Preliminary Report

LEI: 213800PS7FS5UYOWAC49

27 November 2019

Brewin Dolphin Holdings PLC

Preliminary Report

For the Year Ended 30 September 2019

Another period of strong organic funds inflows with the Group making progress on its strategic plan.

Financial Highlights

- Total funds were £45.0bn, an increase of 5.1% (2018: £42.8bn).

- Discretionary funds of £40.1bn, including acquired funds of £0.3bn, (2018: £37.6bn) reflect continued organic growth and positive investment performance.

- Discretionary net funds inflows of £1.4bn (2018: £2.3bn) represent an annualised growth rate of 3.7% (2018: 6.8%).

- Profit before tax and adjusted1 items of £75.0m, 3.2% lower than 2018 (£77.5m) in-line with expectations.

- Statutory profit before tax of £62.6m, 8.6% lower than 2018 (£68.5m).

- Total income for the period increased by 3.1% to £339.1m (2018: £329.0m).

- Total costs of £265.7m excluding adjusted1 items (2018: £252.3m), 5.3% increase due to planned spending on growth initiatives and infrastructure projects.

- Adjusted1 earnings per share:

- Diluted earnings per share2 of 20.5p (2018: 21.7p).

- Basic earnings per share of 21.2p (2018: 22.5p).

- Statutory earnings per share:

- Diluted earnings per share of 16.6p (2018: 18.9p).

- Basic earnings per share of 17.0p (2018: 19.5p).

- Full year dividend 16.4p (2018: 16.4p), final dividend of 12.0p per share (2018: 12.0p per share).

1. See Financial Review for a reconciliation of profit before tax and adjusted items to statutory profit before tax and an explanation of adjusted performance measures.

2. See note 9.

Business Highlights

- Continued strong funds growth, driven by a year of positive net inflows.

- Successfully completing three acquisitions; increasing funds, advice-led capacity and geographical footprint.

- Completed the acquisition of Investec Capital and Investments (Ireland) Limited on 31 October 2019.

- Technology infrastructure projects on track, supporting our growth strategy.

- Client offering expanded through MPS expansion and 1762 from Brewin Dolphin propositions.

- Balance sheet remains strong.

David Nicol, Chief Executive, said:

"I am very pleased with our financial performance, particularly over the second half of the year. The Group has continued to deliver strong and resilient organic growth, against the continued uncertain economic and political backdrop. This is demonstrated by the strength of our discretionary funds flows. Our strategy of focusing on our advice-led wealth management service continues to deliver results.

We continue to invest in our business to support future long-term growth. We have completed and integrated a number of strategic acquisitions and the replacement of our core custody and settlement system is on track. These initiatives are laying the foundations for long-term growth and will ensure that we are well placed to capture future market opportunities."

Declaration of Final Dividend

The Board is proposing a final dividend of 12.0p per share, to be approved at the 2020 AGM and to be paid on 12 February 2020 to shareholders on the register at the close of business on 10 January 2020 with an ex-dividend date of 9 January 2020.

For further information:

NOTES TO EDITORS: Brewin Dolphin is one of the UK's leading independent providers of discretionary wealth management.

We continue to focus on discretionary investment management, and we manage £40.1 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.

CHIEF EXECUTIVE'S REVIEW

Building an innovative business

Summary

• Robust performance across the business.

• Over 40% of new direct business was through our integrated wealth management service.

• Strategic acquisitions enhance services and broaden coverage.

• 1762 from Brewin Dolphin gaining momentum.

• Innovation in service proposition for indirect clients.

• Technology platform for WealthPilot to be launched in the Spring.

• Significant investments in talent and technology are positioning the business for next stage of growth.

• Well positioned to capture future growth opportunities.

This has been another good year for the business. Despite economic uncertainty, we have delivered a robust performance, and have made significant progress against our strategy, building a modern business that is well positioned for continued growth. We have been focused on delivering:

• Growth

• Innovation

• Disciplined Investment

Our focus has enabled us to ensure that we invest in those areas that we believe, will drive future growth and complement our existing business. This is particularly important in the acquisitions we have made this year which are in strategically attractive markets and provide future growth opportunities.

Performance

This year has seen economic uncertainty resulting in subdued client activity; however, the performance of the business has held up very well. We have delivered organic net discretionary funds growth of 3.7%, bringing our total funds to £45.0 billion and we remain on track to meet our target to grow new discretionary funds organically by a third by the end of FY 2020.

Our business has continued to broaden and this is demonstrated by our strong net discretionary inflows of £1.4 billion balanced across our direct and intermediaries channels and MPS service. As a result of this well balanced growth our revenue is up 3.1% to £339.1 million driven by an increase in financial planning and MPS in particular. Our financial planning income has grown by 12.2% to £27.5 million. Our integrated wealth management service continues to be attractive with over 50% of new private client business now on this proposition.

We have continued to invest in our business in a careful and disciplined way. The expected increase in costs has been into growth initiatives and infrastructure projects which will lay the foundations for future growth. The infrastructure projects will be delivered over the next twelve to eighteen months. Adjusted profit before tax was £75.0 million, down 3.2% from £77.5 million, reflecting the increased investment that has been made. Statutory profit before tax was £62.6 million, down 8.6%, reflecting this investment and one-off items.

Demand for advice

At our heart we are an advice-led business. We have made significant progress in growing our financial planning business over the past five years.

We know that good advice can help people achieve their financial objectives and outcomes. There is an increased onus on individuals to provide for their own retirement and, partly as a result, there is an increased demand for financial advice across a broad range of society - from mass market to mass affluent and high net worth. However, many people in the UK who have financial needs currently choose not to, or are unwilling to, take advice. We see this as a strategic opportunity and the basis for a widening service offer that means we can meet the specific needs of an increasingly broad spectrum of clients.

Over recent years we have strengthened our financial planning resources considerably. We now have 105 qualified financial planners operating across the business, supported by 129 paraplanners and assistants. We offer financial planning from every office in the UK and Ireland. Our income from financial planning has doubled in the past four years, but that alone does not tell the whole story as financial planning relationships provide access to further investment opportunities.

This year, in delivering our strategy, we have made significant progress on our advice-led growth initiatives and made strategic acquisitions.

Direct clients

Two years ago, we began the design and test implementation of WealthPilot, our cost-effective, simplified wealth planning and investment advice service. Last year, we launched 1762 from Brewin Dolphin, our advice-led proposition for clients with more sophisticated and complex needs and we continue to develop both services.

The WealthPilot team has expanded from 12 to 15 employees as we have added clients. We have learned more about the types of people the service appeals to, and we have further tested and evolved the systems and processes that sit behind it. Following an evaluation of potential technology platforms, we appointed Focus Solutions as our provider. We are now working with them to launch the online platform in Spring 2020, which will provide a modern portal for prospective clients to use.

We recognise that people want to access services in different ways for different tasks, so WealthPilot allows clients to access the service either digitally or more personally. We are confident that combining the two enhances WealthPilot's potential to provide simplified cost-effective advice.

1762 from Brewin Dolphin is now fully up and running. It is gaining traction and a number of individuals with a range of different skills have joined us, all attracted by our ambitious growth plans and innovative services. The team now stands at 44, up from 17 at launch.

Through 1762 from Brewin Dolphin, we have introduced two new services for people with more complex requirements. The first is our core and conviction portfolio which combines a funds-based portfolio approach together with access to direct equities. It is an example of innovative thinking - offering an integrated investment approach that provides more cost-effective access to our investment expertise. The second is a liquidity management service, designed for clients with significant short-term cash holdings. We will introduce further value-enhancing propositions in the year ahead to create opportunities for growth.

