7th Dec 2011 07:00
7 December 2011
Group Preliminary Results
For the 53 weeks ended 30 September 2011
Highlights
(from continuing operations)
● | Total managed funds £24.0 billion at 30 September 2011 (26 September 2010: £23.2 billion).
| |
● | Discretionary funds £15.6 billion at 30 September 2011 (26 September 2010: £14.0 billion).
| |
● | Total income £264.0 million (26 September 2010: £240.0 million) an increase of 10%.
| |
● | Profit before tax £21.9 million (26 September 2010: £30.0 million) a 27% decrease. | |
● | Adjusted* profit before tax £39.6 million (26 September 2010: £39.2 million) a 1% increase.
| |
● | Earnings per share: | |
- | Basic earnings per share 6.6p (26 September 2010: 9.2p) a decrease of 28%. | |
- | Diluted earnings per share 6.3p (26 September 2010: 9.1p) a decrease of 31%.
| |
● | Adjusted* earnings per share: | |
- | Basic earnings per share 12.4p (26 September 2010: 12.2p) an increase of 1.6%. | |
- | Diluted earnings per share 11.7p (26 September 2010: 12.0p) an decrease of 2.5%. | |
* these figures have been adjusted to exclude redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships.
Declaration of Final Dividend
The Board is proposing a final dividend of 3.55p, to be approved at the 2012 AGM and payable on 10 April 2012 to shareholders on the register at close of business on 16 March 2012, with an ex-dividend date of 14 March 2012.
Jamie Matheson, Executive Chairman said:
"I am pleased to report that your Company has delivered a resilient performance…. your Board looks to the future with cautious optimism."
For further information, please contact:
Brewin Dolphin Holdings PLC | Hudson Sandler |
Jamie Matheson, Executive Chairman | Andrew Hayes / Wendy Baker |
Tel: 020 7248 4400 | Tel: 020 7796 4133 |
Business Review: Executive Chairman's Statement
I am pleased to report that your Company has delivered a resilient performance, despite turbulence across the financial markets worldwide and the effect on the UK of the continuing difficulties in many countries. Combined with our clear focus on the individual requirements of our clients the scale of our operation underpins Brewin Dolphin's ability to retain and attract clients.
With 41 offices throughout the UK, the Channel Islands and Ireland, our business has made good progress. The total income for the year from continuing operations is up by 10% from £240.0 million to £264.0 million and pre tax profit from continuing operations (excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships) was £39.6 million, a 1% increase on the previous year.
Funds under Management at the year end were £24 billion, 3.4% higher than last year. This increase is wholly attributable to the increase in funds under discretionary management. During the same period the FTSE 100 fell by 8.4% and the APCIMS Private Investor Series Balanced Portfolio fell by 3.8%.
Investment Management
There have been significant developments in our office network this year.
One is the acquisition of Tilman Brewin Dolphin Limited (formerly Tilman Asset Management Limited) in Dublin. We have long believed that there is a strong demand in the Republic of Ireland for the services that Brewin Dolphin offers. We have known Tilman for many years and we have every confidence that it will prove to be an important addition. Tilman Brewin Dolphin manages €0.9 billion funds on behalf of clients and its style and modus operandi fit well with our ethos and approach.
Another development is the imminent opening of an important new office in Bristol. Bristol is a significant city where we were not represented. This closes a noticeable gap in our national coverage.
We now have a network that is of sufficient size to give us good coverage throughout the UK and we continue to attract new teams in a number of locations, including Glasgow, Leeds and London this year.
We have also doubled our Charity team in London and have risen to 9th place in the top 50 Charity Managers survey 2011 by the Charity Finance Magazine.
Dividend
The Board is proposing a final dividend of 3.55p per share to be approved at the AGM in February 2012 and paid on 10 April 2012. This will bring the total dividend for the period to 7.1p in line with the dividend paid last year.
Regulation
This year we were required to pay a dramatically higher Financial Services Compensation Scheme levy in excess of £6 million (2010: £0.6 million). This related largely to the failure of Keydata. While clearly a charge of this nature is not something that any company would relish, or indeed anticipate, it is important that investors are provided with appropriate redress when the industry has clearly failed them. However, it is important to note that this is only part of the ongoing and increasing cost of regulation. Much work is being done in the United Kingdom and Europe regarding regulatory reform and Brewin Dolphin is fully engaged in the process. We hope that the eventual outcome of a number of important Parliamentary committee hearings and industry inquiries will lead to more efficient and suitable regulation for private investors and greater confidence in the industry as a whole.
Board Changes
I am pleased to announce some changes of responsibility within your Board. Henry Algeo has been appointed Chief Operating Officer and has responsibility for Business Support; Information, Communication and Technology; Facilities and Change Management. Henry brings much knowledge and experience to this role in both the operational and client facing sides of our industry. Ben Speke has taken responsibility for Human Resources to add to his Training & Competence and Health & Safety responsibilities. The Board has great confidence in both Henry and Ben and expects that they will bring many improvements to these vital areas of the business.
It has already been announced that our Deputy Chairman, Nick Hood, will retire from the Board at the forthcoming AGM. Nick has been Deputy Chairman since the summer of 2005, having first joined the Brewin Dolphin Board in 2000. He has been a member of the Audit Committee, the Remuneration Committee and the Nomination Committee, chairing the latter two as well as being Senior Independent Director. During his time on the Board he has been unstinting in his efforts and most generous with his time, and he has consistently provided very welcome advice. I am pleased to inform you that your Board has decided to ask Simon Miller to take on the role of Deputy Chairman and Senior Independent Director with effect from the end of our AGM. The search is well underway for two new Non-Executive Directors.
The process has also begun to search for a candidate to take on the role of Finance Director ahead of the anticipated retirement of Robin Bayford. Robin will be a difficult man to replace. He has been Finance Director since the Company floated in 1994 and his contribution to the Company for over 25 years is incalculable. A final date for Robin's departure is yet to be established and shareholders will be made aware of this in due course.
