Interim Management Report

This announcement contains inside information for the purposes of the Market Abuse Regulation (596/2014/EU).

13 May 2020

Brewin Dolphin Holdings PLC

Interim Management Report

For the Half Year Ended 31 March 2020

Resilient set of results despite volatile market, with strong balance sheet and good cash generation.

David Nicol, Chief Executive, said: 

"In the first half of 2020, we delivered a resilient set of results, notwithstanding the negative impact of COVID-19 on global markets towards the end of the second quarter. We saw a greater level of direct inflows in the first half, with strong demand for integrated wealth management service. We have a strong balance sheet and good cash generation although we need to be mindful of the high level of uncertainty for the remainder of the financial year. We continue to monitor the impacts on the business and maintain strong cost discipline.

With the prioritisation of keeping our employees safe, we were able to move to a remote operating model within days, ensuring business continuity, operational resilience, and sustainability for the foreseeable future. We increased our engagement with our clients, and saw increased demand for financial advice, which we were able to offer remotely. We have continued to focus on the implementation of our infrastructure projects and the integration of our recent acquisitions. We are pleased to confirm we have successfully integrated the people and assets of our Irish business and launched new technology to enhance the user-experience for WealthPilot. We are making significant progress on both Client Engage and custody and settlement system, which we are confident will be delivered in the second half of the year, supporting our growth ambitions and enabling greater efficiencies."

Financial

- Strong total discretionary funds inflows of £1.5bn (H1 2019: £1.4bn), total discretionary net flows of £0.5bn for H1 2020 representing an annualised growth rate of 2.5%.

- Total funds were £41.4bn (FY 2019: £45.0bn). Excluding funds from acquisitions of £2.7bn, total funds decreased by 14.0%. Discretionary funds reduced to £35.7bn (FY 2019: £40.1bn) mostly due to negative market performance.

- Total income for the period increased by 8.3% to £175.8m (H1 2019: £162.3m). Excluding income from acquisitions of £9.3m, income increased by 2.6%.

- Profit before tax and adjusted1,3 items increased 2.5% to £36.5m (H1 2019: £35.6m).

- Statutory profit before tax of £28.2m, 5.1% lower than H1 2019 (£29.7m).

- Strong cash balance of £144.1m (H1 2019: £138.8m) and capital adequacy ratio of 204%.

- Adjusted1,3 earnings per share ('EPS'):

- Diluted EPS2 decreased by 4.0% to 9.5p (H1 2019: 9.9p).

- Basic EPS decreased by 2.9% to 9.9p (H1 2019: 10.2p).

- Statutory earnings per share:

- Diluted EPS decreased by 12.3% to 7.1p (H1 2019: 8.1p).

- Basic EPS decreased by 12.0% to 7.3p (H1 2019: 8.3p).

- Interim dividend held at 4.4p per share (2019 interim dividend: 4.4p per share).

Operational

- 99% of employees working from home within two weeks of lockdown.

- Swift integration of Investec Capital & Investments (Ireland) Limited: rebranded to Brewin Dolphin Capital & Investments (Ireland) Limited ('BDCIIL'), new management team announced in March and migration of clients and assets completed remotely in April.

- Client management system in final stages of training and implementation.

- New technology launched to enhance user-experience for WealthPilot's clients.

Outlook

- High level of uncertainty expected for the remainder of the financial year but we are monitoring the COVID-19 impacts to the business and client behaviours so we can adapt and manage our business and operating models appropriately.

- Estimated operating cost savings in FY 2020 of £6m-£8m through disciplined cost management into H2 2020 based on values-led decision making.

- We continue to support and engage with our clients, employees and suppliers, whilst delivering on our strategic objectives.

1. Adjusted items are amortisation of client relationships and brand - £5.4m (H1 2019: £3.3m), defined benefit pension scheme past service costs - £nil (H1 2019: £1.9m), acquisition costs - £2.3m (H1 2019: £0.5m), incentivisation awards £0.6m (H1 2019: £0.2m) and onerous contracts - £(0.04)m (H1 2019: £(0.04)m).

2. See note 8.

3. See Annual Report and Accounts 2019 page 34 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

LEI: 213800PS7FS5UYOWAC49

Declaration of Interim Dividend

The Board declares an interim dividend of 4.4p per share. The interim dividend is payable on 12 June 2020 to shareholders on the register at the close of business on 22 May 2020 with an ex-dividend date of 21 May 2020.

For further information:

The Interim Results presentation will be held at 9.00am on 13 May 2020 and available to watch via an audio webcast. The audio link can be found on the corporate website (www.brewin.co.uk/group/investor-relations). Investors and analysts are also able to dial in to the call using +44 (0) 20 3003 2666.