While 1762 from Brewin Dolphin is designed for clients with the most complex needs, our non-advised online investment service, Brewin Portfolio Service (BPS), is for those with straightforward requirements. We continue to add new clients and attract further investment from existing clients. We see BPS as an adjacent proposition to WealthPilot and our core services enabling clients to access our investment services from as little as £2,000.

Indirect clients

We have continued our strong track record of innovation for our indirect clients, further developing our services in this area that can be accessed via intermediaries. We unitised the funds in our Managed Portfolio Service (MPS), a move that has continued to deliver cost benefits for our intermediaries' clients.

As part of our intermediaries strategy, we have entered into three new partnerships in different target market segments in order to broaden our MPS distribution channels. We have achieved this by pursuing new avenues to extract value from our award-winning investment expertise, licensing our investment know-how to other businesses under the Powered by brand. In January 2019, we signed an agreement with Guinness Asset Management to provide our asset allocation and fund selection expertise for their new multi-asset funds. Since then we have concluded two similar agreements with consolidator, Fairstone, and regional IFA, Eden Park. This has been an innovative way of monetising the quality of thinking in our research team and we see further opportunities for this proposition.

We have also introduced several additional lower-risk portfolios to MPS, providing our indirect clients with more choice.

Office network and acquisitions

As well as developing our propositions, we are seeking to reach more people by strategically focusing on geographic areas of affluence that are home to potential new clients. This year, we have developed our existing office network and bolstered it with strategically important acquisitions that add capability and capacity.

Our office network has always been an important part of how we access clients and local business communities, differentiating us from many of our peers. We have reorganised our offices in the south of England, especially those to the south of London. We opened an office in Winchester, bringing together our existing Bournemouth office with Basingstoke-based IFA, Aylwin Limited, which we acquired in March 2019. We have opened a new office in Tunbridge Wells to improve our footprint in the South East and we are also relocating our Reigate office to Gatwick.

To the north of London, we have increased the size of our Cambridge office space as we see great further client opportunities in this region.

In the West Country, we acquired the staff and assets of Bath-based Epoch Wealth Management LLP ("Epoch") in August 2019, an independent financial planning firm with 38 members of staff. This provides a significant increase in our financial planning capacity and adds to our office footprint in an important part of the country.

All these new offices are led by financial planners. This once again highlights our commitment to advice-led growth, whilst also benefiting from our investment management expertise.

We are expanding our presence and scale in Ireland with the acquisition of Investec's Irish wealth management business, which completed on 31 October 2019. This makes us the third-largest discretionary wealth manager in the country. Ireland has a young, affluent population, and the market there has a growing demand for discretionary and advice-led wealth management services.

When acquiring these businesses, we assess each opportunity through three lenses: strategic fit with our business; commercial and financial benefits; and cultural fit. This third point is an important and often overlooked element of bringing businesses together. Having recognised that each of these businesses shares our values, we are confident that we can integrate them successfully into the Group, retaining their people and clients, and securing the commercial benefits.

Professional services

Two years ago, we launched our professional services proposition, with a particular focus on family lawyers and corporate advisers. Since then, we have built successful relationships with many professionals in these areas and we are now seeing introductions and a strong flow of business.

To expand the Group's professional service offering further, we acquired Mathieson Consulting Limited in April 2019, a consultancy business that provides expert witness reports on pension valuations. This is a business that we have known and worked alongside for some time; we are comfortable with its values and it has clear opportunities for expansion. While it will continue to operate independently as a separate brand within the Brewin Dolphin Group, it complements the core business. There have already been opportunities to make introductions to the broader firm.

Scale matters

In our industry it is becoming ever more apparent that scale matters, as the cost of regulatory compliance increases in particular. Our relative scale therefore is a point of value, not just to ourselves, but also to smaller businesses that we provide services for through our intermediary channel, who can also benefit from our scale.

As regulation continues to expand - in areas such as the Senior Managers & Certification Regime ('SMCR') - our size means we can continue to manage the complexity that smaller businesses find more burdensome.

Investments in technology

Last year, we indicated that we would begin to make significant investments in our technology infrastructure, including the replacement of our core custody and settlement system, and our client management system. That development is now well under way and will provide a platform to support our future growth.

Our new client management system, Client Engage, will be delivered in Spring 2020. This has been a complex project which has required considerable investment over the last two years. The new platform will enable our advisers to become more effective and efficient in their handling of client relationships and client information.

In April 2019, we announced that we had appointed Avaloq to replace our core custody and settlement system. Avaloq is a pre-eminent provider of core software and digital technology to banks and wealth managers. Its robust and scalable software is used by over 150 wealth managers and banks globally. We expect the system to go live towards the end of 2020.

These two systems are key components of the strategic investment the Group is making to develop its services and client proposition. They will enable us to enhance the experience we provide for our clients and our own people and improve the efficiency of our business.

As part of these large programmes we have put in place governance to monitor and manage the delivery. This also ensures best practice procedures are used from top to bottom, with full control over risk management and spending.

During the year we made improvements to our MyBrewin client portal, with the release of MyBrewin apps for phones and tablets, enhancing our clients' experience. We recognise that people increasingly want to use a range of communication channels for different aspects of their relationship with us. Our clients see technology and a physical office network as complementary parts of an integrated client experience.

Talent

Our culture is incredibly important to our business. Ensuring we have the right talent in place is a fundamental aspect of this and we continue to focus on ensuring that a high ratio of staff is in direct client support roles.

This year we have seen continued success from our Financial Planning Academy, part-funded by the Apprenticeship Levy, which has taken its third intake and is an important part of developing our financial planning capability and capacity. We are also into the third year of our Executive Leadership Programme. By the end of this year, more than 50 of our senior managers will have benefited from this high-quality bespoke programme.

Our new London office

To deliver our growth strategy and accommodate our planned expansion, we will be moving our head office in 2022 to a new site opposite St Paul's Cathedral. We have secured this new building at a similar cost per square foot to refurbishing and remaining in our current office in Smithfield. It will offer a high-quality environment in a central location.

Looking ahead

The progress we have made over the past year means we can look ahead with considerable optimism.

Over the coming year, our priorities will be to integrate our new acquisitions and drive ongoing organic growth. We will also continue to commit considerable resource to delivering the change and technology projects that we are confident will put us in a strong position for the future.

With respect to Brexit, we are prepared and will take appropriate measures to address any eventualities that emerge, for our employees, clients and the business as a whole. We are well positioned to withstand market-wide stresses which may be triggered by Brexit.

All of this gives me confidence as I look forward. Brewin Dolphin is a business of great heritage. It is also focused on evolving as a modern business, empowering us to realise our vision of becoming the leading discretionary wealth manager in the UK and Ireland.

David Nicol

Chief Executive26 November 2019

FINANCIAL REVIEW

Delivering a robustfinancial performance

Results for the year

The Group's financial performance for the year to 30 September 2019 was robust against a backdrop of economic uncertainty, delivering organic growth across both our channels.

Profit before tax and adjusted items ('adjusted PBT') was £75.0 million (2018: £77.5 million) reflecting the investment the Group continues to make in growth initiatives and its infrastructure in line with its strategic objectives. The adjusted PBT margin was 22.1% (2018: 23.6%) as the Group makes investments for future growth.

Statutory profit before tax ('statutory PBT') was 8.6% lower than last year at £62.6 million (2018: £68.5 million). Statutory PBT margin for the period was 18.5% (2018: 20.8%).

