Financial Statements
Strategic Report
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13. Intangible assets continued a. Goodwill
clients withdrawing funds to repay debt. This gave rise to impairment indicators in relation to the International CGU, which were recognised upon the acquisition of the Spearpoint business in 2012. Accordingly, an impairment review was carried out for this CGU, and based on a value-in-use calculation, the recoverable amount of the International CGU at 31 December 2023 did not support the carrying amount of the International CGU of £31,311,000. As a result, the International goodwill balance was impaired by £11,641,000, leaving a goodwill balance of £9,061,000 as at 31 December 2023. International Based on a value-in-use calculation as at 30 June 2024, the recoverable amount of the Brooks Macdonald International CGU at 30 June 2024 was £36,697,000 (FY23: £33,642,000), giving a surplus over the Brooks Macdonald International CGU carrying amount of £17,263,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 13% (FY23: 13%) has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald International. The key input in forecasting revenue is FUM, which is forecast to grow based on new business targets, attrition and estimated impact of market performance. FUM is multiplied by estimated fee yields for the business resulting in annual revenue growth between 4% and 6% annually over the five-year period. Expenditure growth is forecast to increase by between 3% and 4% annually over the five-year period, which includes consideration for reasonable allocated costs. The underlying methodology for allocating costs is reviewed by management each year when preparing the value-in-use calculations to ensure the methodology remains appropriate. The period covered is five years and the forecasts are based on management’s growth projections for the business based on its strategic objectives, taking into account historic performance and prevailing market and economic conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds and investment management industries in which the CGU operates. The Directors do not believe that any reasonably possible change would result in an impairment, including the outcome of the strategic review discussed in Note 36; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised. • An increase of the pre-tax discount rate of 10% (FY23: 2%), from 13% to 23%, would result in an impairment. • The perpetuity growth rate would need to reduce by 29% (FY23: 2%), from 2% to (27%), to result in an impairment. • The forecast pre-tax cash inflows would need to reduce by 44% (FY23: 11%) each year to result in an impairment.
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill in respect of these CGUs within the operating segments of the Group comprises:
2024 £’000
2023 £’000
Funds Braemar Group Limited (“Braemar”)
3,320
3,320
International Brooks Macdonald Asset Management (International) Limited (“Brooks Macdonald International”)
9,602
21,243
Cornelian Cornelian Asset Managers Group Limited (“Cornelian”)
16,111
16,111
Integrity Integrity Wealth (Holdings) Limited (“Integrity”)
3,945
3,945
Adroit Adroit Financial Planning Limited (“Adroit”)
8,541
8,541
Total goodwill
41,519
53,160
Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2024 by comparing the carrying amount of the CGUs to their expected recoverable amount, estimated on a value-in-use basis. The value in use of each CGU has been calculated using pre-tax discounted cash flow projections based on the most recent budgets and forecasts approved by the relevant subsidiary company boards of directors. The most recent budgets prepared are part of the detailed budget process for the year ending 30 June 2024, and then extrapolated over a longer period for the following four years, resulting in the budgets and forecasts covering a period of five years. Cash flows are then extrapolated beyond the five-year budget and forecast period using an expected long-term growth rate, with the long-term growth rate considered reasonable against the budgeted and forecast growth. During the six months ended 31 December 2023, the prevailing macroeconomic environment and market volatility seen during the reporting period had an impact on client sentiment and new business, whilst the higher interest rate environment resulted in higher outflows with
Brooks Macdonald Group plc Annual Report and Accounts 2024
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