Strategy
Our focus on cost control to achieve efficiencies is undiminished. During the year we undertook a major strategic review of our investment management activities. As a result of this we are concentrating on the dual targets of reinforcing for the long term our continuing high standard of service to clients, and at the same time re-engineering our processes to improve the return to shareholders. It will take three years to achieve maximum benefits for shareholders, by which time we intend to have increased our operating margin to over 20%. Six months into the project, we are on time and on budget. These strategic initiatives will be delivered without increasing our capital expenditure run rate of recent years, and a much fitter and more responsive Brewin Dolphin will emerge. This will enable us to seize the increasing opportunities in our sector.
Last year, we announced our decision to focus on our core investment management business and are progressing with the disposal of our Corporate Advisory & Broking division to N+1. Disposing of a division rather than a clearly identifiable legal entity is inevitably a lengthy legal process and I would like to record my appreciation for the hard work and patience of all those involved.
Outlook
At the time of writing stock market sentiment remains fractious with the euro zone debt crisis and the possibility of another recession causing concern. However it is your Board's belief that long-term equity investments will continue to have an important role in the wealth management market.
The work undertaken as a result of our strategic review will improve the service to clients and the return to shareholders. With this in mind, your Board looks to the future with cautious optimism.
Jamie Matheson
6 December 2011
Business Review: Investment Management
David McCorkell - Executive Director - Head of Investment Management
Investment Management has performed well in what has been a volatile year for global financial markets. Our performance has been supported by our position as one of the UK's largest independent private client portfolio managers, with a network of over 40 offices and since August 2011, one in the Republic of Ireland.
Investment Management has seen its total income grow by 10% to £264.0 million in 2011 and operating profits excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships rose by 0.7% to £39.1 million.
This is analysed as follows:
2011 | 2010 | ||
£'000 | £'000 | ||
Total income | 264,013 | 240,012 | 10.0% |
Salaries | (90,676) | (80,786) | 12.2% |
Other operating costs | (98,409) | (87,326) | 12.7% |
Profit before profit share | 74,928 | 71,900 | 4.2% |
Profit share | (35,780) | (33,031) | 8.3% |
Operating profit * | 39,148 | 38,869 | 0.7% |
* excluding redundancy costs, additional FSCS Levy, contract renewal payments,
acquisition of subsidiary costs and amortisation of client relationships
Income comprises:
2011 | 2010 | |
£'000 | £'000 | |
Fee, interest and other recurring income | 160,652 | 138,087 |
Commission | 103,361 | 101,925 |
Total income | 264,013 | 240,012 |
The split of income and profits between Discretionary and Advisory portfolio management:
Total Income | Operating Profit | Total Income | Operating Profit | |
2011 | 2011 | 2010 | 2010 | |
£ million | £ million | £ million | £ million | |
Discretionary Portfolio Management | 180.5 | 26.8 | 157.2 | 25.5 |
Advisory Portfolio Management | 83.5 | 12.3 | 82.8 | 13.4 |
264.0 | 39.1 | 240.0 | 38.9 |
Fee, interest and other recurring income has increased by 16.3% (2010: 24%) to 61% of total revenue (2010: 57%) whilst commission rose by 1.4% (2010:10%). The trend towards Discretionary management in recent years has continued with the level of recurring income increasing.
Funds under Management (FUM)
Advisory funds | Discretionary funds | Total managed funds | |
£ billion | £ billion | £ billion | |
Value of funds at 26 September 2010 | 9.2 | 14.0 | 23.2 |
Inflows | 0.3 | 1.6 | 1.9 |
Acquired funds* | 0.2 | 0.6 | 0.8 |
Outflows | (0.6) | (0.3) | (0.9) |
Transfers | - | - | - |
Market movement | (0.7) | (0.3) | (1.0) |
Value of funds at 30 September 2011 | 8.4 | 15.6 | 24.0 |
* Tilman Brewin Dolphin Limited | |||
% change in funds year on year | -8.7% | 11.4% | 3.4% |
Excluding the acquisition of Tilman Brewin Dolphin Limited (formerly Tilman Asset Management Limited), there was an inflow of new FUM of £1.9 billion of which 84% was under discretionary mandates; discretionary funds under management have grown by 10.9% above the APCIMS Private Investor Balanced Portfolio Index and the growth in value of total funds under management has exceeded the APCIMS Private Investor Balanced Portfolio Index by 3.8%.
During the period, the FTSE100 Share Index and the APCIMS Private Investor Balanced Portfolio Index fell by 8.4% and 3.8% respectively.
The Business
During the year, five new Investment Management teams have been added to the Group, including a new Charities team in London which will be followed by further specialist charity investment managers before the end of 2011. Our enhanced charities department is now well placed to provide both the investment management and added value services increasingly required by charities, many of whom themselves are under considerable pressure in the current climate. This business is expected to develop further following this expansion.
The offices in Marlborough, Manchester, Cardiff and Leicester have moved to bigger and more suitable premises, our Keswick office has relocated to Penrith and we will be opening a branch in Bristol. The office in Llandudno has now closed. The Group has opened an office in Dublin following the acquisition of Tilman Brewin Dolphin Limited.
Currently there are a total of 643 FSA Approved Persons of which 531 are FSA Registered CF30 Client Executives, Investment Managers and Financial Planners around the country. The business could not function without their efforts and those of their support staff and I thank them all for their dedication to their clients during what has not been an easy year.
In my last report I mentioned the Retail Distribution Review (RDR) and I am confident the remaining client executives who have not yet completed the required professional qualifications will have achieved them by the end of 2012. RDR will bring fundamental changes for most of our industry and alter the way all advisers to private investors manage their businesses. We believe these changes will bring opportunities to Brewin Dolphin.
Early in the year, an independent survey of our clients was commissioned. We were very pleased to achieve an overall satisfaction level of 83% and to learn that 76% of our clients are likely to recommend us to others. Building on the strength of these findings, we instigated the major strategic review that we announced at the time of our interim report. This project will mean considerable change for our Investment Management business and enable Brewin Dolphin to provide a more efficient service to more clients in the future.