Adjusted diluted earnings per share ('EPS') fell by 5.5% to 20.5p (2018: 21.7p), partly reflecting the increased number of shares following the equity share issue in May 2019, ahead of the completion of the acquisition of Investec Capital & Investments (Ireland) Limited ('ICIIL'). Statutory diluted EPS was 16.6p (2018: 18.9p).

1. Adjusted items are amortisation of client relationships and brand, defined benefit pension scheme past service costs, acquisition costs, incentivisation awards, onerous contracts, FSCS levy refund and other gains and losses.

2. See note 9.

Explanation of profit before tax and adjusted items and reconciliation to Financial Statements

Profit before tax and adjusted items ('adjusted PBT'), adjusted diluted EPS and adjusted PBT margin ('adjusted measures') are used to measure and report on the underlying financial performance of the Group, aiding comparability between reporting periods. The Board and management use adjusted measures for planning and reporting. They are also useful measures for investors and analysts.

Additionally, some of the adjusted performance measures are used as Key Performance Indicators, as well as for performance measures for various incentive schemes, including the annual bonuses of Executive Directors and long-term incentive plans.

These adjusted profit measures are calculated based on statutory PBT adjusted to exclude various infrequent or unusual items of income or expense. The Directors consider such items to be outside the ordinary course of business. Income or expenditure adjusted for are shown in the reconciliation below and meet the criteria.

Some adjusted for items of income or expense may, like onerous contracts costs, recur from one period to the next. Although these may recur over one or more periods, they are the result of events or decisions which the Directors consider to be outside the ordinary course of business, such as material restructuring decisions to reduce the ongoing cost base of the Group that do not represent long-term expenses of the business. Likewise, costs related to acquisitions are also infrequent by their nature and therefore are excluded. Incentivisation awards costs in relation to acquisitions that are payable for a predetermined period of time, are adjusted for on this basis.

Additionally, the amortisation of acquired client relationships and brand is an expense which investors and analysts typically add back when considering profit before tax or earnings per share ratios.

Reconciliation of profit before tax and adjusted items to statutory profit before tax

Funds

Total funds grew by 5.1% to £45.0 billion as at 30 September 2019 (2018: £42.8 billion) driven by strong total net flows of £1.3 billion, investment performance of £0.6 billion and acquired funds of £0.3 billion as a result of the acquisition of the client relationships of Epoch in August 2019.

Total discretionary funds grew by 6.6% to £40.1 billion including acquired funds of £0.3 billion. Gross inflows were £2.8 billion (2018: £3.2 billion) with 43% now coming from direct business (2018: 34%). Gross outflows reduced to £1.2 billion (2018: £1.3 billion) and internal transfers were £(0.2) billion, a reduction from last year which saw significant internal transfers from the advisory service into discretionary services. Net fund inflows of £1.4 billion (2018: £2.3 billion) represents a growth rate of 3.7% (2018: 6.8%), a resilient result considering market conditions.

Total direct organic discretionary funds increased 3.6% to £26.0 billion, excluding acquired funds of £0.3 billion (2018: £25.1 billion). The growth in direct funds was driven by another year of strong organic gross inflows of £1.2 billion (2018: £1.1 billion). Gross outflows were lower at £0.7 billion (2018: £0.9 billion) reflecting strong client retention. Net new funds into this service (excluding transfers) of £0.5 billion (2018: £0.2 billion) represent a significant increase in the growth of the direct discretionary business. Acquired funds of £0.3 billion brings total direct discretionary funds to £26.3 billion total a growth of 4.8%.

Private client direct discretionary funds (excluding acquired) grew 3.4% to £21.1 billion (2018: £20.4 billion). Inflows from integrated wealth management services accounted for over 50% of total private client inflows with 21% of private clients' funds now in this service. Flows from 1762 from Brewin Dolphin are starting to gain momentum.

Growth in direct discretionary charities and corporates of 4.3% remains in line with previous years.

Indirect funds grew 10.4% to £13.8 billion (2018: £12.5 billion). The intermediaries business saw lower gross inflows of £0.9 billion (2018: £1.5 billion) in line with subdued client activity seen across the industry. Outflows of £0.5 billion remain stable and in line with prior year. MPS had another outstanding year and grew by 26.7% to £3.8 billion and accounted for 63.6% of indirect net flows in the year.  

Income

Total income increased by 3.1% to £339.1 million (2018: £329.0 million) and is analysed as follows:

Direct discretionary income grew by 2.8% to £217.5 million (2018: £211.6 million) driven by direct discretionary funds growth, excluding acquired funds, of 3.6% (2018: 7.3%) with much of the growth coming from direct private clients.

Income from our indirect discretionary business grew by 7.0% to £76.8 million (2018: £71.8 million) and remains resilient in light of the recognised industry slowdown in the intermediaries sector.

MPS income grew strongly to £9.1 million (2018: £7.6 million) with the business continuing to attract new inflows from a range of platforms. This now represent 11.8% of indirect discretionary income (2018: 10.6%).

Financial planning income increased by 12.2% to £27.5 million (2018: £24.5 million) reflecting the continued growth of our advice-led wealth management service, a key element of the Group's strategy for growth.

Advisory income fell, as expected, by £4.0 million to £2.5 million in line with the lower advisory funds.

Other income consists of interest income and fee income from Mathieson Consulting Limited, the newly acquired expert witness report writing business. The increase of £0.5 million to £3.3 million (2018: £2.8 million) is wholly attributable to this new business which is performing well with good demand for its service.

Total discretionary fee income grew by 3.6% to £231.7 million (2018: £223.7 million) driven by the growth in total organic discretionary funds of 5.9%. Total discretionary commission income increased by £2.9 million to £62.6 million (2018: £59.7 million) as a result of a small increase in activity.

Income margin1

Overall income margin at 71.8bps was slightly lower than 2018 (72.5bps).

1. The 2019 income margins are calculated as total income over the average funds at the end of each fee billing quarter for the year and the 2018 income margins were calculated as total income over the average funds at the end of each calendar quarter for the year.

The overall blended margin across all our discretionary services declined to 77.2bps (2018: 78.7bps), largely attributable to the changing mix of our business, our strategy of focusing on financial planning advice and tiering across our pricing bands as our business and client funds grow.

The margin for direct discretionary business reflects the changing business mix as the proportion of integrated service increases. This revenue mix is expected to continue to change over time as financial planning income together with 1762 from Brewin Dolphin becomes a larger part of our business.

The blended margin for MPS has decreased to 27.0bps (2018: 27.9bps) due to the impact of tiering as the MPS funds grow.

Costs (excluding adjusted1 items)

1. Adjusted items are amortisation of client relationships and brand, defined benefit pension scheme past service costs, acquisition costs, incentivisation awards, onerous contracts, FSCS levy refund and other gains/losses.

Total operating costs before adjusted items were 5.3% higher at £265.7 million (2018: £252.3 million) driven by investment spend into key growth and infrastructure initiatives.

These comprised of £126.7 million of fixed staff costs (2018: £117.1 million) and £80.8 million of other operating costs (2018: £77.5 million). The increase in staff costs of £9.6 million reflects increased headcount in 1762 from Brewin Dolphin, financial planning, the impact of acquisitions in the year and salary inflation. In addition, we have increased headcount to manage the delivery of our infrastructure projects; our new client management system and the replacement of our custody and settlement system.

The increase in non-staff costs reflects a full year of 8 Waterloo Place property costs, a higher FSCS levy of £3.1 million consistent with the increase experienced across the industry and higher infrastructure project costs.