NOTES TO EDITORS:

About Brewin Dolphin:

Brewin Dolphin is one of the UK and Ireland's leading independent providers of discretionary wealth management. We continue to focus on discretionary investment management, and we manage £35.7 billion of funds on a discretionary basis. In line with the premium we place on personal relationships, we have built a network of offices across the UK, Channel Islands and the Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients' needs at the core.

Interim Management Report

To the members of Brewin Dolphin Holdings PLC

First half review

COVID-19 response

The business has responded professionally and at pace in response to COVID-19, with 99% of our workforce working remotely within two weeks of lockdown. We have kept two offices open for postal and cheque-based tasks. The investment in our IT infrastructure and strong client-centric culture has been the driving force behind our resilience and flexibility, with almost all of our employees already set up with remote-working capability. The leadership team deployed incident management procedures to ensure governance and oversight for responses and all decision making. Employees were kept up to date real-time via various communication channels, and our human resource team worked hard to roll out various initiatives to support colleagues with their personal and financial wellbeing and change of working environment.

With falling markets and our client's funds decreasing in value, we have increased the frequency of communication with written correspondence and market updates and engagement via video, telephone and conference calls. All of our efforts have helped reassure our clients with only a slight increase in clients logging into MyBrewin (client portal) during February and March compared to last year. With resilient systems and processes we have seen no impact on business continuity and continue to monitor and apply controls to mitigate any incremental risk which may arise as we have moved to a digital/remote business model.

Financial update

The business performed well in the first half of the year, despite markets falling sharply towards the end of the second quarter due to the COVID-19 pandemic.

Total funds decreased by 8.0% to £41.4bn (FY 2019: £45.0bn), with discretionary funds decreasing 11.0% to £35.7bn (FY 2019: £40.1bn), benefiting from £1.0bn of acquired funds from BDCIIL and resilient flows, more than offset by negative market performance. Total funds include £2.7bn from the acquisition of BDCIIL which completed at the end of October 2019. Net discretionary flows of £0.5bn, representing an annualised growth rate of 2.5%, were driven by strong flows in MPS and increased demand for advice-led services. Strong fund flows were offset by negative investment performance due to falling markets towards the end of the period. The MSCI PIMFA Private Investor Balanced Index fell by 14.5% and the FTSE 100 Index fell by 23.4%, during the first half of the year.

Direct discretionary gross inflows of £0.7bn (H1 2019: £0.6bn) were offset by elevated outflows as a result of the departure of a low margin institutional account. These strong inflows, of which around 60% came in the second quarter, demonstrate that our strategy to grow this business through both broadening propositions and our advice-led integrated wealth management service is gaining momentum. Sixty percent of new private client business now taking advice-led wealth management services, up from 52% from the same period last year.

Intermediaries fund inflows were slightly lower at £0.4bn (H1 2019: £0.5bn). Net flows in our managed portfolio service ('MPS') of £0.4bn were greater than last year (H1 2019: £0.3bn), representing an annualised growth of 21%.

Income increased 8.3% to £175.8m compared to the same period last year (H1 2019: £162.3m) and includes £9.3m from recent acquisitions. Income was lower in the second quarter due to weaker market conditions, although it benefitted from higher commission income due to greater activity following volatile market movements.

Operating profit before adjusted items was £37.2m, 7.2% higher than the same period last year (£34.7m). Profit before tax and adjusted items of £36.5m was 2.5% higher than the same period last year (H1 2019: £35.6m). This predominantly reflects the contribution from acquisitions offset by lower income in our second quarter due to significantly lower market levels at the end of March 2020. Finance costs were higher following the application of the new lease accounting standard (IFRS 16) in the period.

Adjusted diluted EPS was 9.5p (H1 2019: 9.9p) and statutory diluted EPS was 7.1p (H1 2019: 8.1p).

Operational update

We continue to develop our propositions and advice-led services to support current and prospective client needs. Our core business continues to make good progress. We have also further developed our WealthPilot and 1762 from Brewin Dolphin initiatives. We implemented a new technology solution for our WealthPilot proposition which will enhance the remote user-experience for clients and will be of value during this period of social distancing. Our London West End office (1762 from Brewin Dolphin) continues to grow with net funds flows more than doubling against H1 2019. We continue to expand and innovate, enhancing the proposition whilst attracting experienced financial planning professionals.

For our Intermediaries we launched our new 'Client Valuation Data Service' designed to deliver automated client valuations, which will complement the range of digital services we already provide. We are continuing to see the benefits of our 'powered by Brewin Dolphin' proposition.

We completed the acquisition of Investec Capital & Investments (Ireland) Limited on 31 October 2019. We have moved at pace with the integration and rebranding of the business to Brewin Dolphin Capital & Investments (Ireland) Limited, announcing the new leadership and management team in March 2020 and successfully migrated the majority of the acquired assets and clients onto our existing systems by mid-April. We are very pleased at the smooth migration, despite having to undertake this in a remote environment. The combined business delivered net inflows in the first half and we are now the third largest wealth management business in Ireland with funds of approximately €4.5bn and over 6,000 clients making us well positioned for future growth.

