P/E has now evaporated.

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Eustace Santa Barbara
Eustace Santa Barbara
28/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 32.32%
Giles Hargreave
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13/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 44.95%
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