On 1st October 2011, a new national charging structure for all new Discretionary and Advisory Managed clients was introduced. During the 2011/12 financial year, existing clients will transfer to these new rates. As part of this re pricing policy, trail commission will no longer be accepted from unit trust providers and will be switching retail units to non trail paying units in the coming months. The new structure will be more transparent and efficient and above all, fair to all our clients.
The systems used by our Investment Managers will also be changed over the next two years. Investment Managers will be provided with up to date technology which will enable them to manage client portfolios in a more efficient way and to provide an enhanced reporting service to all our clients. This also presents an opportunity to review the systems structure in our business support areas, which will allow the creation of more efficient processes.
Financial Planning, by client demand, has become an important part of Brewin's business and the number of Financial Planners around the Group will be expanded, so that all offices will provide this service in due course.
The Business Development team has had an excellent year. The team introduces Brewin Dolphin services to Independent Financial Advisers (IFAs) and other professional intermediaries around the UK. The team has introduced £482 million of new business in the year, an increase of 27% on last year; increasing demand for these services in the run up to RDR is expected.
Building brand awareness through targeted advertising and sponsorship of national and local events close to many of Brewin's offices has continued throughout the year. Highlights have included a Show Garden at the Chelsea Flower Show in aid of the British Heart Foundation, and supporting the national tour of Zulu War Talks for Help for Heroes. This has resulted in a steady flow of new business leads. Next year Brewin's will be celebrating its 250th Anniversary and marketing activities and our sponsorship of charitable events around the country will be increased as part of these celebrations.
Our Investment Managers have provided an excellent service to their clients during the year and we are determined that we will continue to provide bespoke investment management in an ever changing regulatory environment.
Extracts from Business Review: Finance
Results for 2011 Financial Year
The performance of continuing operations in the period is set out below (see note 9 for discontinued operations):
2011 | 2010 | % Change | |
Average indices for the year | |||
FTSE 100 | 5,764 | 5,319 | 8.4% |
FTSE APCIMS Private Investor Series Balanced Portfolio | 2,930 | 2,739 | 7.0% |
£'000 | £'000 | ||
Total income | 264,013 | 240,012 | 10.0% |
Salaries | (90,676) | (80,786) | 12.2% |
Other operating costs | (98,409) | (87,326) | 12.7% |
Profit before profit share¥ | 74,928 | 71,900 | 4.2% |
Profit share | (35,780) | (33,031) | 8.3% |
Operating profit ¥ | 39,148 | 38,869 | 0.7% |
Net finance income and other gains and losses | 494 | 345 | 43.2% |
Profit before tax¥ | 39,642 | 39,214 | 1.1% |
Redundancy costs | (1,008) | (135) | |
Additional FSCS Levy | (6,058) | (595) | |
Acquisition of subsidiary costs | (228) | - | |
Contract renewal payments | - | (2,090) | |
Amortisation of client relationships | (10,486) | (6,349) | |
Profit before tax | 21,862 | 30,045 | -27.2% |
Taxation | (6,884) | (9,447) | |
Profit after tax | 14,978 | 20,598 | |
Interim and proposed final dividend for the year | (16,596) | (16,239) | |
(1,618) | 4,359 | ||
Earnings per share | |||
Basic earning per share | 6.6p | 9.2p | -28.3% |
Diluted earnings per share | 6.3p | 9.1p | -30.8% |
Earnings per share ¥ | |||
Basic earning per share | 12.4p | 12.2p | 1.6% |
Diluted earnings per share | 11.7p | 12.0p | -2.5% |
¥ these figures have been adjusted to exclude redundancy costs, additional FSCS Levy,
contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships.
Pension Fund
The actuarial gain on the pension fund this year was £2.8m (2010: loss £1.9m). Under IAS19, large annual fluctuations will occur. The Government passed legislation during the year to change the statutory inflation measure for pensions from Retail Price Index (RPI) to Consumer Prices Index (CPI). The change in the inflation measure has led to a reduction in defined benefit obligation of £1.3m out of the £2.8m. The Group has agreed to make additional pension contributions of £3 million per annum with the aim of paying the deficit off over the next 7 years.
Cash Flow and Capital Expenditure
2011 saw a net cash outflow of £1.8m (2010: inflow £21.9m) after paying the £6.1m (2010 £0.6m) additional FSCS levy. There was a £32.9m (2010: £45.1m) inflow of funds from operating activities (a figure calculated net of the FSCS levy). £7.9m (2010: £8.3m) of cash was spent on acquiring teams of Investment Managers and their client relationships, and £8.3m (2010: £13.6m) on computer software and other, mainly computer related, fixed assets.
The purchase of Tilman Asset Management Limited for 100% share consideration resulted in a cash injection to the Group of £5.8m. While purchase of the Group's shares for both the Deferred Profit Share Scheme and Share Incentive Plan resulted in an outflow of cash of £10.6m (2010: £0.1m), against this the issue of shares in the year led to a cash inflow of £2.4m (2010: £14.6m)
Dividends paid in the period came to £16.3m (2010: £16.0m).
Capital Structure, Treasury Policy, Liquidity and Capital Requirement
At 30 September 2011 the Group had net assets of £154.8m (2010: £141.6m). Net assets excluding intangible assets and shares to be issued of £68m (2010: £65m) broadly represent the Group's capital for regulatory purposes. These net assets were largely represented by net cash and cash equivalents of £85m (2010: £87m), including £21m (2010: £25m) of client settlement money. The Group, has an agreed overdraft facility of £15m (2010: £15m). At the period end the Group had a surplus of net assets for regulatory capital adequacy purposes of £24.1m (2010: £24.3m).
Our policy is to hold 90% of our clients' and Group's money only at major UK clearers. Our client money is segregated under client money rules.
Client stock is also ring fenced in our nominee companies. Stock is settled via the Crest System which is owned by Euroclear a highly rated bank, and, in the case of foreign stock, the Bank of New York.