To support our growth strategy and strengthen operations, we have continued to prioritise the implementation and completion of the client management system ('Client Engage') and custody and settlement system ('Avaloq') in the 2020 calendar year. We are making good progress on both projects and expect to implement Client Engage in the early summer having spent £2.9m1 in the first half (FY 2019: £4.8m1). We spent £10.0m1 in the first half on the custody and settlement system (FY 2019: £7.7m1) and are still on track to complete this project in the second half of the calendar year. Benefits from the completion of these two projects include workflow efficiencies, reduction or avoidance of operating costs, improved operational risk management and scale benefits that will support the business with its growth ambitions. Amortisation of these projects is expected to start during the second half of this calendar year and will increase operating costs by approximately £4m-£5m for FY 2021.

1. Total spend includes operating and capital expenditure.

Results and business performance

Profit before tax and adjusted items of £36.5m was 2.5% higher than the first six months last year (H1 2019: £35.6m). This reflects the contribution from acquisitions completed in the second half of FY 2019 and first quarter of FY 2020, offset by lower income in our second quarter due to the significant fall in market levels at the end of March 2020. In addition, headcount increased over the period to support the delivery of our infrastructure projects and growth strategy. Net finance costs of £0.7m (H1 2019: £0.9m income) reflect the impact of IFRS 16 lease accounting standard (see notes 6 and 22).

Statutory profit before tax for the period was lower than last year at £28.2m (H1 2019: £29.7m), and includes acquisition costs in relation to the integration of BDCIIL of £2.3m. H1 2019 included a one-off cost of £1.9m for defined benefit pension scheme past service costs in relation to Guaranteed Minimum Pensions (see note 14).

1. Adjusted items are amortisation of client relationships and brand - £5.4m (H1 2019: £3.3m), defined benefit pension scheme past service costs - £nil (H1 2019: £1.9m), acquisition costs - £2.3m (H1 2019: £0.5m), incentivisation awards £0.6m (H1 2019: £0.2m) and onerous contracts - £(0.04)m (H1 2019: £(0.04)m).

2. See note 8.

3. See Annual Report and Accounts 2019 page 34 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

Funds

Total funds were £41.4bn at 31 March 2020 (H1 2019: £42.4bn, FY 2019: £45.0bn). The movement was driven by strong total net fund flows of £0.6bn and acquired funds from BDCIIL of £2.7bn. Investment performance was impacted by an unprecedented fall in markets due to COVID-19, reducing the overall value of funds by £6.9bn. The MSCI PIMFA Private Investor Balanced Index fell by 14.5% and the FTSE 100 Index fell by 23.4%, during the first half of the year.

Total funds by service category

Funds flow by service category1

1. The funds figures are rounded to one decimal place and therefore may not always cast.

Total discretionary funds were £35.7bn at 31 March 2020 (H1 2019: £37.5bn, FY 2019: £40.1bn) with net fund flows of £0.5bn (H1 2019: £0.8bn), representing an annualised growth rate of 2.5%. Total discretionary funds also included £1.0bn from the BDCIIL acquisition. The investment performance reduced discretionary funds by £5.9bn, in-line with the market. We had a strong second quarter with total discretionary net flows of £0.4bn, representing an annualised growth rate of 3.8%.

Direct discretionary net flows were flat in the period (H1 2019: £0.3bn) but saw higher levels of gross inflows of £0.7bn (H1 2019: £0.6bn) being offset by transfers and elevated outflows as a result of the departure of a low margin institutional account. These inflows are being driven by an increasing number of clients using our integrated wealth management service, and 1762 from Brewin Dolphin showing continued momentum as it more than doubled its inflows in the first half against H1 2019.

Indirect discretionary net flows remained stable at £0.5bn (H1 2019: £0.5bn), with 80% of net flows coming from MPS.

Execution only funds of £3.7bn, which includes funds of £0.5bn from the acquisition of BDCIIL, was impacted by negative investment performance. Advisory funds rose to £1.8bn mainly as a result of £1.2bn of acquired funds from BDCIIL.

Income

Income increased 8.3% to £175.8m compared to the same period last year (H1 2019: £162.3m) and includes £9.3m from recent acquisitions. Income was lower in the second quarter due to significantly adverse market conditions, although it benefitted from higher commission income due to greater activity following volatile market movements.

Discretionary income increased by 6.3% to £149.5m (H1 2019: £140.6m), following strong growth in the first quarter.

