Financial review
Amortisation of client relationship contracts (£6.0 million) These intangible assets are created in the course of acquiring funds under management and financial advice portfolios, which are amortised over their useful life, which have been assessed to range between 6 and 20 years. This amortisation charge has been excluded from the underlying profit since it is a significant non-cash item. (Refer to Note 13 to the Consolidated financial statements for more details).
Acquisition and integration-related costs (£0.4 million) These represent the share-based payment integration charge for share options awarded to acquired employees as part of acquisitions in the prior period. In the prior year, costs were incurred in relation to the acquisitions of Integrity Wealth Solutions on 31 October 2022 and Adroit Financial Planning on 15 December 2022, in addition to the share-based payment integration charges. FY23 - Dual running operating platform costs (£1.6 million) The Group is in a partnership agreement with SS&C to transform our adviser and client service including the onboarding process and digital experience, as well as enhancing our operating platform. As part of the transition process in the prior year, the Group incurred net incremental costs in running two operating platforms concurrently. The dual running costs were excluded from underlying profit in view of their non-recurring nature. FY23 - Changes in fair value and finance cost of deferred contingent consideration (£0.2 million) This comprises the associated net finance costs arising on deferred contingent consideration payments from acquisitions carried out by the Group, together with their fair value measurements, where applicable. (Refer to Note 24 of the Consolidated financial statements for more details).
Table 7 – Reconciliation between underlying profit and statutory profit before tax
FY24 £m
FY23 £m
Underlying profit before tax
34.1
30.3
(11.6) (6.0) (3.0) (1.5) (0.4)
Goodwill impairment
–
Amortisation of client relationships
(5.7)
Organisational restructure International strategic review
– –
Acquisition and integration-related costs Dual running operating platform costs
(0.6) (1.6)
–
Changes in fair value and finance cost of deferred contingent consideration
Organisational restructure (£3.0 million)
–
(0.2) (8.1)
Total underlying adjustments
(22.5)
The Group carried out an organisational restructure in December 2023 to ensure it is set up for future success. The Group identified opportunities to streamline and remove duplication from core processes, resulting in redundancy and associated third- party consultancy costs. These have been excluded from underlying earnings in view of their one-off nature.
Statutory profit before tax
11.6
22.2
Reconciliation between underlying and statutory profits Underlying profit before tax is considered by the Board to be an appropriate reflection of the Group’s performance compared to the statutory results as it excludes income and expense categories, which are deemed to be of a non-recurring nature or a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage. Underlying profit is deemed to be an alternative performance measure (“APM”); (refer to the Non-IFRS financial information section on page 172 for a glossary of the Group’s APMs, their definitions, and the criteria for how underlying adjustments are considered). A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2024 with comparatives is shown in Table 7.
Goodwill impairment (£11.6 million) Goodwill is reviewed for impairment indicators at each reporting period, and if indicators are present, an impairment test is carried out based on the carrying value of the asset compared to its expected recoverable amount. The review of our International business at 31 December 2023 indicated that the estimated recoverable amount arising from future cash flows, was less than the carrying value of the goodwill held on the Group’s Consolidated statement of financial position that was recognised upon the acquisition of the business in 2012. The goodwill impairment charge has been excluded from underlying profit in view of its non-recurring nature, and the fact that it does not impact cash or regulatory capital. The annual impairment review at 30 June 2024 was also carried out and the remaining goodwill balance was fully supported. (Refer to Note 13 to the Consolidated financial statements for more details).
International strategic review (£1.5 million)
As announced as part of the Group’s half-year results in March 2024, the Group is carrying out a strategic review of the International business as a result of its performance falling behind plan. The costs incurred relate to third-party consultancy spend to assist with the review and have been excluded from underlying earnings in view of their non- recurring nature.
36 Brooks Macdonald Group plc Annual Report and Accounts 2024
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