Variable staff costs are 0.9% higher year on year and include profit share, share based payments related costs for prior years deferred profit share awards and long-term incentive plan awards.

The Group has incurred £16.7 million of capital expenditure in 2019, significantly higher than the £8.3 million in 2018. This is in line with the strategy to invest in growth initiatives, infrastructure and client facing systems. Included within capital expenditure are £4.0 million of costs for 8 Waterloo Place and the increased office network in the south of England. The replacement of our core custody and settlement system is on track and making good progress. We expect to invest a further £30.0 million in 2020 on this infrastructure upgrade. Two-thirds of this is expected be in the custody and settlement system, in addition to the £5.6 million in the current year, and is expected to be capitalised as a software intangible asset on the balance sheet. The remainder will be in both property and the client management system.

Adjusted items

Adjusted items for the year were higher at £12.4 million (2018: £9.0 million) and included one-off costs in relation to past service costs for the defined benefit pension scheme of £1.9 million and acquisition costs of £2.3 million for the acquisitions during in the year.

Other adjusted items were in relation to incentivisation awards of £0.3 million and onerous contracts of £1.0 million following a reassessment of the likelihood of subletting the onerous space in Newcastle and the recognition of a new onerous lease.

Amortisation of client relationships reduced to £6.8 million (2018: £7.6 million) as previously acquired client relationships reached the end of their amortisation periods. With the new acquisitions in 2019 the amortisation charge will increase next year.

Acquisitions

During the year to 30 September 2019 we completed three acquisitions that further broaden and enhance our financial planning capabilities, diversify our routes to market and broaden our footprint in strategically attractive parts of the UK. Resulting in a total financial commitment of £24.6 million of which £12.7 million has been settled in the year and the balance is deferred and contingent on performance conditions.

Both the acquisition of Epoch and Aylwin are financial planning businesses and deepen our capabilities. The acquisition of Mathieson Consulting, an expert witness report writing business, broadens our professional services offering. Further details of the acquisitions are provided in note 15.

On 31 October 2019, the Group completed the acquisition of Investec Capital & Investments (Ireland) Limited ('ICIIL'); the wealth management business of Investec Group in Ireland. The net consideration after adjustments for surplus capital was €44.1 million. Assets under management and advice were €3.1 billion as at 30 September 2019.

The impact of all these acquisitions is expected to contribute approximately £7.0 million in profit before adjusted items and tax for 2020.

Defined benefit pension scheme (the 'Scheme')

The final salary pension scheme surplus has increased to £17.4 million (2018: £11.4 million). The actuarial gain for the year was £5.6 million (2018: £3.8 million). A past service cost of £1.9 million in relation to the equalisation of Guaranteed Minimum Pensions ('GMP') across males and females has been recognised in the Income Statement and excluded from adjusted measures, as it is a one-off item.

Under International Accounting Standard 19 ('IAS 19'), large annual fluctuations can occur. The increase in the surplus has been driven by contributions to the Scheme, updated post-retirement mortality assumptions that incorporate the latest mortality projection models, and asset returns have been higher than expected over the year mainly as a result of hedging assets matching the Scheme's funding liabilities. These increases were partially offset by a significant increase in the value of liabilities reflecting the application of a lower discount rate as a result of the fall in corporate bond yields. The increases were also offset by the impact of the equalisation GMP.

The Group has agreed to pay additional contributions of £1.25 million per annum until December 2020 into the Scheme (see note 17 to the 2019 Annual Report and Accounts for further detail).

IFRS 16 Leases

A new accounting standard for leases will be applicable to the Group next year. The standard relates to operating leases; all of the properties used by the Group are on operating leases. The standard will result in the recognition of a right of use asset and corresponding lease liability on the Group's balance sheet. Additionally, the standard changes the pattern of recognition of costs in relation to these assets; instead of expensing the rental cost on a straight line basis within operating expenses, there will be both depreciation and finance costs. The operating leases being more expensive in their earlier years reflecting the finance costs. See note 2c for the expected impact to the Balance Sheet. The impact of this change in accounting is expected to decrease profit before tax by approximately £1.0 million in 2020 based on the lease portfolio of the Group.

Dividend

In determining the level of dividend in any year, the Board considers a number of factors such as: the level of distributable reserves; the future cash commitments and investments needed to sustain the long-term growth of the Group; the level of dividend cover; and anticipated regulatory capital requirements.

The Company is the parent company of the Group and is a non-trading investment holding company. It derives its distributable reserves from dividends received from its subsidiaries, of which Brewin Dolphin Limited is the principal operating subsidiary.

Before the Board proposes any interim or final dividend it satisfies itself that there will be sufficient distributable reserves in the Company at the respective payment dates.

The distributable reserves of the Company comprise £38.4 million of the merger reserve (see note 25 to the 2019 Annual Report and Accounts) and the majority of the balance of the profit and loss reserve.

The Group is well positioned to continue funding dividend payments in accordance with the Dividend policy. The ability to maintain future dividends will be influenced by a number of the principal risks identified that could adversely impact the performance of the Group.

The majority of the cash resources are held by the principal operating subsidiary Brewin Dolphin Limited. Further details of the Group's cash flow can be found below. Details of the Group's continuing viability and going concern are set out further below.

Capital resources and regulatory capital

The Group's financial position remains very strong with net assets increasing to £337.7 million at 30 September 2019 (2018:£273.7 million). The increase in net assets is in part attributable to the cash raised in May 2019 following the share placing ahead of the acquisition of ICIIL which completed post 30 September 2019; the total cash raised was £58.4 million after costs.

At 30 September 2019, the Group had regulatory capital resources of £215.9 million (2018: £180.8 million), see note 16. 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.

Following the completion of the acquisition of ICIIL, the net assets of the Group on a proforma basis are £183.1 million.

The Group's Pillar III disclosures are published annually on our website and provide further details about regulatory capital resources and requirements.

Cash flow

The Group had a cash inflow for the period of £43.0 million (2018: £16.2 million) and total net cash balances of £229.2 million as at 30 September 2019 (2018: £186.2 million).

The Group raised capital of £58.4 million in the year through an equity placing of Brewin Dolphin Holdings PLC shares in May 2019.

Adjusted EBITDA (see table below) was £85.1 million (2018: £92.0 million). Capital expenditure of £15.3 million was significantly higher than last year (2018: £8.2 million), as a result of the infrastructure spend. The purchase of client relationships of £10.0 million (2018: £0.1 million) resulted from the acquisition of Epoch. The contribution to the defined benefit pension scheme of £2.0 million was £1.0 million lower year on year.

Cash outflow for own share 'matching' purchases in the year of £8.9 million to match the awards made in 2018 for the Deferred Profit Share Plan (DPSP) awards was lower than 2018 (£13.5 million) which included the purchase of shares to cover the Long-Term Incentive Plan (LTIP) awards granted in December 2014, 2015 and 2016 as well as the matching shares for the DPSP awards for 2017. All past awards are largely matched except for the December 2017 and 2018 LTIP awards. Shares were also purchased (£0.2 million) for the Share Incentive Plan.

Dividends paid in the period increased by 10.6% to £46.0 million (2018: £41.6 million).

KEY PERFORMANCE INDICATORS

Measuring the success of our strategy

Delivery of our strategy is measured through focused and select KPIs that demonstrate continued progress to build and grow our business.

Measuring our performance

Key Performance Indicators ('KPIs') are used to measure both the progress and success of our strategy implementation. The KPIs for each objective are set out below.