Financial planning income grew 30.2% to £16.4m (H1 2019: £12.6m) primarily due to the growth in 1762 from Brewin Dolphin alongside the financial planning led acquisitions we made in the second half of FY 2019. Of the £3.8m increase, £1.9m was from recent acquisitions.

Advisory income is up £0.9m on H1 2019, driven predominantly by the acquisition of BDCIIL.

Other income consisting of interest, report writing income and rental (sublet) income is down £0.6m in the period. Interest income was lower at £0.6m in the first half (H1 2019: £1.9m), driven by a reduction in interest rates in Q2 2020 as well as the impact of our new client interest policy introduced in January 2019. Report writing income is generated by Mathieson Consulting acquired in H2 2019 and contributed £0.5m of other income. Rental (sublet) income contributed a further £0.2m as a result of the new IFRS 16 accounting standard.

The overall blended margin across our discretionary services increased to 77.9bps (FY 2019: 77.2bps). Total direct margin increased to 88.6bps (FY 2019: 86.6bps) driven mostly by higher commission income in the period. Intermediaries margin decreased to 69.9bps (FY 2019: 70.5bps) due to the tiering effects of the pricing structure.

The blended margin for MPS of 27.2bps, remained in line with FY 2019: 27.1bps.

Costs

Total operating costs before adjusted items were 8.6% higher at £138.6m (H1 2019: £127.6m), predominantly driven by acquisitions, that completed in the second half of FY 2019 and first quarter of FY 2020, which added £6.4m.

Total fixed costs have increased by £9.5m to £110.5m (H1 2019: £101.0m) with incremental costs through acquisitions totalling £6.2m. Total fixed costs comprised of £70.2m of staff costs (H1 2019: £63.2m) and £40.3m of other operating costs before adjusted items (H1 2019: £37.8m). Of the £7.0m increase in staff costs, £3.9m reflects the impact of acquisitions which included circa 100 additional staff over the period. Excluding acquisitions, staff costs grew 4.9% as a result of annual salary inflation and headcount increases to support the Group's growth including the delivery of the planned infrastructure projects. The increase in other operating costs before adjusted items is almost entirely attributable to acquisitions with underlying costs flat compared to H1 2019.

Variable staff costs of £28.1m (H1 2019: £26.6m), predominantly in the form of discretionary profit share, is 5.6% higher and is largely due to acquisitions. Variable staff costs are provided for on an accrual basis and are based on the first half financial performance, the impact of higher numbers of eligible staff and the historical cost of share-based awards.

Adjusted items of £8.3m (H1 2019: £5.9m) include acquisition costs of £2.3m relating to BDCIIL. Amortisation of intangible client relationships of £5.3m, was £2.0m higher than H1 2019 following the recognition of client relationships from recent acquisitions.

Capital expenditure

We have continued to make good progress on our strategic projects. Total capital expenditure in H1 2020 was £17.2m of which £2.5m was on our client management system and £9.9m on the custody and settlement system. The client management system is currently in the testing phase and will be delivered in the early summer, enabling us to increase capacity within our client teams. The custody and settlement system remains on track to complete in the second half of the calendar year, in-line with our expectations. Total capital expenditure on these two projects is expected to be approximately £25m for the full year. We expect to incur total capital expenditure for the full year of approximately £30m-£33m, of which the remainder is on property improvements and some smaller technology enhancement projects for client facing systems.

Cost management

The impact of COVID-19 is being felt across the business. We are closely monitoring the impact on our operations and any change to client behaviours so we can adapt our business and operating models appropriately. We are values-led in our decision making whilst applying prudence and discipline to our cost base in the second half of the year. As a result of these decisions we expect operating cost savings to be between £6m-£8m mainly in the second half of the year. Areas of consideration include travel, marketing, slowdown of hiring, and delaying smaller technology/IT projects and office upgrades. Once we have further clarity on the impact of COVID-19 over the summer we would expect to consider further actions at this point.

Net finance costs

Finance income of £0.6m was lower than H1 2019 of £0.9m due to lower interest rates. Finance costs were £1.3m (H1 2019: £0.05m) primarily due to the impact of the new IFRS 16 lease accounting standard.

Tax

The Group's effective corporation tax rate is 23.9% (FY 2019: 23.1%) and is higher than the UK statutory tax rate of 19% (2019: 19%) as a result of increased disallowable expenses following the acquisition of BDCIIL.

Cash and capital

The Group's financial position remains very strong with total net assets of £318.2m and cash balances at period end of £144.1m (H1 2019: £138.8m).

As at 31 March 2020 the Group had regulatory capital resources of £151.6m. The Group's primary regulator is the Financial Conduct Authority ('FCA'). The FCA's rules determine the calculation of the Group's regulatory capital resources and regulatory capital requirements. As required under FCA rules, we perform an Internal Capital Adequacy Assessment Process ('ICAAP') which includes performing a range of stress tests to determine the appropriate level of regulatory capital that the Group needs to hold. Our capital resources represent 204% of the FCA requirement. This is substantially above our risk appetite of 150%.

