Profits have dropped at Brooks Macdonald despite a strong year of net inflows and rising funds under management, as tough market conditions and inflationary cost pressures bite.
Although FUM grew 7.5% to £16.8bn and the firm enjoyed positive net flows in every month of the year to 30 June 2023, contributing 5.2% of the boosted assets, underlying profit before tax took a 12.2% hit and fell to £30.3m, according to its final year results published today (14 September).
Both acting chair Richard Price and CEO Andrew Shepherd cited increased market volatility and "sticky inflation pressures" to explain the weaker profits, although were complimentary of the firm's investment performance of 2.3%, which beat the MSCI PIMFA Private Investor Balanced index's return of 1.6%.
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Revenue also saw a slight boost at the group, up 1.3% to £123.8m while dividend growth continued. The firm's proposed final dividend per share rose to 47 pence, up 4.4% on last year's figure.
CEO Shepherd noted that while there is a "healthy pipeline" for the firm headed into the next financial year, he believes client sentiment will remain "subdued" due to market conditions.
Costs increased substantially at the manager, with an extra £5.8m being added to the annual bill.
Staff costs increased by roughly £800,000, a minor bump taking the headcount cost to £56.1m, however non-staff costs rose 15.4% on the prior year.
When client relationship amortisation, platform, acquisition and integration costs and change in fair value are taken into account, profits slip further from an underlying figure of £30.3m to a statutory profit before tax of £22.2m, a 25% decrease on last year.
Despite this, Shepherd said he was "pleased to report a year of strategic progress and solid financial performance".
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"Despite market headwinds, we delivered 5.2% net flows and robust underlying profit margin," he added. "Although the economic climate continued to affect investor sentiment, we delivered consistent positive net flows, demonstrating the strength of both our proposition and our relationships with clients and advisers.
"As we look ahead, our focus remains on ensuring we are well positioned to support clients, advisers and our people. This underpins our ambition and the plans we have in place to take advantage of the long-term opportunity."