Changes to KPIs

During the year, we have reviewed our measurements to ensure that they are appropriate for our strategy. We have removed the following KPIs as we believe they are no longer relevant and have explained why below:

• Discretionary service yield: this is an output of the charge we make to clients and as such is not a target.

• Average client portfolio size: the metric is an output rather than an efficiency metric and we believe discretionary funds per CF30 is a better metric.

Additionally, the KPI for dividend which was shown as the total dividend for the year has been replaced with the dividend payout ratio. This ratio, along with the capital adequacy risk appetite ratio and adjusted1 diluted EPS measure, have been presented as part of capital efficiency and shareholder return.

KPIs

1. Adjusted items are amortisation of client relationships and brand, defined benefit pension scheme past service costs, acquisition costs, incentivisationawards, onerous contracts, FSCS levy refund and other gains and losses.

2. See note 9.

3. Scored out of 10.

PRINCIPAL RISKS AND UNCERTAINTIES

Managing our risks

Effective risk management is key to the success of delivering our strategic objectives. Our risk culture continues to strengthen; it ensures identification, assessment, and management of the principal risks to our business.

We have a defined risk appetite which enables us to effectively manage the potential upside and downside risks of our strategy.

A number of our principal risks correspond to our growth strategy. Examples include where we continue to develop new propositions, increasing the spectrum of our offerings, to meet a broader range of client needs, and where we have undertaken acquisitions resulting in inorganic growth. In addition, our Change Management Programme is focused on enhancing our technology infrastructure to support future growth.

The primary objectives of risk management at Brewin Dolphin are to ensure that there is:

• a strong risk culture so that employees are able to identify, assess, manage and report against the risks the business is faced with;

• a defined risk appetite within which risks are managed;

• a swift and effective response to incidents in order to minimise impact; and

• an appropriate balance between risk and the cost of control.

Our approach is to maintain a strong control framework to identify, monitor and manage the principal risks we face, adequately quantify them and ensure we retain sufficient capital in the business to support our strategy for growth.

We assess our principal risks regularly to ensure that our risk profile is within our risk appetite which is set by the Board. Annual risk workshops are attended by both the Risk Committee and the Executive Committee.

Risk management process

We categorise risks into risk groups covering potential impacts to clients, revenue, capital and reputation. The three risk groups are:

• Business risks;

• Financial risks; and

• Operational risks.

Our risk management process involves the identification and assessment of specific risks within these risk groups, mitigation and management of these risks, and monitoring and reporting against these risks, which provides the foundation to enable us to deliver against our strategic objectives.

Risk Management Framework

The Board has established a Risk Management Framework to ensure there is effective risk governance. The Board promotes a strong risk culture and expects every employee within the Group to adhere to the standards established by the Board.

The Board encourages a strong risk culture throughout the business by promoting:

• A distinct and consistent tone from the top;

• Clear accountabilities for those managing risk;

• Prompt sharing and reporting of risk information;

• A commitment to ethical principles;

• Appropriate levels of conduct and considered risk taking behaviour;

• Recognition of the importance of knowledge, skill and experience in risk management;

• Members of staff at all levels to escalate events and make suggestions for improving processes and controls; and

• An acceptance of the importance of continuous management of risk, including clear accountability for and ownership of specific risks.

The benefits of establishing a strong risk culture is evident; with our employees self-identifying and escalating risk events and potential issues to mitigate the probability of risks crystallising.

We follow industry practice for risk management through the "three lines of defence" model. The first line is the business that owns and manages the risk, the second consists of the control functions that monitor and facilitate the implementation of effective risk management practices, and the third line is independent assurance provided by internal audit.

The Board reviews the effectiveness of this Risk Management Framework, receiving reports on internal control from the Audit and Risk Committees and debating key risks for the Group following more detailed work by the Risk Committee.

The key parties involved in the risk management process within the Group and their respective responsibilities and an explanation of how risk management is structured within the Group, is set below.

Responding to risks

• We have developed our approach to horizon scanning, enhancing the processes for identification, assessment and monitoring of potential and planned external changes that potentially impact the firm and its clients.

• We once again conducted an in-depth risk workshop with our Risk Committee and Executive Committee members to review the risks facing the Group.

• Uncertainty in financial markets has continued along with a changing political environment in the UK.

o We model severe market wide scenarios to stress test our funds under management, profit, cash, and regulatory capital.

o We have a Brexit Steering Committee in place to coordinate the Group's preparation for EU withdrawal.

• We have enhanced governance and Board level oversight of change management, including acquisitions providing oversight and management of associated risks.

• We continue to focus on the pipeline of regulatory change, including our preparations for SMCR, which comes into effect in December 2019.

• To further develop our operational resilience, we have continued to train our crisis management teams and test our strategic, tactical and operational responses to potential scenarios. We have developed our testing of physical security, systems, processes and people, by engaging an independent party to act undercover and simulate attacks. In addition, we have increased focus on vendors, with a third-party security specialist in place to verify that the third parties we engage with have acceptable resilience capabilities.

• We have been embedding a monitoring dashboard which covers an array of portfolio metrics to reduce conduct risk. The dashboard is overseen by our first line monitoring team, our Regional Directors and Heads of Office, and governance committees.

• In addition, we have been focusing on the alignment and aggregation of all risk-related data into a single application to provide a holistic view and new insights into potential risks.

Principal Risks and Uncertainties

The tables below detail the principal risks and uncertainties we have identified, it is not an exhaustive list of all of the risks the Group faces. We have a process to regularly report key risk indicators and identify changes in the profile of these principal risks. We also consider emerging risks as part of this process.

Key to our strategic outcomes

RG Revenue growth

IE Improved efficiency

CS Capital efficiency and shareholder return

Business risks

These are the risks that we do not set the right strategy, a material business decision fails, or external market factors impact the businesses viability. This could include an inability to introduce or enter into new business lines effectively, to expand organically or through merger/acquisition, or to enhance the effectiveness of our operational infrastructure. In addition to the principal risk specified, we monitor the external environment and model the potential impact of different potential geopolitical scenarios as part of our stress testing programme.

Financial risks

These are the risks facing our business in terms of inadequate or failed management of finances and the risk introduced by external factors that could have a detrimental impact to our cash flow, capital and liquidity.

Operational risks

This is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

Viability Statement

The Directors have assessed the outlook of the Group over a longer period than the 12 months required by the going concern statement in accordance with the UK Corporate Governance Code.

The assessment is based on the Group's Medium Term Plan ('MTP'), the Internal Capital Adequacy Assessment Process ('ICAAP') and the evaluation of the Group's principal risks and uncertainties, including those risks that could threaten its business model, future performance or solvency.

The Group maintains a five-year MTP as part of its corporate planning process, which is a financial articulation of the Group's strategy. The financial forecasting model is predicated on a detailed year-one budget and higher level forecasts for years two to five.

As a matter of good practice and as part of the ICAAP required by the Financial Conduct Authority ('FCA'), the Group performs a range of stress tests including reverse stress tests. These assess the Group's ability to withstand a market-wide stress, a Group- specific (idiosyncratic) stress and a combined stress taking into account both market-wide and Group-specific events. The stress tests are derived through discussions with senior management, are deemed to be severe but plausible, after considering the principal risks and uncertainties faced by the Group. The scenarios involved are refreshed on an at least annual basis or sooner if a trigger event occurs to ensure they remain current.

The stress tests enable the Group to model the impact of a variety of external and internal events on the MTP; to identify the potential impact of stress events on the Group's income, costs, cash flow and capital; and the Board to assess the effectiveness of any management actions that may be taken to mitigate the impact of the stress events.

