13th May 2014 07:35
LONDON (Alliance News) - Brewin Dolphin Holdings PLC Tuesday said it expects to take an "exceptional" pretax impairment charge of about GBP32.0 million in the second-half of the year after deciding against implementing the Figaro software system into its discretionary wealth management business.
In a statement, Brewin Dolphin said the charge will be a non-cash item and will have "no impact" on its regulatory capital position or adjusted pretax profit.
However, Brewin Dolphin said it is also negotiating to vary and settle the original contracts it signed in relation to the software. The contracts include payments of about GBP15.0 million before tax over the next decade, which, under the original contracts, would be payable following implementation of the software into the discretionary wealth management business.
Despite the charge, Brewin Dolphin said there will be no change to its existing target of achieving a 25% operating margin run rate by the end of 2016. Nor will there be any increment to the group's forecast capital expenditure for 2014 to 2016.
Brewin Dolphin said it expects its adjusted pretax profit margin for the first half of the year to exceed 20%, compared with 18.5% over its last full-year.
"The board believes the decision to cease the roll out of Figaro is in the best commercial interests of the group. Moreover, it remains confident that the 2016 operating margin target will be achieved through on-going business improvements," Brewin Dolphin said in a statement.
Brewin Dolphin has already implemented the first stage of the Figaro software into Stocktrade, its execution-only service, but Tuesday said the process has "uncovered" a number of issues with the "functionality and robustness" of the software.
The British wealth manager said the issues are taking "additional time and resource" to address.
The implementation of Figaro began in 2011 as part of an initiative to improve operational efficiency by streamlining business processes and help improve Brewin Dolphin's operating margin to 20% from 15%. Figaro is a product of JHC Systems Ltd.
"Following the Stocktrade implementation, the board does not believe that the roll out of Figaro into the discretionary wealth management business would be in shareholder and clients' best interests; furthermore it would not help drive future efficiency gains," Brewin Dolphin said in a statement.
"The board believes that existing software deployed in the wealth management business can be upgraded to current versions commercially available, and that with appropriate enhancements will better support the strategy of seeking further efficiencies. Further, the board believes this can be achieved without additional capital expenditure beyond that already budgeted and with lower risk to the group," Brewin Dolphin added.
Brewin Dolphin shares were Tuesday quoted at 319.00 pence, down 2.6%.
By Samuel Agini; [email protected]; @samuelagini
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