Robin Bayford
Finance Director
6 December 2011
Consolidated Income Statement
53 week period ended 30 September 2011
53 weeks to 30 September 2011 | 52 weeks to 26 September 2010 | ||
Note | £'000 | £'000 | |
Continuing operations | |||
Revenue | 248,375 | 224,013 | |
Other operating income | 15,638 | 15,999 | |
Total income | 1 & 2 | 264,013 | 240,012 |
Staff costs | (126,456) | (115,907) | |
Redundancy costs | (1,008) | (135) | |
Additional FSCS Levy | (6,058) | (595) | |
Acquisition of subsidiary costs | (228) | - | |
Amortisation of intangible assets - client relationships | (10,486) | (6,349) | |
Other operating costs | (98,409) | (87,326) | |
Operating expenses | (242,645) | (210,312) | |
Operating profit | 2 | 21,368 | 29,700 |
Finance income | 3 | 1,253 | 1,293 |
Other gains and losses | 4 | (27) | (495) |
Finance costs | 3 | (732) | (453) |
Profit before tax | 5 | 21,862 | 30,045 |
Tax | (6,884) | (9,447) | |
Profit for the period from continuing operations | 14,978 | 20,598 | |
Discontinued Operations | |||
(Loss)/profit for the period from discontinued operations | 9 | (877) | 955 |
Profit for the period | 14,101 | 21,553 | |
Attributable to: | |||
Equity shareholders of the parent | 14,101 | 21,553 | |
14,101 | 21,553 | ||
Earnings per share | |||
From continuing operations | |||
Basic | 7 | 6.6p | 9.2p |
Diluted | 7 | 6.3p | 9.1p |
From continuing and discontinued operations | |||
Basic | 7 | 6.2p | 9.7p |
Diluted | 7 | 5.9p | 9.5p |
Consolidated Statement of Comprehensive Income
53 week period ended 30 September 2011
53 weeks to 30 September 2011 | 52 weeks to 26 September 2010 | ||
£'000 | £'000 | ||
Profit for the period | 14,101 | 21,553 | |
Loss on revaluation of available-for-sale investments | - | (4,000) | |
Deferred tax credit on revaluation of available-for-sale investments | 56 | 1,177 | |
Exchanges differences on translation of foreign operations | (83) | - | |
Actuarial profit/(loss) on defined benefit pension scheme | 2,766 | (1,878) | |
Deferred tax (charge)/credit on actuarial profit/(loss) on defined benefit pension scheme | (719) | 507 | |
Other comprehensive income/(expense) for the period | 2,020 | (4,194) | |
Total comprehensive income for the period | 16,121 | 17,359 | |
Attributable to: | |||
Equity shareholders of the parent | 16,121 | 17,359 | |
16,121 | 17,359 | ||
Consolidated Balance Sheet
As at 30 September 2011
As at 30 September 2011 | As at 26 September 2010 | |
£'000 | £'000 | |
ASSETS | ||
Non-current assets | ||
Intangible assets | 115,805 | 91,114 |
Property, plant and equipment | 15,869 | 19,384 |
Available-for-sale investments | 6,087 | 6,114 |
Other receivables | 2,377 | 2,306 |
Deferred tax asset | 559 | 1,097 |
Total non-current assets | 140,697 | 120,015 |
Current assets | ||
Trading investments | 744 | 632 |
Trade and other receivables | 242,492 | 331,423 |
Cash and cash equivalents | 85,702 | 87,921 |
Total currents assets | 328,938 | 419,976 |
Total assets | 469,635 | 539,991 |
LIABILITIES | ||
Current liabilities | ||
Bank overdrafts | 672 | 1,046 |
Trade and other payables | 267,819 | 359,086 |
Current tax liabilities | 1,390 | 4,433 |
Provisions | 5,931 | 5,420 |
Shares to be issued including premium | 6,541 | 438 |
Total current liabilities | 282,353 | 370,423 |
Net current assets | 46,585 | 49,553 |
Non-current liabilities | ||
Retirement benefit obligation | 7,101 | 12,498 |
Deferred purchase consideration | 2,556 | 1,749 |
Provisions | - | 44 |
Shares to be issued including premium | 22,840 | 13,661 |
Total non-current liabilities | 32,497 | 27,952 |
Total liabilities | 314,850 | 398,375 |
Net assets | 154,785 | 141,616 |
EQUITY | ||
Called up share capital | 2,405 | 2,270 |
Share premium account | 116,028 | 113,612 |
Own shares | (10,686) | (101) |
Revaluation reserve | 4,118 | 4,062 |
Merger reserve | 22,950 | 4,562 |
Profit and loss account | 19,970 | 17,211 |
Equity attributable to equity holders of the parent | 154,785 | 141,616 |
Consolidated Statement of Changes in Equity
53 week period ended 30 September 2011
Attributable to the equity shareholders of the parent | |||||||
Called up share capital | Share premium account | Own shares | Revaluation reserve | Merger reserve | Profit and loss account | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 27 September 2009 | 2,122 | 94,140 | - | 6,885 | 4,562 | 10,510 | 118,219 |
Profit for the period | - | - | - | - | - | 21,553 | 21,553 |
Other comprehensive income for the period | |||||||
Deferred and current tax on other comprehensive income | - | - | - | 1,177 | - | 507 | 1,684 |
Actuarial loss on defined benefit pension scheme | - | - | - | - | - | (1,878) | (1,878) |
Revaluation of available-for-sale investments | - | - | - | (4,000) | - | - | (4,000) |
Total comprehensive income for the period | - | - | - | (2,823) | - | 20,182 | 17,359 |
Dividends | - | - | - | - | - | (16,038) | (16,038) |
Issue of shares | 148 | 19,472 | - | - | - | - | 19,620 |
Own shares acquired in the period | - | - | (101) | - | - | - | (101) |
Share-based payments | - | - | - | - | - | 2,679 | 2,679 |
Current tax credit on share-based payments | - | - | - | - | - | 23 | 23 |
Deferred tax charge on share-based payments | - | - | - | - | - | (145) | (145) |
Balance at 26 September 2010 | 2,270 | 113,612 | (101) | 4,062 | 4,562 | 17,211 | 141,616 |
Profit for the period | - | - | - | - | - | 14,101 | 14,101 |
Other comprehensive income for the period | |||||||
Deferred and current tax on other comprehensive income | - | - | - | 56 | - | (719) | (663) |
Actuarial profit on defined benefit pension scheme | - | - | - | - | - | 2,766 | 2,766 |
Exchanges differences on translation of foreign operations | - | - | - | - | - | (83) | (83) |
Total comprehensive income for the period | - | - | - | 56 | - | 16,065 | 16,121 |
Dividends | - | - | - | - | - | (16,286) | (16,286) |
Issue of shares | 135 | 2,416 | - | - | 18,388 | - | 20,939 |
Own shares acquired in the period | - | - | (10,585) | - | - | - | (10,585) |
Share-based payments | - | - | - | - | - | 3,029 | 3,029 |
Current tax credit on share-based payments | - | - | - | - | - | (124) | (124) |
Deferred tax charge on share-based payments | - | - | - | - | - | 75 | 75 |
Balance at 30 September 2011 | 2,405 | 116,028 | (10,686) | 4,118 | 22,950 | 19,970 | 154,785 |
Company Balance Sheet
As at 30 September 2011
As at 30 September 2011 | As at 26 September 2010 | |
£'000 | £'000 | |
ASSETS | ||
Non-current assets | ||
Investment in subsidiaries | 168,953 | 140,702 |
Other receivables | 130 | 329 |
Total non-current assets | 169,083 | 141,031 |
Current assets | ||
Trade and other receivables | 19,171 | 12,242 |
Cash and cash equivalents | 597 | 621 |
Total currents assets | 19,768 | 12,863 |
Total assets | 188,851 | 153,894 |
LIABILITIES | ||
Current liabilities | ||
Trade and other payables | 13,401 | 7,447 |
Shares to be issued including premium | 6,541 | 438 |
Total current liabilities | 19,942 | 7,885 |
Net current (liabilities)/assets | (174) | 4,978 |
Non-current liabilities | ||
Shares to be issued including premium | 22,840 | 13,661 |
Total non-current liabilities | 22,840 | 13,661 |
Total liabilities | 42,782 | 21,546 |
Net assets | 146,069 | 132,348 |
EQUITY | ||
Called up share capital | 2,405 | 2,270 |
Share premium account | 116,028 | 113,612 |
Own shares | (10,686) | (101) |
Merger reserve | 23,235 | 4,847 |
Profit and loss account | 15,087 | 11,720 |
Equity attributable to equity holders | 146,069 | 132,348 |
Company Statement of Changes in Equity
53 week period ended 30 September 2011
Attributable to the equity shareholders of the parent | ||||||
Called up share capital | Share premium account | Own shares | Merger reserve | Profit and loss account | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 27 September 2009 | 2,122 | 94,140 | - | 4,847 | 15,176 | 116,285 |
Profit for the period | - | - | - | - | 9,903 | 9,903 |
Total comprehensive income for the period | - | - | - | - | 9,903 | 9,903 |
Dividends | - | - | - | - | (16,038) | (16,038) |
Issue of shares | 148 | 19,472 | - | - | - | 19,620 |
Own shares acquired in the period | - | - | (101) | - | - | (101) |
Share-based payments | - | - | - | - | 2,679 | 2,679 |
Balance at 26 September 2010 | 2,270 | 113,612 | (101) | 4,847 | 11,720 | 132,348 |
Profit for the period | - | - | - | - | 16,624 | 16,624 |
Total comprehensive income for the period | - | - | - | - | 16,624 | 16,624 |
Dividends | - | - | - | - | (16,286) | (16,286) |
Issue of shares | 135 | 2,416 | - | 18,388 | - | 20,939 |
Own shares acquired in the period | - | - | (10,585) | - | - | (10,585) |
Share-based payments | - | - | - | - | 3,029 | 3,029 |
Balance at 30 September 2011 | 2,405 | 116,028 | (10,686) | 23,235 | 15,087 | 146,069 |
Consolidated Cash Flow Statement
53 week period ended 30 September 2011
53 weeks to 30 September 2011 | 52 weeks to 26 September 2010 | ||
Note | £'000 | £'000 | |
Net cash inflow from operating activities | 8 | 32,858 | 45,114 |
Cash flows from investing activities | |||
Purchase of intangible assets - goodwill | - | (268) | |
Purchase of intangible assets - client relationships | (7,946) | (8,048) | |
Purchase of intangible assets - software | (3,147) | (5,982) | |
Purchases of property, plant and equipment | (5,171) | (7,669) | |
Acquisition of subsidiary | 5,802 | - | |
Dividend received from available-for-sale investments | 194 | 188 | |
Net cash used in investing activities | (10,268) | (21,779) | |
Cash flows from financing activities | |||
Dividends paid to equity shareholders | (16,286) | (16,038) | |
Purchase of own shares | (10,585) | (101) | |
Proceeds on issue of shares | 2,436 | 14,697 | |
Net cash used in financing activities | (24,435) | (1,442) | |
Net (decrease)/increase in cash and cash equivalents | (1,845) | 21,893 | |
Cash and cash equivalents at the start of period | 86,875 | 64,982 | |
Cash and cash equivalents at the end of period | 85,030 | 86,875 | |
Firm's cash | 64,469 | 62,886 | |
Firm's overdraft | (672) | (1,046) | |
Firm's net cash | 63,797 | 61,840 | |
Client settlement cash | 21,233 | 25,035 | |
Net cash and cash equivalents | 85,030 | 86,875 | |
Cash and cash equivalents shown in current assets | 85,702 | 87,921 | |
Bank overdrafts | (672) | (1,046) | |
Net cash and cash equivalents | 85,030 | 86,875 |
For the purposes of the cash flow statement, cash and cash equivalents include bank overdrafts.