Dividend

As a profitable cash generative business, the Group has to consider the needs of all stakeholders including regulators, employees, shareholders and savers (including pensioners) who look to Brewin as a source of reliable income. The Group has an established full year dividend policy to grow dividends in line with adjusted earnings, with a target payout ratio of 60% to 80% of annual adjusted diluted earnings per share. As a cash generative business it is important to note that a payout ratio based policy is designed to address significant market movement without having to change our dividend policy.

Given our strong performance in the first half of 2020 and with an adjusted EPS of 9.5p, the Board has decided to maintain the interim dividend at 4.4p per share (2019 interim: 4.4p per share). Looking ahead to the final dividend, the Board will need to consider the 2020 full year performance and take into account market conditions in the second half of the year and the potential impact on income through 2021, so the dividend can grow into the future. The Board will continue to maintain its dividend policy in setting the final dividend including with regard to growing dividends in line with adjusted earnings, although it is likely that the Board will recommend a final dividend that may be towards the lower end of the target payout ratio. Therefore if market levels remain consistent with those we are currently experiencing and earnings are lower, the final dividend would reflect this. The interim dividend will be payable on 12 June 2020 to shareholders on the register at the close of business on 22 May 2020 with an ex-dividend date of 21 May 2020.

Going concern

As stated in note 2 to the condensed consolidated set of interim financial statements, 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 in light of Covid-19 pandemic and resulting economic uncertainty (see note 2ii for detail) and stressed events that the Group is required to assess show that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt a going concern basis for the preparation of the condensed consolidated interim financial statements. In forming their view, the Directors have considered the Group's prospects for a period exceeding twelve months from the date the condensed consolidated interim financial statements are approved.

Principal risks and uncertainties

In light of recent events, with respect to COVID-19, we have reconsidered and assessed our principal risks and uncertainties. The principal risks and uncertainties that we had identified at the time of our report and accounts remain largely unchanged and are set out on pages 31 and 32 of the Annual Report and Accounts available on our website. However, there are specific areas where COVID-19 has had some significant impact on the risks in the business and these are set out below:

Board changes

Paul Wilson resigned from the Board with effect from 9 October 2019. Phillip Monks joined the Board as an Independent Non-Executive Director on 10 February 2020. David Nicol, the Group's Chief Executive, will step down on 14 June 2020 and will be replaced by Robin Beer as Chief Executive on this date. David Nicol will remain with the Group for a transitionary period until 29 July 2020.

Outlook and updated guidance

The recent market weakness has created a high level of uncertainty as to the outlook for the remainder of the financial year. It is too early to ascertain the consequential impact this may have on our full year 2020 income and profitability. We continue to monitor the impact COVID-19 may have on our business, from client asset valuations declining due to falling markets and changes in fund flow. We have been able to adapt and respond to the current pandemic at pace led by an experienced and agile leadership team and are confident we can adapt our operating and cost model appropriately. We have identified mostly non-staff related cost savings of £6m-£8m, of which we can leverage during the second half of the financial year. We will have further clarity on the impact of COVID-19 over the summer, at which point we would expect to consider further actions to support us beyond FY 2020.

In periods of uncertainty we believe our advice-led services are required more than ever. We have a strong balance sheet with good cash generation, and a robust regulatory capital position, which will support us during these challenging market and social economic cycles. We have a strong brand and are able to offer a broad range of products and services to existing and potential clients. We have invested in our infrastructure which gives us the flexibility to adapt to changing environments at pace. We continue to be fully engaged with our clients, while supporting our employees and suppliers and are confident we can continue to deliver on our strategic objectives.

David Nicol

Chief Executive

12 May 2020

Condensed Consolidated Income Statement

for the six months ended 31 March 2020

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2020

Condensed Consolidated Balance Sheet

As at 31 March 2020

1. Presented following the adoption of IFRS 16 'Leases' - see notes 3 and 22 for more detail.

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2020

1. A cumulative debit of £68k has been recognised in the profit and loss account reserve as at 31 March 2020 for exchange differences on translation of foreign operations(30 September 2019: £81k debit, 31 March 2019 £188k debit/credit and 30 September 2018: £14k debit).

Condensed Consolidated Cash Flow Statement

for the six months ended 31 March 2020

Notes to the Condensed Consolidated Set of Financial Statements

1. General information

Brewin Dolphin Holdings PLC (the 'Company') is a public limited company incorporated in the United Kingdom. The shares of the Company are listed on the London Stock Exchange. The address of its registered office is 12 Smithfield Street, London, EC1A 9BD. This Interim Financial Report of Brewin Dolphin Holdings PLC and its subsidiaries (collectively, the Group) was approved for issue by its directors on 12 May 2020.