The reverse stress tests allow the Board to assess scenarios and circumstances that would render its business model unviable.

This enables the identification of potential business vulnerabilities and the development of potentially mitigating actions.

Throughout the year the Group has continued to evaluate the potential risks and opportunities of the UK leaving the European Union. Although there still remains uncertainty on the final outcome of the negotiations, a range of potential scenarios have been considered and the potential impacts on our clients, the Group and the wider industry have been assessed. This analysis does not present any reason to believe the Group will not remain viable over the longer term. The Group will continue to engage with industry bodies, regulators and clients to further understand these impacts and manage the associated risks.

Following the assessment of the above, the Board concluded that the Viability Statement should cover a period of five years. While the Directors have no reason to believe that the Group will not be viable over a longer period, this period has been chosen to be consistent with the MTP used as part of the Group's corporate planning process.

Taking account of the Group's current position and principal risks and the Board's assessment of the Group's prospects, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over a period of at least five years.

Going concern

The Group's business activities, performance and position, together with the factors likely to affect its future development are set out in the Chairman's Statement, the Strategic Report and the report of the Risk Committee.

The Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit risk and liquidity risk are described in note 16.

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 has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis for the preparation of the Financial Statements. In forming their view, the Directors have considered the Group's prospects for a period exceeding 12 months from the date on which the Financial Statements are approved.

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF BREWIN DOLPHIN HOLDINGS PLC ON THE PRELIMINARY ANNOUNCEMENT OF BREWIN DOLPHIN HOLDINGS PLC

As the independent auditor of Brewin Dolphin Holdings PLC ("the company") we are required by UK Listing Rule LR 9.7A.1(2)R to agree to the publication of Brewin Dolphin Holding PLC's preliminary announcement statement of annual results for the period ended 30 September 2019.

The directors of Brewin Dolphin Holdings PLC are responsible for the preparation, presentation and publication of the preliminary statement of annual results in accordance with the UK Listing Rules.

We are responsible for agreeing to the publication of the preliminary statement of annual results, having regard to the Financial Reporting Council's Bulletin "The Auditor's Association with Preliminary Announcements made in accordance with UK Listing Rules".

Status of our audit of the financial statements

Our audit of the annual financial statements of Brewin Dolphin Holdings PLC is complete and we signed our auditor's report on 26 November 2019. Our auditor's report is not modified and contains no emphasis of matter paragraph.

Our audit report on the full financial statements sets out the following key audit matters which had the greatest effect on our overall audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those key audit matters and the key observations arising from our work:

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.

Procedures performed to agree to the preliminary announcement of annual results

In order to agree to the publication of the preliminary announcement of annual results of Brewin Dolphin Holdings PLC we carried out the following procedures:

(a) checked that the figures in the preliminary announcement covering the full year have been accurately extracted from the audited or draft financial statements and reflect the presentation to be adopted in the audited financial statements;

(b) considered whether the information (including the management commentary) is consistent with other expected contents of the annual report;

(c) considered whether the financial information in the preliminary announcement is misstated;

(d) considered whether the preliminary announcement includes a statement by directors as required by section 435 of CA 2006 and whether the preliminary announcement includes the minimum information required by UKLA Listing Rule 9.7A.1;

(e) where the preliminary announcement includes alternative performance measures ("APMs"), considered whether appropriate prominence is given to statutory financial information and whether:

·; the use, relevance and reliability of APMs has been explained;

·; the APMs used have been clearly defined, and have been given meaningful labels reflecting their content and basis of calculation;

·; the APMs have been reconciled to the most directly reconcilable line item, subtotal or total presented in the financial statements of the corresponding period; and

·; comparatives have been included, and where the basis of calculation has changed over time this is explained.

(f) read the management commentary, any other narrative disclosures and any final interim period figures and considered whether they are fair, balanced and understandable.

Use of our report

Our liability for this report, and for our full audit report on the financial statements is to the company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.

Robert Topley FCA (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

26 November 2019

Consolidated Income Statement

Year ended 30 September 2019

Consolidated Statement of Comprehensive Income

Year ended 30 September 2019

Consolidated Balance Sheet

As at 30 September 2019

1. Presented following the adoption of IFRS 9 Financial Instruments - see notes 2 and 18 for more detail.

Approved by the Board of Directors and authorised for issue on 26 November 2019.

Signed on its behalf by

Consolidated Statement of Changes in Equity

Year ended 30 September 2019

1. A cumulative debit of £81k has been recognised in the profit and loss account reserve as at 30 September 2019 for exchange differences on translation of foreign operations (2018: £14k debit, 2017: £49k debit).

Company Balance Sheet

As at 30 September 2019

Approved by the Board of Directors and authorised for issue on 26 November 2019.

Signed on its behalf by

Company Statement of Changes in Equity

Year ended 30 September 2019

Consolidated Cash Flow Statement

Year ended 30 September 2019

Company Cash Flow Statement

Year ended 30 September 2019

1. General information

The financial information contained in this preliminary announcement does not constitute the Group's and the Company's Statutory Financial Statements for the period ended 30 September 2019 within the meaning of section 435 of the Companies Act 2006.

The financial information set out in this preliminary announcement has been extracted from the Group's and the Company's 2019 Annual Report and Accounts, which have been approved by the Board of Directors on 26 November 2019 and agreed with Deloitte LLP, the Company's Auditor. The Auditor's Report was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Whilst the financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") the preliminary announcement does not contain sufficient information to comply with IFRS.

The accounting policies used are consistent with those set out in note 3 to the 2018 Annual Report and Accounts which have been delivered to the Registrar of Companies, with the exception of 3h.revenue recognition and 3q.financial instruments which have been updated following the new revised standards adopted, see note 2b below for more information. The revised accounting policies for these are set out in note 21. Additionally, there are new accounting policies for derivative financial instruments and hedging activities; shares to be issued including premium and intangible asset - brand, these are also set out in note 21.

The critical accounting judgements and key sources of estimation uncertainty are set out in note 3.

The 2019 Annual Report and Accounts will be posted to shareholders during January 2020. Copies will be available from the registered office of the Company, 12 Smithfield Street, London, EC1A 9BD. It will also be available on the Company's website www.brewin.co.uk.

2. Application of new and revised International Financial Reporting Standards ('IFRSs') and changes in accounting policies

a. New standards, amendments and interpretations adopted

The following new and revised standards and interpretations have been applied in the current year:

• IFRS 15 Revenue from Contracts with Customers; and

• IFRS 9 Financial Instruments.

Both standards were adopted from 1 October 2018 and under the transition methods chosen, comparative information has not been restated, however, the Balance Sheet has been reclassified. Further information and changes to significant accounting policies as a result of the application of these standards for the first time are described below in note 2b.

The Group adopted the amendments to IFRS 2 Classification and Measurement of Share Based Payments Transactions in the current period. This did not result in a significant impact on the amounts reported in these financial statements.

b. Changes in accounting policies

There have been no changes to accounting policies in the year except for the changes described below:

(i) IFRS 15 Revenue from Contracts with Customers

IFRS 15 replaced IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The core principle of IFRS 15 is that revenue reflects the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled.

Revenue is recognised in accordance with a principle based five-step model applied to all contracts with customers. The model determines when and how much revenue to recognise. Revenue is recognised when (or as) an entity satisfies a performance obligation by transferring promised goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether performance obligations expressed in the customer contracts are fulfilled, revenue is recognised either over time, in a manner that best reflects the entity's performance of those obligations, or at a point in time, when control of the goods or services is transferred to the customer. Any incremental cost of obtaining a customer contract is capitalised if that cost is expected to be recovered.

