Expansion plan which Brooks no contradiction proves to be a winner

BROOKS Macdonald, the wealth manager which caused a storm when it poached a high-profile team from Adam & Co for its newly-opened Scottish office last year, has reported a 78 per cent surge in pre-tax profits, driven by its regional expansion.

The Mayfair-headquartered firm said operations such its Edinburgh office were behind the growth. It saw funds under management rise 57 per cent to 2.2 billion.

Chris Macdonald, chief executive, claimed the Aim-listed firm had seen an increase in clients from fund managers owned by the banks, helping Brooks Macdonald attract 600 million in new business in the 12 months to 30 June, pushing pre-tax profits up from 3.2m to 5.7m.

The firm has recommended a 64 per cent hike the final dividend from 5.5p to 9p.

As well as a strong response from its offices based outside of London, the wealth manager said it was helped by favourable market conditions which improved substantially as Britain moved out of recession.

Macdonald described his strategy for the next 6 to 12 months as "go, go growth" - including the company's Scottish office which so far has a headcount of eight.

He would not disclose what proportion of funds under management the Edinburgh operation accounts for but insisted it is "ahead of where we thought it would be".

Brooks Macdonald was among a number of London-based fund managers which took the brave decision to open shop in the already crowded Edinburgh market last year.

Its arrival in the city provoked a stir after it persuaded Adam & Co's former chief investment officer, Gareth Howlett, to join its ranks, bringing with him a team of three senior managers from the Royal Bank of Scotland-owned rival.

In June Brooks Macdonald made two further appointments, attracting Richard Allison from Cornelian Asset Managers and Scott Lothian from Adam Investment Management.

Other wealth managers to have recently launched an assault on the Scottish market include Ruffer and Cazenove Capital Management, which in December bought Thornhill, the private client business spun out of Martin Currie in 2003.

It is rumoured that Quilter is poised to open an Edinburgh office over the next few months.

Despite the stiff competition, Macdonald said the gamble was paying off as many clients have chosen to review how their finances are managed since the banking crisis.

The company has also been in expansionary mode south of the Border. In June it bought the Cheshire-based investment and property group Braemar, which marked its second acquisition in 14 months.Macdonald did not rule out further purchases "if the opportunity arises" although he insisted the company would not turn into an "acquisitions machine".

Collins Stewart analyst Michael O'Brien said the results were "above expectations".

"It is worth noting that these figures include the cost of the group's Edinburgh office opened in the year and without these profit before tax would have more than doubled," O'Brien said.

"As the group's regional footprint becomes more established and profitable, we believe that both the operational gearing and scalability of the group's business model will start to come to the fore."

Shares in Brooks Macdonald, which were admitted to Aim in 2005, closed up 1.4 per cent or 12.5p at 940p.