A copy of this Interim Financial Report including the Condensed Consolidated Financial Statements for the period ended 31 March 2020 is available at the Company's registered office and on the Company's investor relations website (www.brewin.co.uk).

The comparative information for the period ended 30 September 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

The condensed consolidated set of financial statements included in this Interim Financial Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34'), as adopted by the European Union and the Interim Financial Report has been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority.

The condensed consolidated set of financial statements included in this Interim Financial Report for the six months ended 31 March 2020 should be read in conjunction with the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2019.

The annual financial statements of Brewin Dolphin Holdings PLC are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.

(i) Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

To form the view that the condensed consolidated financial statements should continue to be prepared on an ongoing basis in light of the current COVID-19 pandemic and the resulting economic uncertainty, the Directors have assessed the outlook of the Group by considering:

i. the Group's Medium Term Plan ('MTP') updated for the expected impact of the COVID-19 pandemic, various market scenarios and management actions; and

ii. the reperformance of the range of stress tests including reverse stress tests that are used as part of the Internal Capital Adequacy Assessment Process ('ICAAP') to assess the Group's ability to withstand a market-wide stress.

The stress tests enable the modelling of the impact of a variety of external and internal events on the MTP; identify the potential impact of stress events on the Group's income, costs, cash flow and capital; and enable the Directors to assess management's ability to implement effective management actions that may be taken to mitigate the impact of the stress events. The reverse stress tests have considered severe scenarios and actions and allow the Directors to assess scenarios and circumstances that would render the Group's business model unviable.

(ii) Impairment considerations

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

The impairment review considered the COVID-19 pandemic as a potential indicator of impairment and consequently an extensive exercise was undertaken to determine the recoverable amount for all material assets to assess for impairment losses. The higher of the fair value less costs of disposal ('FVLCTD') and the value in use ('VIU') calculations was determined to be the recoverable amount; this was compared to the carrying amount of the assets.

The estimated FVLCTD for assets were based on a percentage of funds, where appropriate. The percentages applied are inherently judgemental and were adjusted to reflect the downturn. The VIU calculations which are subject to estimation uncertainty, included a protracted period (18 months) of economic downturn and market falls to determine likely revenue to be generated from the assets.

As a result of these reviews, none of the assets held by the Group were impaired - see note 10 for further details

2. Basis of preparation continued

(iii) Significant accounting policies and use of estimates and judgements

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 30 September 2019, except for the adoption of new and amended standards as set out in 2 iv below.

The preparation of interim condensed consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the Group's accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2019. However, for the six months to 31 March 2020, the following additional critical accounting judgements and key sources of estimation uncertainty have been identified:

a. Critical accounting judgement

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend or terminate the lease. In making this judgment, the Group evaluates whether it is reasonably certain to exercise the option to renew or break the lease term.

That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal and the circumstances and facts for each lease including past experience to determine the likely lease term and whether the break option is likely to be exercised. This includes an assessment on the length of time remaining before the option is exercisable, current trading conditions and future trading forecasts on the ongoing profitability of the business.

After the lease commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (for example, a change in business strategy).

As at 31 March 2020, it has been assumed that all leases will be until the end of the lease term for the Group.

b. Key source of estimation uncertainty

As part of any business combination the Group recognises all assets acquired and liabilities assumed at their acquisition date fair values, including any separately identifiable intangible assets such as the client relationship intangibles recognised as part of the BDCIIL acquisition (as set out in note 20).

The value attributed to the client relationships affects the amount of goodwill recognised. This value together with the assessment of useful economic lives, which is based both on past experience and future expectations, determines the future amortisation charges. Further the value determined for the client relationships assets impacts the deferred tax liability recognised by the Group.

The valuation gives rise to estimation uncertainty. Certain assumptions regarding the amount, timing and discounting of future cash flows have been adopted in order to determine these fair values. The Group has recognised £32.1m of separately identifiable client relationship intangible assets and goodwill of £2.0m; see notes 10 and 20 for further information.

The table below sets out the approximate impact on the value recognised for both goodwill and client relationships intangibles of an increase or decrease of 10% in the:

i. expected cash flows, applied equally over the cash flows in each period; and

ii. the discount rate.

The Group uses its incremental borrowing rate as the discount rate for determining its lease liabilities at the lease commencement date. The calculation of the incremental borrowing rate involves estimation and has been obtained from the Group's bank to determine the rate on a lease-by-lease basis that the Group would have to pay to borrow money to purchase the type of assets being leased. Rates applied are dependent on the entity leasing the asset, the following factors have been considered:

- Lease term;

- Credit risk of the entity; and

- Level of indebtedness of the entity.