Transition

The Group has applied IFRS 15 using the cumulative effect method as an adjustment to the opening balance of equity at 1 October 2018. There have been no adjustments to opening retained reserves on transition. The comparative information has not been adjusted and continues to be reported under IAS 18.

Impact

The details of the significant changes and the conclusions adopted by the Group in applying the requirements of IFRS 15 to determine the transaction price and performance obligations specified in contracts with customers are explained below.

Transaction price

Revenue is measured based on the consideration specified in customer contracts, excluding amounts collected on behalf of third parties, that the Group is entitled to in exchange for transferring services to a customer. Where a contract contains variable consideration and provides the services over time the Group estimates the amount to which it is entitled under the contract. The Group constrains the estimate where there is a risk of significant revenue reversal and reassesses this estimate at the end of the relevant billing period when the variable consideration amount is known.

Services

The Group has considered when its services are delivered in determining when revenue is recognised. Its services are delivered both over time and at a point in time.

The Group has assessed all the services expressed in its contracts with customers and has identified several series of distinct services that are substantially the same and have the same pattern of transfer to the customer. All the services are highly interrelated and interdependent and are integrated to provide an overall service to the customer. The Group has identified bundles of services that constitute separate performance obligations; the majority of the performance obligations identified are satisfied over time.

For performance obligations that are satisfied over time the Group measures progress towards complete satisfaction of the performance obligations equally over time. It recognises income when the relevant performance obligation has been satisfied as the customer simultaneously receives and consumes the benefits of the services. For the performance obligations for services that are delivered at a point in time, the Group satisfies the performance obligations at the point of delivery and is simultaneously entitled to the revenue.

See note 4 on income for further information on the performance obligations and timing of revenue recognition.

Contract costs

The Group has assessed if payments to employees under various reward schemes meet the new criteria for capitalising incremental costs under IFRS 15. The Group has determined that it does not currently make incremental payments to employees to secure investment management or financial planning contracts. Consequently, none of the awards made under these schemes should be capitalised and the costs of these awards continue to be expensed through staff costs.

Introducer fees which are incremental costs incurred to obtain a contract with a client are capitalised if they meet the criteria for capitalising under the standard. These costs are amortised over the useful life of the client relationships.

Practical expedients

The Group does not have any financing arrangements in any of its contracts with customers and has adopted the practical expedient not to account for significant financing arrangements in any of its contracts with customers where consideration is received for services rendered within 12 months.

(ii) IFRS 9 Financial Instruments

IFRS 9 is effective for periods commencing on or after 1 January 2018 and replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard addresses classification, measurement and derecognition of financial assets and liabilities by introducing a new principle-based approach driven by the cash flow characteristics of the asset and the business model in which it is held. It also replaces the 'incurred loss' approach for impairment of financial assets under IAS 39 to a more forward looking 'expected credit loss' model. Under IFRS 9, the general hedge accounting requirements align hedge accounting more closely with risk management practices.

Transition

The Group has taken advantage of the exemption from restating comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Under the exemption, differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings as at 1 October 2018.

Impact

The details of the significant changes are set out below. Details of the quantitative impact of IFRS 9 are provided in note 18.

Classification and measurement

IFRS 9 requires financial assets to be classified into one of the following three measurement categories: fair value through profit or loss ('FVTPL'), fair value through other comprehensive income ('FVTOCI') and amortised cost. The held to maturity, loans and receivables and available-for-sale categories available under IAS 39 have been withdrawn. Classification is made on the basis of the objectives of the entity's business model for managing its financial assets and the contractual cash flow characteristics of the instruments.

The basis of classification for financial liabilities under IFRS 9 remains unchanged from under IAS 39 except for those designated at FVTPL. The Group has continued to classify all financial liabilities at amortised cost under IFRS 9, with no impact on measurement.

The following table shows the original measurement categories under IAS 39 and the new measurement categories and identified business models under IFRS 9 for each class of the Group's financial assets as at 1 October 2018. The majority of the Group's financial assets as at 1 October 2018 were managed within business models whose objective is solely to collect contractual cash flows (held to collect), except for those specified below.

Derecognition

The requirements for derecognition of financial assets and liabilities are broadly unchanged from IAS 39.

Impairment of financial assets

IFRS 9 makes fundamental changes to the impairment of financial assets measured at amortised cost or at fair value through other comprehensive income, lease receivables and certain commitments to extend credit and financial guarantee contracts. It is no longer necessary for a credit event to have occurred before credit losses are recognised. Instead, under IFRS 9, an entity always accounts for expected credit losses (ECLs), and any changes in those ECLs. The ECL approach requires an allowance to be established upon initial recognition of an asset reflecting the level of losses anticipated after having regard to the Group's historical credit loss experience and its expectation of future economic conditions.

Expected credit loss impairment model

The Group has applied a simplified approach to determine ECLs for trade receivables as permitted by IFRS 9. It has adopted the practical expedient to use a single loss-rate approach to determine lifetime expected credit losses since the Group has historically experienced low levels of bad debts from its trade debtors which are short term and do not contain significant financing components.

Applying the single loss-rate approach as at 1 October 2018 would have resulted in an immaterial ECL provision; consequently opening reserves have not been adjusted.

Presentation of ECL provision and impairment losses

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Impairment losses for financial assets (including trade debtors) are charged to the Income Statement.

c. New standards, amendments and interpretations issued but not effective

The table below sets out changes to accounting standards which will be effective for periods beginning on or after:

1. These amendments have not yet been endorsed by the EU.

The Directors are reviewing the impact of these new standards, amendments and interpretations and do not intend to adopt the standards early. It is not currently expected that these will have a material impact on the financial statements of the Group except as noted below.

The Directors have reviewed the impact of IFRS 16 Leases and an estimate of the expected impact on the consolidated financial statements of the Group is set out below.

IFRS 16 Leases

IFRS 16 supersedes IAS 17 Leases and was endorsed by the European Union during 2017. The standard is effective for periods commencing on or after 1 January 2019 and will first be applicable to the Group's accounting period ending 30 September 2020.IFRS 16 represents a significant change in the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single lessee accounting model.

Under the single lessee accounting model, a right of use asset and corresponding lease liability will be recognised which represents future lease payables with movements through the Income Statement. The movements through the Income Statement will be 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 will continue to classify leases as either operating or finance leases using similar principles as in IAS 17.

Transition

On transition to IFRS 16, the Group can choose to apply one of two transition methods:

• the full retrospective transition method, whereby IFRS 16 is applied to all its contracts as if it had always applied; or

• the modified retrospective approach with optional practical expedients.

The Group has considered the available transition options and has decided to apply the modified retrospective approach and the practical expedient that allows an entity not to reassess whether a contract is, or contains, a lease at the date of initial application of the standard.

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

Impact

The Group is primarily a lessee and is also a sub-lessor for a small number of property leases that have been identified as onerous. On adoption, lease agreements will give rise to both a right of use ('ROU') asset and a lease liability which represents the present value obligation of future lease payments.

Right of use assets

The ROU asset will be assessed for impairment annually (incorporating any onerous lease assessments) and will be 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. The depreciation charge will be recognised in the Income Statement.

Lease liabilities

The lease liability will be reduced by lease payments, offset by the unwinding of the liability over the lease term and amended for the impact of any lease modifications. Interest recognised on the lease liability will be charged to the Income Statement.

