Hits: 6

16 April 2020

Brooks Macdonald – Trading Update

Share Price 1550p

Mkt Cap £250m

Conflict Disclosure: No Holding

 

  • Update Net outflows were 1.6% (£204m) in the quarter to March. The market decline of 14% (£1.8bn) was balnced by the acquisition of Cornelian bringing £1.18bn AUM resulting in 31 March AUM of £12.2m. Fees were lower in the quarter but were partly offset by higher transaction revenues.

 

  • Estimates Forecasts of £22.2m PBT are likely to be downgraded as no downgrade was done at the H1 results on 12 March.

 

  • Valuation PE 12.3X Yield 3.7% pre downgrades.

 

  • Conclusion Given the market noise about the headcount reductions the net outflows are surpisingly modest. This looks like an interesting recovery situation, but in current markets it could get a bit cheaper.

12 March 2020

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Brooks Macdonald– H1 Results

Share Price 1725p

Mkt Cap £281m

Conflict Disclosure: No Holding

  • Results With AUM up 12% over the 6 months to December revenue rose 8.1% to £55.8m. Underlying PBT was up 28.6% to £11.7m representing a 21% operating margin. EPS up 30% to 68.7p and DPS up 10%. Outlook is confident they will deliver growth ambitions, but short term uncertainty.
  • Estimates With market moves all forecasts are subjective currently. The consensus of £24.4m for Brooks looks high with 48% of this being delivered in H1 and 20% market falls.
  • Valuation On current estimates PE 12.5, yield 3.4%
  • Conclusion The headlines refer to investment in talent while there has been a headcount reduction of 50 people. Typically the AUM outflows will follow with a time lag.  It may be a little early but one for the watch list to buy on the outflows.

16 January 2020

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Brooks Macdonald – Trading Update 

Share Price 2200p

Mkt Cap £345m

Conflict Disclosure: No Holding

  • Update AUM was down 1.5% in the quarter to December and flat over 6 months at £13.1bn. International increased AUM by 1.8% while UK discretionary grew by 1.3%. Termination of a Grosvenor Wealth account reduced AUM by £244m. Revenue and profits are said to be in line with expectations despite this.  The outlook says expectations remain unchanged which are cautious over short term flows but optimistic over the medium term.  
  • Estimates £23.9m PBT is expected to June 2019. Which is 137p EPS.  
  • Valuation EV/AUM 2.3%. PE 16X Yield 2.7%
  • Conclusion The low valuation relative to AUM underlines the low profitability.  This therefore is a play on margin improvement rather than growth.  With lower flows than peers it may be alittle early but perhaps in 6 months time this could be a good recovery situation.

22 November 2019

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Brooks Macdonald – Acquisition and Placing

Share Price 1825p

Mkt Cap £254m

Conflict Disclosure: No Holding

  • Acquisition of Cornelian Asset Management in Edinburgh for up to £39m of which £30m will be financed by placing shares. AUM is £1.4bn, so the price equates to 2.8% of AUM. Revenue yield on AUM is 73bps and EBITDA margins 33% so the price equates to 3.8X revenue and 11.4X EBITDA. Cost synergies are expected to be £3.75m which will more than double the profits from Cornelian.
  • Estimates On a post synergy PE of 7X the EPS accretion is 9% despite issuing shares to fund the acquisition.
  • Valuation PER 13.1X Yield 3.2% before the 9% earnings enhancement.
  • Conclusion  Coming out of a period of restructuring and consolidation it is good to see Brooks back on the front foot.  The share could do well over the next couple of years and are cheap, as they always are after a period of restructuring.

24 October 2019

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Brooks Macdonald – Acquisition and Placing

Share Price 1825p

Mkt Cap £254m

Conflict Disclosure: No Holding

  • Acquisition of Cornelian Asset Management in Edinburgh for up to £39m of which £30m will be financed by placing shares. AUM is £1.4bn, so the price equates to 2.8% of AUM. Revenue yield on AUM is 73bps and EBITDA margins 33% so the price equates to 3.8X revenue and 11.4X EBITDA. Cost synergies are expected to be £3.75m which will more than double the profits from Cornelian.
  • Estimates On a post synergy PE of 7X the EPS accretion is 9% despite issuing shares to fund the acquisition.
  • Valuation PER 13.1X Yield 3.2% before the 9% earnings enhancement.
  • Conclusion  Coming out of a period of restructuring and consolidation it is good to see Brooks back on the front foot.  The share could do well over the next couple of years and are cheap, as they always are after a period of restructuring.

12 September 2019

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Brooks Macdonald – FY Results  

Share Price 1960p

Mkt Cap £273m

Conflict Disclosure: No Holding

  • Results Revenue is up 7.3% to £107m off the back of discretionary AUM up 6.8% to £13.2bn. Underlying PBT up 11.8% to £21m as the operating margin reached 19.6%. There is a £4.8m goodwill write down, a £3.3m restructuring charge, and a client relationship impairment charge. The tax rate increased resulting in EPS up 2.2% to 125.9p. Cash is £35m and the outlook statement refers to improving margins and acquisitions.
  • Estimates Revenue is in line with expectations but PBT looks to be usefully ahead of the £19.1m consensus.  The £22.5m expected for the current year could be a little light.
  • Valuation PER is 16.7X and yield 2.7%. Brewin trades at 15.9X and Rathbone at 17.7X.
  • Conclusion it is two years the new CEO has been in place over which time the shares are down 10%. There have been a significant number of issues to deal with around the Spearpoint business as well as streamlining the operations and eliminating overlap. I get the sense this is drawing to a close as the company is now looking at acquisitions again while there is margin upside potential. With a low (ish) valuation this looks like a good time in the companies lifecycle.

24 July 2019

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Brooks Macdonald – Trading Update 

Share Price 1985p

Mkt Cap £276m

Conflict Disclosure: No Holding

  • Update Net inflows over the quarter were almost flat at £2m but market tailwinds lifted AUM 3.5% to £13.2bn. Flows were respectable in the UK but International continues to suffer outflows due to team departures. Legacy matters, again from the international business, have reached a settlement which was previously provided for. Outlook refers to a challenging environment
  • Numbers The statement says revenue growth is expected to be broadly in line with AUM growth.  AUM is up 6.8%over the year and expectations are for a 4.6% revenue increase.  .
  • Valuation PER 17.1. Yield 2.6%
  • Conclusion It looks like the restructuring is drawing to a close which makes it interesting but the challenging outlook isn’t encouraging. On 17X PER this still looks a bit high.

14 March 2019

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Brooks Macdonald – H1 Results 

Share Price 1587p

Mkt Cap £220m

  • Results Revenue up 7.7% to £52m over the half year with modestlt imp[roved operating margin to 17.3% gave a 9% increase in underlying PBT of £9m although statutory PBT was £0.5m and cash was lower at £24.8m. Interim dividend up 12% to 19p. Outlook is well positioned for the future. The cash reduction is partly a result of the group continuing to pay deferred consideration for acquisitions while client relationships capitalised are written down by £2.3m which is adjusted out of underlying profits
  • Estimates Full year estimates assume 5% revenue growth and c £20m PBT which may be possible if markets hold.
  • Valuation PER 11.4X and yield 4%
  • Conclusion I am finding this company interesting in terms of its capex lifecycle. Having undergone a management change and then taking significant exceptionals for the international business and investing in IT the company has undergone a period of investment. It continues to suffer from disruption in the international business while paying out deferred consideration and writing down capitalised contracts. Once this is out of the way the future could look rather good.

24 January 2019

Brooks Macdonald – Trading Update 

Share Price 1730p

Mkt Cap £241m

  • Update AUM was down 7.2% over the quarter to £11.9bn. This was market driven. Net inflows were o.6% despite the loss of a client team in the international division. Profits for the year to June 19 are said to be inline with management expectations and the statement talks of cost discipline in this more challenging environment. The margin improvement plan has been implemented which will deliver one third of the £4m annualised benefit in the current year. New services are being launched in responsible investment and court of protection work and the pipeline of new business is said to be encouraging.
  • Estimates Unlikely to change
  • Valuation EV/AUM is a lowly 1.8% similar to Brewin. PER is 12.3X and yield 3.6%
  • Conclusion Cheap share going through significant change. If the new services can regain Brooks ability to harvest assets faster than peers there could be a significant re rating. But Nutmeg it seems performs better for shareholders