The impact of an increase in the incremental borrowing rates used for calculating the discount rate in determining the lease liabilities for all entities on transition to IFRS 16 'Leases' as at 1 October 2019 is set out below.

Impairment of goodwill, client relationships and brand

Impairment exists when the carrying value of an asset or cash-generating unit ('CGU') exceeds its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal ('FVLCTD') and its value in use ('VIU').

For the purposes of impairment testing, the Group has historically valued the recoverable amount of goodwill, client relationships and brand at the FVLCTD. The calculation of the FVLCTD is based on the valuation of the funds, which make up the relevant intangible asset where appropriate. A percentage is applied to funds to determine the fair value. In light of the economic uncertainty resulting from the COVID-19 pandemic, these percentages have been based on recent public transactions and adjusted for the economic uncertainty resulting from the COVID-19 pandemic.

Further, recognising the challenge of estimating a reliable FVLCTD in the current uncertain economic environment, the Group has also prepared VIU calculations, as set out in notes 2ii and note 10.

For the VIU calculations, the recoverable amount is sensitive to assumptions applied to future cash flows and the discount rate (the Group's estimated weighted average cost of capital).

A sensitivity analysis is disclosed in note 10. Note 3.r to the 2019 Group Annual Report and Accounts explains the accounting policy with respect to the impairment of intangible assets.

(iv) New standards, interpretations and amendments adopted during the current period

During this reporting period, IFRS 16 'Leases', a new standard has been applied for the first time, it replaces IAS 17. The Group adopted IFRS 16 'Leases' with effect from 1 October 2019 and elected to apply the standard under the modified retrospective approach with the cumulative effect of initial application being recognised at 1 October 2019; comparative information has therefore not been restated.

Further information and changes to significant accounting policies as a result of the application of the standard for the first time is described below in note 3.

3. Changes in Significant Accounting Policies

The Group has consistently applied the accounting policies to all periods presented in these condensed consolidated interim financial statements as those applied in the Group's consolidated financial statements for the year ended 30 September 2019, except for the changes described below:

IFRS 16 'Leases'

IFRS 16 represents a significant change in the principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 requires lessees to account for most leases under a single lessee accounting model.

Under the single lessee accounting model, a right of use ('ROU') asset and corresponding lease liability is recognised which represents future lease payables with movements through the Income Statement. The movements through the Income Statement are for depreciation, additions or releases on the liability and unwinding of the discount for all leases unless the underlying asset has a low value, or the remaining lease term is less than twelve months at the date of transition.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors continue to classify leases as either operating or finance leases using similar principles as in IAS 17.

Transition

The Group has used the following practical expedients when applying the modified retrospective approach to leases previously classified as operating leases under IAS 17. The Group has:

- elected to use the transition practical expedient allowing an entity not to reassess whether a contract is, or contains, a lease at the date of initial application of the standard.

- relied on its assessment of whether leases are onerous immediately before the date of initial application by adjusting the ROU asset at 1 October 2019 by the amount of provision for onerous lease rental payments previously recognised under IAS 17 as at 30 September 2019; as an alternative to performing an impairment review;

- elected not to recognise the ROU assets and lease liabilities for leases where the lease term ends within 12 months of the date of initial application.

- excluded initial direct costs from the measurement of the right of use asset at the date of initial application.

- used hindsight when determining the lease term where the contract contains options to extend or terminate the lease; and

- applied a single discount rate to a portfolio of leases with reasonably similar characteristics.

The Group has chosen not to apply the practical expedient to account for any associated non-lease components of a lease as a single arrangement.

Impact

The details of the significant changes are set out below. The Group is primarily a lessee of property leases and is also a sub-lessor for a small number of property leases that have been identified as onerous. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

The adoption of IFRS 16 has had a material impact on the Group's Condensed Consolidated Balance Sheet, in which the Group recognised right of use assets of £43.3m, lease liabilities of £57.8m, finance lease receivables of £1.3m, and a negative impact on the Group's equity of £5.1m net of deferred tax assets, onerous provisions and trade payables and receivables adjustments at 1 October 2019 on transition.

Details of the quantitative impact of IFRS 16 are provided in note 22.

(i) Classification and measurement as a lessee

Right of use assets

The right of use assets recognised on adoption have been calculated as if the Standard applied at the commencement of each lease and discounted using the borrowing rate at the date of initial application.

The depreciation charge is recognised in the Income Statement.

The ROU assets are assessed for impairment annually in accordance with IAS 36 (incorporating any onerous lease assessments) and depreciated on a straight-line basis over the shorter of the expected life of the asset and the lease term, adjusted for any remeasurements of the lease liability.

Lease liabilities

Leases previously classified as operating leases under IAS 17 have been measured at the present value of the remaining lease payments on adoption and discounted using an incremental borrowing rate at the lease commencement date as the interest rate implicit in the lease is not readily determinable.