Impact on the Group's Financial Statements

The adoption of IFRS 16 will result in a significant increase in the Group's reported assets and liabilities on the balance sheet. The depreciation (of the ROU asset) and interest charges (unwind of the discounted lease liability) will replace the lease costs currently charged to other operating costs in the Income Statement on a straight-line basis. This will result in a change to the profile of the charge recognised in the Income Statement over the life of the lease; higher expenses will be recognised in earlier years of the lease, with a reduction in the annual expenses in the later years of the lease owing to the application of the actuarial method of accounting for the lease liability.

Subleases

The Group has identified certain property leases as onerous where there is surplus office space. For some of the onerous property leases, it sublets this surplus space and in these instances the Group acts as an intermediate lessor in the sublease. The Group expects to reclassify some of its subleases previously recognised as an operating lease under IAS 17 as a finance lease per IFRS 16.

Lessor accounting

As a result of the Group being an intermediate lessor for its finance subleases, it will derecognise the right-of-use asset relating to the head lease that it transfers to the sublessees and recognise the net investment in the subleases. Any differences between the right-of-use asset and the net investment in the subleases will be recognised in the Income Statement. The Group will retain the lease liabilities relating to the head leases on its Consolidated Balance Sheet, which represents the lease payments payable to the head lessor.

For subleases which are classified as an operating lease, the Group will retain the lease liability and the right-of-use asset relating to the head lease on its Consolidated Balance Sheet and recognises lease income from the sublease.

Assessment of the accounting impact of IFRS 16

The implementation of the new standard will have a material impact on the consolidated results of the Group. All leases will be recognised on a cumulative retrospective basis using the modified transition approach. Based on the information currently available, which is subject to change until the Group presents its first full financial statements that include the date of application, the Group estimates that it will recognise right of use assets of £42.5 million, lease liabilities of £57.8 million and a finance lease receivable of£2.2 million at 1 October 2019; as well as an adjustment to the opening retained reserves of £6.6 million net of deferred tax assets, onerous provisions and trade payables and receivables adjustments.

3. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

a. Critical judgements in applying the Group's accounting policies

i. Business combinations

The Group applies judgement in determining whether a transaction is a business combination, which includes consideration as to whether the Group has acquired a business or a group of assets. In making this judgement, the Group assesses the assets, liabilities, operations and processes that were the subject of the transaction against the definition of a business in IFRS 3.

The Group has during the year acquired the following:

• On 11 March 2019, the Group's principal operating subsidiary, Brewin Dolphin Limited ('BDL'), acquired 100% of the ordinary share capital of Aylwin Limited ('Aylwin'), an unlisted company based in Hampshire which specialises in the provision of financial planning services.

• On 1 April 2019, BDL acquired 100% of the ordinary share capital of Mathieson Consulting Limited ('MC'), a consultancy business, that provides an expert witness report service covering pensions.

• On 9 August 2019, BDL acquired the assets and staff of Epoch Wealth Management LLP ('Epoch'), an IFA firm based in Bath.

It has been judged that all of the above acquisitions should be accounted for as business combinations. Separate legal entities were acquired for both Aylwin and MC, including control of processes, assets and liabilities assumed. Whilst a legal entity was not acquired for Epoch, the trade and assets purchased constituted a business rather than a group of assets.

See note 15 for additional information.

b. Key sources of estimation uncertainty

i. Business combinations

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 Aylwin and Epoch acquisitions and the brand intangible asset recognised as part of the MC acquisition (as set out in note 3.a.i. above).

The value attributed to the client relationships and brand affects the amount of goodwill recognised. This value together with the assessment of useful economic lives of these intangible assets determines the future amortisation charges.

The valuation of the client relationship and brand intangible assets 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 the following separately identifiable intangible assets in relation to each of the acquisitions:

See notes 10 and 15 for further information.

An increase of 10% in the expected cash flows, applied equally over the cash flows in each period would increase intangible assets recognised by £7,680,000 approximately, whereas a decrease of 10% in the expected cash flows would reduce the intangible assets by £7,100,000 approximately. An increase or decrease of 10% in the discount rate would increase or decrease intangible assets by approximately £3,000,000, respectively.

ii. Amortisation of client relationships

The useful economic life over which client relationships are amortised is determined by the expected duration of the client relationships which are determined with reference to past experience of account closures, in particular the average life of those relationships, and future expectations. During the year, client relationships were amortised over periods ranging from 5 to 15 years.

The amortisation for the year was £6,858,000 (2018: £7,619,000). A reduction in the average amortisation period by one year would increase the amortisation expense for the year by £1,218,000 (2018: £1,583,000).

iii. Defined benefit pension scheme

The calculation of the present value of the defined benefit pension scheme is determined by using actuarial valuations. Management makes key assumptions in determining the inputs into the actuarial valuations, which may differ from actual experience in the future. These assumptions are governed by IAS 19 Employee Benefits, and include the determination of the discount rate, life expectancies, inflation rates and future salary increases. Due to the complexities in the valuation, the defined benefit pension scheme obligation is highly sensitive to changes in these assumptions. The detailed assumptions, including a sensitivity analysis, are set out in note 17 to the 2019 Annual Report and Accounts.

The defined benefit pension scheme has a surplus of £17,373,000 (2018: £11,408,000). See note 17 'Defined benefit pension scheme asset recognition basis' to the 2019 Annual Report and Accounts for further detail.

iv. Share-based payments

Long Term Incentive Plan ('LTIP')

Awards are granted under the LTIP. The scheme includes performance-based vesting conditions, which impact the amount of benefit paid, such as:

• Average annual net inflows in discretionary funds; and

• Growth in adjusted diluted EPS over the performance period.

Assumptions are made on the likelihood of meeting certain average and stretch targets over the remaining service periods in determining the expense in the year. The directors consider that the LTIP is qualitatively material. The charge for the year was £415,000 (2018: £1,830,000).

If all of the performance conditions were assumed to be met, the charge for the year would increase by £1,576,000 (2018: £519,000); an increase of 10% in the vesting assumptions would increase the charge for the year by £248,000 (2018: £295,000).

Further information on the scheme is disclosed in note 28 to the 2019 Annual Report and Accounts.

v. Provisions

Onerous leases

The Group recognises a provision for several onerous property leases of £4,840,000 (2018: £4,664,000). The valuation of an onerous lease is based on the best estimate of the likely future costs discounted to present value. Where the provision is in relation to premises and it is more likely than not that the premises will be sublet, an allowance for sublease income has been included in the valuation. The ultimate amount of the provision is dependent on the timing of any sublet and the associated terms of the sublet achieved.

If the assumptions regarding unconfirmed sublet income are removed, the provision would increase by £4,587,000 (2018: £3,917,000) to £9,427,000 (2018: £8,581,000). A delay of one year to the assumed sublets would increase the onerous lease provision and Income Statement expense for the year by £1,531,000 (2018: £1,259,000). Further information is disclosed in note 13.

4. Income

Group

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 (see note 21 to the 2019 Annual Report and Accounts).

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

Group

For management reporting purposes the Group currently has a single operating segment: the Wealth Management division. This forms the reportable segment of the Group for the year. Please refer to the Consolidated Income Statement and the Consolidated Balance Sheet for numerical information.

The Group's operations are carried out in the United Kingdom, Channel Islands and the Republic of Ireland. The operations in the Channel Islands and the Republic of Ireland are not material and accordingly geographical segmental disclosures are not included. All segmental income related to external clients. The accounting policies of the operating segment are the same as those of the Group.

6. Finance income and finance costs

Group

7. Income tax expense

Group