Notes to the Financial Statements
1. | Revenue |
2011 | 2010 | |
£'000 | £'000 | |
53 weeks | 52 weeks | |
Continuing operations | ||
Commission income | 100,225 | 98,566 |
Financial planning and trail income | 39,563 | 34,960 |
Investment management fees | 108,587 | 90,487 |
248,375 | 224,013 | |
Other operating income | 15,638 | 15,999 |
Revenue from continuing operations | 264,013 | 240,012 |
Discontinued operations | ||
Corporate Advisory & Broking Division (see note 9) | 10,346 | 10,877 |
Total revenue from continuing and discontinued operations | 274,359 | 250,889 |
2. | Segmental information |
For management purposes, the Group is divided into two business streams: Investment Management and Corporate Advisory & Broking which is being discontinued (see note 9). These form the reportable segments of the Group.
Until the 1 August 2011, all operations were carried out in the United Kingdom and the Channel Islands. On 1 August 2011, the Group acquired Tilman Asset Management Limited which is based in Republic of Ireland. This income is reported as part of the Investment Management business stream. All segment income relates to external clients.
The accounting policies of the operating segments are the same as those of the Group.
53 week period ended 30 September 2011 | |||||
Continuing operations | Discontinued operations | ||||
Discretionary Portfolio Management | Advisory Portfolio Management | Total Investment Management | Corporate Advisory & Broking | Group | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Total income | 180,518 | 83,495 | 264,013 | 10,346 | 274,359 |
Operating profit before redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 26,767 | 12,381 | 39,148 | 1,204 | 40,352 |
Additional FSCS Levy | (6,058) | - | (6,058) | ||
Redundancy costs | (1,008) | (12) | (1,020) | ||
Acquisition of subsidiary costs | (228) | - | (228) | ||
Amortisation of client relationships | (10,486) | - | (10,486) | ||
Operating profit | 21,368 | 1,192 | 22,560 | ||
Finance income (net) | 521 | - | 521 | ||
Other gains and losses | (27) | - | (27) | ||
Costs of separation | - | (2,393) | (2,393) | ||
Profit/(loss) before tax | 21,862 | (1,201) | 20,661 | ||
Other Information | |||||
Capital expenditure | 8,287 | 31 | 8,318 | ||
Depreciation | 8,704 | 131 | 8,835 | ||
Amortisation of intangible asset - software | 3,370 | 76 | 3,446 | ||
Share-based payments | 3,015 | 14 | 3,029 | ||
Segment assets excluding current tax assets | 458,417 | 11,218 | 469,635 | ||
Segment liabilities excluding current tax liabilities | 269,745 | 11,218 | 280,963 | ||
52 week period ended 26 September 2010
| |||||
Discretionary Portfolio Management | Advisory Portfolio Management | Total Investment Management | Corporate Advisory & Broking | Group | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Total income | 157,233 | 82,779 | 240,012 | 10,877 | 250,889 |
Operating profit before redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 25,463 | 13,406 | 38,869 | 1,545 | 40,414 |
Contract renewal payments (see note 7) | (2,090) | (101) | (2,191) | ||
Additional FSCS Levy | (595) | - | (595) | ||
Redundancy costs | (135) | (118) | (253) | ||
Amortisation of client relationships | (6,349) | - | (6,349) | ||
Operating profit | 29,700 | 1,326 | 31,026 | ||
Finance income (net) | 840 | - | 840 | ||
Other gains and losses | (495) | - | (495) | ||
Profit before tax | 30,045 | 1,326 | 31,371 | ||
Other Information | |||||
Capital expenditure | 13,558 | 93 | 13,651 | ||
Depreciation | 10,358 | 123 | 10,481 | ||
Amortisation of intangible asset - software | 1,797 | 11 | 1,808 | ||
Share-based payments | 2,647 | 32 | 2,679 | ||
Segment assets excluding current tax assets | 506,578 | 33,413 | 539,991 | ||
Segment liabilities excluding current tax liabilities |
|
| 332,577 | 33,413 | 365,990 |
3. | Finance income and finance costs |
2011 | 2010 | |
53 Weeks | 52 Weeks | |
£'000 | £'000 | |
Finance income | ||
Dividends from available-for-sale investments | 194 | 188 |
Interest on bank deposits | 1,059 | 1,105 |
1,253 | 1,293 | |
Finance costs | ||
Finance cost of deferred consideration | 317 | 24 |
Interest expense on defined pension obligation | 369 | 366 |
Interest on bank overdrafts | 46 | 63 |
732 | 453 |
4. | Other gains and losses |
2011 | 2010 | |
53 Weeks | 52 Weeks | |
£'000 | £'000 | |
Impairment loss recognised on available-for-sale equity investments | 27 | 495 |
5. | Taxation |
Continuing Operations | Discontinued Operations | Total | ||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||
53 Weeks | 52 Weeks | 53 Weeks | 52 Weeks | 53 Weeks | 52 Weeks | |||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
United Kingdom | ||||||||
Current tax | 6,246 | 8,340 | (122) | 371 | 6,124 | 8,711 | ||
Prior year | 422 | (363) | - | - | 422 | (363) | ||
Overseas tax | - | - | ||||||
Current tax | 181 | 153 | - | - | 181 | 153 | ||
Prior year | - | - | - | - | - | - | ||
6,849 | 8,130 | (122) | 371 | 6,727 | 8,501 | |||
United Kingdom deferred tax | - | - | ||||||
Current year | 439 | 1,142 | (202) | - | 237 | 1,142 | ||
Prior year | (404) | 175 | - | - | (404) | 175 | ||
6,884 | 9,447 | (324) | 371 | 6,560 | 9,818 | |||
United Kingdom corporation tax is calculated at 27% (2010: 28%) of the estimated assessable taxable profit for the period. The Finance Act 2011 received royal assent on 19 July 2010 and reduced the corporation tax rate to 26% (28%) from 1 April 2011.
| ||||||||
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. | ||||||||
The charge for the year for continuing operations can be reconciled to the profit per the income statement as follows: | ||
2011 | 2010 | |
53 Weeks | 52 Weeks | |
£'000 | £'000 | |
Profit before tax on continuing operations | 21,862 | 30,045 |
Tax at the UK corporation tax rate of 27% (2010: 28%) | 5,903 | 8,413 |
Tax effect of expenses that are not deductible in determining taxable profit | 591 | 474 |
Tax effect of deferred tax timing differences | 147 | 95 |
Tax effect of leasehold property depreciation | 391 | 320 |
Tax effect of prior year tax | 422 | (363) |
Tax effect of prior year deferred tax | (404) | 175 |
Tax effect of share-based payments | (117) | 342 |
Tax effect of lower rates in subsidiaries | (35) | - |
Tax effect of exempt dividend income | (52) | - |
Tax effect of change in tax rate on deferred tax | 38 | (9) |
Tax expense for the period | 6,884 | 9,447 |
Effective tax rate for the year | 31% | 31% |
In addition to the amount credited to the income statement, deferred tax relating to the revaluation of the Group's available-for-sale investments amounting to £56,000 (2010: £1,177,000) has been credited directly to equity and deferred tax relating to the actuarial gain/(loss) in the defined benefit pension scheme amounting to £719,000 (2010: £507,000 credited) has been debited directly to equity. Deferred tax on share-based payments of £75,000 (2010: £145,000 credit) has been debited directly to equity. | ||
6. | Dividends |
2011 | 2010 | |
53 Weeks | 52 Weeks | |
£'000 | £'000 | |
Amounts recognised as distributions to equity shareholders in the period: | ||
Final dividend paid 5 April 2011, 3.55p per share (2010: 3.55p per share) | 7,989 | 7,975 |
Interim dividend paid 22 September 2011, 3.55p per share (2010: 3.55p per share) | 8,297 | 8,063 |
16,286 | 16,038 | |
Proposed final dividend for the 53 weeks ended 30 September 2011 of 3.55p (2010: 3.55p) per share based on shares in issue at 30 November 2011 (8 November 2010) | 8,299 | 8,176 |
The proposed final dividend for the 53 week period ended 30 September 2011 of 3.55p per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. | ||
Under an arrangement dated 1 April 2011, EES Trustees International Limited (the "Trustee") who holds 6,857,822 number of ordinary shares representing 2.82% of the Company's called up share capital has agreed to waive all dividends due to the Trustee. | ||
7. | Earnings per share |
From continuing and discontinuing operations
The calculation of the basic and diluted earnings per share is based on the following data:
2011 | 2010 | |
Number of shares | '000 | '000 |
Basic | ||
Weighted average number of shares in issue in the period | 226,796 | 223,193 |
Diluted | ||
Weighted average number of options outstanding for the period | 4,275 | 1,486 |
Estimated weighted average number of shares earned under deferred consideration arrangements | 9,464 | 3,628 |
Diluted weighted average number of options and shares for the period | 240,535 | 228,307 |
Earnings attributable to ordinary shareholders | ||
Continuing operations | ||
£'000 | £'000 | |
Profit for the period from continuing operations | 14,978 | 20,598 |
Redundancy costs | 1,008 | 135 |
less tax | (272) | (38) |
Additional FSCS Levy | 6,058 | 595 |
less tax | (1,636) | (167) |
Contract renewal payment (Note b) | - | 2,090 |
less tax | - | (585) |
Acquisition of subsidiary | 228 | - |
Amortisation of intangible assets - client relationships | 10,486 | 6,349 |
less tax | (2,831) | (1,778) |
Adjusted basic profit for the period and attributable earnings excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 28,019 | 27,199 |
Profit for the period from continuing operations | 14,978 | 20,598 |
Finance costs of deferred consideration (Note a) | 237 | 203 |
less tax | (64) | (57) |
Adjusted fully diluted profit for the period and attributable earnings | 15,151 | 20,744 |
Redundancy costs | 1,008 | 135 |
less tax | (272) | (38) |
Additional FSCS Levy | 6,058 | 595 |
less tax | (1,636) | (167) |
Contract renewal payment (Note b) | - | 2,090 |
less tax | - | (585) |
Acquisition of subsidiary | 228 | - |
Amortisation of intangible assets - client relationships | 10,486 | 6,349 |
less tax | (2,831) | (1,778) |
Adjusted fully diluted profit for the period and attributable earnings excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 28,192 | 27,345 |
From continuing operations | ||
Basic | 6.6p | 9.2p |
Diluted | 6.3p | 9.1p |
From continuing operations excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | ||
Basic | 12.4p | 12.2p |
Diluted | 11.7p | 12.0p |
a) Finance costs of deferred consideration are added back where the issue of shares is more dilutive than the interest cost saved. | ||
b) Once every ten years, the Group reissues its contracts to all personnel; the cost of this is shown within staff costs. | ||
Earnings attributable to ordinary shareholders | 2011 | 2010 |
Continuing and discontinued operations | ||
£'000 | £'000 | |
Profit for the period | 14,101 | 21,553 |
Redundancy costs | 1,020 | 253 |
less tax | (275) | (71) |
Additional FSCS Levy | 6,058 | 595 |
less tax | (1,636) | (167) |
Contract renewal payment (Note b) | - | 2,191 |
less tax | - | (613) |
Acquisition of subsidiary | 228 | - |
Amortisation of intangible assets - client relationships | 10,486 | 6,349 |
less tax | (2,936) | (1,778) |
Adjusted basic profit for the period and attributable earnings excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 27,046 | 28,312 |
Profit for the period | 14,101 | 21,553 |
Finance costs of deferred consideration (Note a above) | 236 | 203 |
less tax | (64) | (57) |
Adjusted fully diluted profit for the period and attributable earnings | 14,273 | 21,699 |
Redundancy costs | 1,020 | 253 |
less tax | (275) | (71) |
Additional FSCS Levy | 6,058 | 595 |
less tax | (1,636) | (167) |
Contract renewal payment (Note b) | - | 2,191 |
less tax | - | (613) |
Acquisition of subsidiary | 228 | - |
Amortisation of intangible assets - client relationships | 10,486 | 6,349 |
less tax | (2,936) | (1,778) |
Adjusted fully diluted profit for the period and attributable earnings excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | 27,218 | 28,458 |
The denominators used are the same as those detailed above for both basic and diluted earnings from continuing operations | ||
From continuing and discontinued operations | ||
Basic | 6.2p | 9.7p |
Diluted | 5.9p | 9.5p |
From continuing and discontinued operations excluding redundancy costs, additional FSCS Levy, contract renewal payments, acquisition of subsidiary costs and amortisation of client relationships | ||
Basic | 11.9p | 12.7p |
Diluted | 11.3p | 12.5p |
From discontinued operations | ||
The denominators used are the same as those detailed above for both basic and diluted earnings from continuing operations | ||
Basic | (0.4p) | 0.5p |
Diluted | (0.4p) | 0.4p |
8. | Notes to the cash flow statement |
53 weeks to30 September 2011 | 52 weeks to26 September 2010 | |
£'000 | £'000 | |
Group | ||
Operating profit from continuing operations | 21,368 | 29,700 |
(Loss)/profit for the period from discontinued operations | (1,201) | 1,326 |
Adjustments for: | ||
Depreciation of property, plant and equipment | 8,835 | 10,481 |
Amortisation of intangible assets - client relationships | 10,486 | 6,349 |
Amortisation of intangible assets - software | 3,446 | 1,808 |
Loss on disposal of property, plant and equipment | - | 64 |
Intangible asset impairment | 207 | - |
Retirement benefit obligation | (2,631) | (5,633) |
Share-based payment expense | 3,029 | 2,679 |
Translation adjustments | (83) | - |
Unwind of discount of shares to be issued and deferred purchase consideration | 317 | 24 |
Interest income | 1,059 | 1,105 |
Interest expense | (732) | (453) |
Operating cash flows before movements in working capital | 44,100 | 47,450 |
Decrease in payables and trading investments | (91,996) | (106,395) |
Decrease in receivables and trading investments | 90,465 | 109,775 |
Cash generated by operating activities | 42,569 | 50,830 |
Tax paid | (9,711) | (5,716) |
Net cash inflow from operating activities | 32,858 | 45,114 |
Cash and cash equivalents comprise cash at bank and bank overdrafts. | ||
9. | Discontinued Operations |
The Group's operating subsidiary, Brewin Dolphin Limited, signed an agreement on 11 May 2011 for the disposal of its Corporate Advisory and Broking Division to a new partnership called N+1 Brewin. Completion of the disposal is subject, inter alia, to receipt of certain regulatory authorisations for the new entity. The disposal has not yet completed but it is anticipated that it will be in January 2012.
The Group will receive nominal goodwill consideration of £4m for the disposal by way of a 14% preferred interest in N+1 Brewin.
The Corporate Advisory and Broking Division represents a reportable segment of the Group and the effect of the discontinued operation on segment results is disclosed in note 2.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
2011 | 2010 | |
53 Weeks | 52 Weeks | |
£'000 | £'000 | |
Revenue | 10,346 | 10,877 |
Expenses | (9,154) | (9,551) |
Operating profit | 1,192 | 1,326 |
Costs of separation | (2,393) | - |
Profit before tax | (1,201) | 1,326 |
Attributable tax | 324 | (371) |
Net (loss)/profit attributable to discontinued operations (attributable to the owners of the Company) | (877) | 955 |
During the year the division contributed a net cash outflow of £1.1m (2010: £1.8m inflow) to the Group's net operating cash flows.
10. | Funds |
At 30 September 2011 | At 26 September 2010 | |
£ Billion | £ Billion | |
In Group's nominee or sponsored member | 15.3 | 13.8 |
Stock not held in Group's nominee | 0.3 | 0.2 |
Discretionary funds under management | 15.6 | 14.0 |
In Group's nominee or sponsored member | 7.2 | 7.7 |
Other funds where valuations are carried out but where the stock is not under the Group's control | 1.2 | 1.5 |
Advisory funds under management | 8.4 | 9.2 |
Managed funds | 24.0 | 23.2 |
In Group's nominee or sponsored member | 4.1 | 4.0 |
Stock not held in Group's nominee | 0.3 | 0.3 |
Execution only stock | 4.4 | 4.3 |
Total funds | 28.4 | 27.5 |
Stock | ||
In Group's nominee or sponsored member | 26.6 | 25.5 |
Stock not held in Group's nominee | 1.8 | 2.0 |
28.4 | 27.5 |
11. | Additional Information |
Brewin Dolphin Holdings PLC is a company incorporated in the United Kingdom under the Companies Act 2006 whose shares are publicly traded on the London Stock Exchange. The address of the registered office is 12 Smithfield Street, London, EC1A 9BD, United Kingdom.
The accounting policies used in arriving at the preliminary figures are those which will be published in the full financial statements. They are consistent with those policies which were set out in the Group's Annual Report and Accounts for 2010.
This preliminary announcement is presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.
This preliminary announcement was approved by the Board on 6 December 2011.
The financial information in this press release does not constitute statutory accounts for the period ended 30 September 2011 or 26 September 2010. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on the 2010 and 2011 accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in January 2012.
12. | Annual General Meeting |
The Annual General Meeting will be held at 12 noon on 24 February 2012 at Merchant Taylors' Hall, 30 Threadneedle Street, London, EC2R 8JB.
13. | Going concern |
The Directors believe that the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of possible adverse changes in trading performance, show that the Group should be able to operate within the level of its current financing arrangements. Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements.
14. | Availability of Annual Report |
The Annual Report will be posted to shareholders during January 2012. Copies will be available from the registered office of the Company, 12 Smithfield Street, London, EC1A 9BD. It will also be available as a download from the Company's website www.brewin.co.uk. A further notification will be made to advise of posting and publishing on the website.
15. | Forward-looking statements |
This announcement contains certain forward-looking statements with respect to the Brewin Dolphin's Group's financial condition, operations, and business opportunities. These forward-looking statements represent the Group's expectations or beliefs concerning future events, and involve known and unknown risks, and uncertainty, that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. Past performance cannot be relied on as a guide to future performance.
Related Shares:
BRW.L