After the commencement date, the lease liability recognised will reduce overtime by the lease payments which will be offset by the unwinding of the liability over the lease term and any amendments for the impact of any lease modifications. Interest recognised on the lease liability is included in finance costs in the Income Statement.

Short term leases and lease of low value assets

The Group has adopted certain optional recognition exemptions available under IFRS 16 for short-term (less than 12 months) and low-value (< £5,000) leases. These leases continue to be off balance sheet with rentals charged to the Income Statement on a straight-line basis over the lease term and are classified as operating leases.

(ii) Classification and measurement as an intermediate lessor

Subleases

The Group has identified certain property leases as onerous where there is surplus office space and in these instances the Group acts as an intermediate lessor. The Group classifies its subleases as operating or finance leases by reference to the right of use asset arising from the head lease (rather than by reference to the underlying asset) or if the head lease belonging to the Group is a short-term lease, the subleases are classified as operating leases.

The Group has reclassified some of its subleases previously recognised as operating leases under IAS 17 as finance leases under IFRS 16.

Finance lease receivable

A finance lease receivable has been recognised on adoption and represents the net investment in the finance sublease.

The lease payments included in the measurement of the net investment in the finance lease comprise of the present value of fixed payments (including in-substance fixed payments), less any lease incentives payable for the right to use the underlying asset during the lease term that are not received at the lease commencement date.

Any difference between the right of use asset and the net investment in the sublease is recognised in the Income Statement.

The lease liabilities relating to the head leases has been retained on the Balance Sheet and represents the lease payments payable to the head lessor.

Operating subleases

For subleases which are classified as an operating lease, the Group has recognised both the lease liability and the right of use asset relating to the head lease.

Lease income from the operating sublease is recognised in the Income Statement as other operating income.

(iii) Accounting policy

The accounting policies impacted by the adoption of the new standard are the other operating income accounting policy (note 3k) and leases accounting policy (note 3l) as set out in the Group's 2019 Annual Report and Accounts. The revised accounting policies are set out in note 23.

4. Income

The following table presents revenue disaggregated by service and timing of revenue recognition:

1. Services transferred at a point in time.

2. Brewin Portfolio Service.

Contract balances

The Group does not have contract assets as it does not enter into contracts where revenue is conditional on the fulfilment of a contingent event.

Contract liabilities

Contract liabilities relate to the advance consideration received from customers for services still to be delivered. The Group derecognises contract liabilities (and recognises revenue) when it transfers services and satisfies its performance obligations.

Unsatisfied performance obligations

The Group does not have material unsatisfied (or partially unsatisfied) performance obligations at the reporting date, as the majority of the Group's performance obligations are satisfied equally over time.

5. Segmental information

For management reporting purposes the Group currently has a single operating segment: the Wealth Management business. This forms the reportable segment of the Group for the period. Please refer to the Condensed Consolidated Income Statement and the Condensed Consolidated Balance Sheet, for numerical information. The accounting policies of the operating segment are the same as those of the Group.

The Group's operations are carried out in the United Kingdom, Channel Islands and the Republic of Ireland. All segmental income related to external clients.

Following the acquisition of BDCIIL on 31 October 2019 (see note 20 for further details), the existing Irish business of the Group expanded substantially and as a result the Irish business as a proportion of the Group is now larger, consequently geographical disclosures are set out below.

For the period ended 31 March 2020

6. Finance income and finance costs

1. Following the adoption of IFRS 16 'Leases' interest on lease liabilities are presented as finance costs.

7. Taxation

The Group calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings.

Net deferred tax liability

8. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

1. The dilutive shares used for this measure differ from that used for statutory dilutive earnings per share; the future value of service costs attributable to employee share options is ignored and contingently issuable shares for Long-term Incentive Plan ('LTIP') options are assumed to fully vest. The Directors have selected this measure as it represents the underlying effective dilution by offsetting the impact to the calculation of basic shares of the purchase of shares by the Employee Share Ownership Trust ('ESOT') to satisfy options.

2. Finance costs of deferred or contingent consideration are added back where the issues of shares is more dilutive than the interest cost saved.

3. Excluding onerous contracts costs, amortisation of client relationships and brand, acquisition costs, incentivisation awards, defined benefit pension scheme past service costs and other gains and losses.

9. Dividends

An interim dividend of 4.4p per share was declared by the Board on 12 May 2020 and has not been included as a liability as at 31 March 2020. This interim dividend will be paid on 12 June 2020 to shareholders on the register at the close of business on 22 May 2020 with an ex-dividend date of 21 May 2020.

10. Intangible assets

Goodwill impairment testing

The tables below show the goodwill allocated to groups of cash-generating units ('CGUs') and the significant client relationship assets: