29th Nov 2006 07:01
Brewin Dolphin Holdings PLC29 November 2006 29 November 2006 Brewin Dolphin Holdings PLC Group Preliminary Results For the 52 week period to 30 September 2006 • Total income £174 million (2005: £145 million) • Discretionary funds £8.8 billion at 30 September 2006 (2005: £6.9 billion) • Profit before tax and exceptional item £32.0 million (2005: £24.6 million) • Profit before tax £32.0 million (2005: £17.8 million) • Earnings per share - Diluted earnings per share 10.6p (2005: 8.3p excluding exceptional item, 6.0p, including exceptional item) - Basic earnings per share 11.1p (2005: 8.7p excluding exceptional item, 6.2p, including exceptional item) • Total dividend 5.25p (2005: 4.5p) per share "It gives me great pleasure to present to Shareholders another set of robustfigures. While market conditions have been favourable there are a number ofother factors which have been significant in achieving the progress that we havemade. We have enjoyed the benefit of new teams joining us both in London andelsewhere in our branch network. We have also seen further migration fromadvisory to discretionary management as well as enjoying a steady inflow of newclients." Jamie Matheson, Executive Chairman For further information:- Jamie Matheson, Executive Chairman John Hall, Chief Executive Brewin Dolphin Brewin Dolphin 020 7248 4400 020 7248 4400 Toby Mountford Citigate Dewe Rogerson 020 7638 9571 / 07710 356611 Chairman's Statement It gives me great pleasure to present to Shareholders another set of robustfigures. While market conditions have been favourable there are a number ofother factors which have been significant in achieving the progress that we havemade. We have enjoyed the benefit of new teams joining us both in London andelsewhere in our branch network. We have also seen further migration fromadvisory to discretionary management as well as enjoying a steady inflow of newclients. Our Corporate Broking operations produced a very strong performance across theboard. Not only has there been an increased level of activity but also a markedincrease in the size of mandates won. All this strengthens our conviction and belief in our branch network and ouremphasis on our clients having both the freedom of choice and the ability tocommunicate directly with the individual manager who looks after theirinterests. During the year we opened an office in Keswick and since the yearend we have opened in Oxford and will shortly be opening in Hereford. We continue to invest in infrastructure in order to ensure that we provide anever improving service to clients. The year under review has seen a materialinvestment in our systems and in particular in the eXimius Data Managementservice. After some twenty five years we had to accept that we had finally outgrown ourold London premises at 5 Giltspur Street and we have been able to move to newpremises at 12 Smithfield Street. While we remain in the same locale the newpremises offer a much improved working environment both in which to meet and tolook after clients. It is a great credit to our personnel that this major movewas achieved with minimal disruption to the firm's efficient operations. Your Group remains committed to the attainment of the highest standards ofbusiness practice and is very conscious of the need to meet the requirements ofthe Financial Services Authority. At the same time we share the widely heldview that regulation must be constructed and administered in a manner that issensible, practical and relevant. To this end we are committed to workingclosely with the Regulator and Government at various levels. We welcome theFSA's decision to adopt a more principle based regime for regulation. At the time of the Interim Results I was able to report to you the appointmentof David McCorkell to the Board and he is already making a significantcontribution to the affairs of your Company. As a new appointment he will bestanding for election at the Annual General Meeting on 23 February 2007.Standing for re-election will be Michael Williams, our director responsible forthe Group's legal matters who orchestrated the superb deal which enabled us tomove into 12 Smithfield Street. Two of our Non-Executive Directors are also standing for re-election: Nick Hood,Senior Independent Director and Deputy Chairman: and Jock Worsley, Chairman ofthe Audit Committee; I commend them to you. I am very pleased to be able to tell you that our Chief Executive, John Hall,has recently been appointed Chairman of our Trade Association APCIMS, where weare confident he will make a significant contribution in the leadership of ourindustry. APCIMS has recently been at the forefront of negotiations in Brusselsand with the FSA, in seeking to reduce the impact of the introduction of MiFIDand increase the relevance of the proposals. As ever it would be foolhardy to become overly involved in short termpredictions about our markets but we remain committed to pursuing the Company'sobjective of achieving steady growth and returns for Shareholders through theprovision of a quality service to our clients. As is always the case, the results achieved in the year under review have beendone so thanks to the hard work of our people and the continued support of ourclients. Once again your Company is firmly committed to pursuing theachievement of a satisfactory outcome for the year ahead. Jamie Matheson28 November 2006 Chief Executive's Report Some years it is much easier to write the report to shareholders than others andthe past 12 months certainly comes into this category. The investment climatethroughout the period has remained relatively benign. The market's performanceas measured by the FTSE 100 Index has risen by less than 10% but if one ignoresa blip in May and June, it has in fact presented a relatively stable backgroundagainst which to advise our clients. We have however strengthened your Groupin a number of ways and broadened the offering to our clients and this has shownthrough in our results. The group's profits before tax for the year ending 30September 2006 amounted to £32m against £24.6m (before exceptional item) a yearago, an increase of 30%. However within operating expenses there is an item of£1.2m relating to the one-off cost of moving to our new Head Office, to whichour Chairman alludes in his statement and if one were to add that back theincrease would be 35%. These profits were earned on total income of £174magainst £145m last year, an increase of 20%. We have, as in previous years, made two interim dividend payments rather than aninterim and a final, in order to distribute the dividends in April and October. A first interim dividend of 2.5p per share (2p per share in 2005) was paid on6 April 2006. A second interim dividend was paid on 25 October 2006 of 2.75pper share against 2.5p per share the previous year, making a total for the yearof 5.25p per share against 4.5p per share in the previous year, an increase of17%. Fully diluted earnings per share were 10.6p which compares with 8.3p if lastyear's exceptional item is excluded, an increase of 28%; 33% if one adjusts formoving costs. Basic earnings per share were 11.1p which compares with 6.2p pershare previously, an increase of 79%. During the past year we have made further good progress in building thediscretionary funds that we manage. In my report a year ago, I outlined thecase for discretionary management and there is no doubt that it enables us togive a better service to our clients and at the same time, by switching theemphasis to a fee based charge, we are underpinning our earnings forshareholders. The value of discretionary funds under our management rose to£8.8 billion at the year end from £6.9 billion a year previously, an increase of28%. This highly satisfactory performance reflects in part a rise in theunderlying values, although the FTSE 100 Index only rose 8.8% over the sameperiod, and in part switching from advisory to discretionary management.However, by far the largest reason for this excellent performance was thewinning of new mandates and clients following those who have joined us fromother houses. Private Client Investment ManagementValue of Funds 2006 2005 £bn £bn Discretionary portfolio management 8.8 6.9Advisory portfolio management 10.1 10.0 18.9 16.9 Responding to our clients' requirements we are now providing a broader wealthmanagement package for those that require it. Our financial planners offerparticular expertise on personal pensions and inheritance tax planning and theyhave held a number of highly successful seminars around the country. We havenow established a SIPP administration service through which we providepersonalised portfolios for our clients. Last year the financial planningteam's turnover rose 76%. Their figures are contained within the income earnedon portfolio management set out below. Total Operating Total Operating Income Profit Income Profit* 2006 2006 2005 2005 £m £m £m £m Discretionary portfolio management 84.9 12.4 69.2 9.6Advisory portfolio management 66.6 9.2 61.2 7.8 151.5 21.6 130.4 17.4 * before exceptional item We have been particularly glad to welcome an additional 38 senior clientexecutives and their clients who have joined us over the past year. It alwaystakes a few months for these transfers to be completed and accordingly the fullbenefit of these additions will not be felt until the current year. London hasbenefited the most, where we have welcomed an additional 23 senior clientexecutives and 10 assistants. In total, we now have 137 client advisers in ourLondon office and 574 groupwide. The Belfast office, which we opened last year, continues to be strengthened. Since the year end we were delighted to announce the purchase of the Bank ofIreland's Northern Ireland private client investment management business whichwill be run by our Belfast office. In August we agreed the purchase of Aberdeen Private Investors from AberdeenAsset Management and the successful transfer of £200 million client fundsfollowed. This further strengthens our Aberdeen branch and also represents avaluable addition to our Glasgow branch. During the year we opened a new branch in Keswick. Since the year end we haveestablished an office in Oxford and will be opening an office in Hereford inJanuary 2007. Our policy of establishing branch offices around the country,staffed by dedicated and enthusiastic professionals who we can support with allthe same technology and investment advice as if they were in London, continuesto work well for us in building the client base and attracting new mandates.We were pleased to win the Investors Chronicle Award for "Financial Security andAdministration", being described as being a clear success story. We wereequally delighted that Stocktrade, our execution only arm, came first in thesame category as "Best On-line Stockbroker". We are always updating our technology, but the new eXimius software which iscurrently being installed represents a step change to what has been available todate. It greatly enhances the portfolio management tools for our clientexecutives, as well as providing the information that will be required underMiFID. Corporate Broking In addition to private client investment management we are now acknowledged asone of the leading corporate brokers for smaller companies. We act as advisersto 133 quoted corporate clients as well as a number of private companies. Ourcorporate advisers are based in Edinburgh, Glasgow, Birmingham, Leeds,Manchester and Newcastle branches. Last year was an excellent one for theDivision as will be seen from their figures:- Total Operating Total Operating Income Profit Income Profit* 2006 2006 2005 2005 £m £m £m £m Corporate broking 22.1 5.3 14.3 2.9 * before exceptional item Revenues rose by 55% and operating profit increased by 83% and the markets fornew and secondary issues were strong for virtually all of the year. Ourexisting clients were active on the acquisition and fund-raising fronts and wegained our full share of new clients both from initial public offerings,flotations and from companies already quoted. Whilst still offering a fullservice to smaller and micro cap companies, we have also been increasinglyactive with larger clients, a trend that has continued in the new financialyear. Conclusion From the foregoing it will be seen that we have made good progress on manyfronts during the past year, particularly in terms of the increase in the numberof clients and amount of funds using discretionary management. At the sametime we are building the number of experienced client executives to give clientsthe personalised attention that is our trademark. We expect this trend tocontinue and it is a key element of our strategy. I would like to thank all our staff for their hard work and their commitment toour clients. It is thanks to them that we can look to the future withconsiderable confidence. Additionally, we will have a full year's contributionfrom the teams that have joined us during 2006, further strengthened by otherswho will be joining us shortly. John Hall28 November 2006 Consolidated Income Statement52 week period ended 30 September 2006 52 weeks to 30 53 weeks to 30 September 2006 September 2005 Note £'000s £'000sContinuing operationsRevenue 164,594 136,563Other operating income 9,044 8,097 Total income 1 173,638 144,660 Staff costs (91,621) (78,293)Other operating costs (55,166) (52,899) (146,787) (131,192) Operating profit 26,851 13,468Finance income 5,235 4,555Finance costs (36) (254) Profit on ordinary activities before exceptional item 1 32,050 24,600Exceptional item 2 - (6,831) Profit before tax 32,050 17,769Tax 3 (10,045) (5,555) Profit attributable to equity shareholders of the parent from continuing operations 22,005 12,214 Earnings per share From continuing operationsBasic 5 11.1p 6.2p Diluted 5 10.6p 6.0p Consolidated Statement of Recognised Income and Expense52 week period ended 30 September 2006 52 weeks to 30 53 weeks to 30 September 2006 September 2005 £'000s £'000s Gain on revaluation of available-for-sale investments 1,509 1,144Tax on revaluation of available-for-sale investments (453) (343)Actuarial loss on defined benefit pension scheme (3,251) (666)Tax on actuarial loss on defined benefit pension scheme 975 200Deferred tax on share based payments 720 599 Net income recognised directly in equity (500) 934Profit for period 22,005 12,214 Total recognised income and expense for the period attributable to equity shareholders of the parent 21,505 13,148 Consolidated Balance SheetAs at 30 September 2006 As at 30 As at 30 September September 2006 2005 £'000s £'000sASSETS NoteNon-current assetsGoodwill 66,846 43,624Property, plant and equipment 16,920 9,168Available-for-sale investments 10,463 8,954Other receivables 1,988 1,938Deferred tax asset 2,473 2,908 98,690 66,592Current assetsTrading investments 2,470 1,227Trade and other receivables 251,437 231,717Cash and cash equivalents 61,576 50,392 315,483 283,336 Total assets 414,173 349,928 LIABILITIESCurrent liabilitiesBank overdrafts 3,197 164Trade and other payables 279,148 250,982Current tax liabilities 3,256 2,259Shares to be issued including premium 1,000 2,928 286,601 256,333 Net current assets 28,882 27,003 Non-current liabilitiesRetirement benefit obligation 15,422 12,937Deferred purchase consideration 3,444 538Shares to be issued including premium 16,500 3,072 35,366 16,547 Total liabilities 321,967 272,880 Net assets 92,206 77,048 EQUITYCalled up share capital 6 1,995 1,965Share premium account 6 82,755 79,287Revaluation reserve 6 6,805 5,749Merger reserve 6 4,562 4,562Profit and loss account 6 (3,911) (14,515) Equity attributable to equity holders of the parent 6 92,206 77,048 Consolidated Cash Flow Statement52 week period ended 30 September 2006 Note 52 weeks to 30 53 weeks to 30 September 2006 September 2005 £'000s £'000s Net cash flow from operating activities 7 34,442 16,075 Cash flows from investing activities Purchase of goodwill (6,289) (1,483) Purchases of property, plant and equipment (11,523) (6,291) Purchases of available-for-sale investments - (310) Dividends received from available-for-sale investments 249 221 Net cash used in investing activities (17,563) (7,863) Cash flows from financing activities Dividends paid to equity shareholders (9,884) (7,837) Proceeds on issue of shares 1,156 210 Net cash used in financing activities (8,728) (7,627) Net increase in cash and cash equivalents 8,151 585 Cash and cash equivalents at the start of period 50,228 49,643 Cash and cash equivalents at the end of period 58,379 50,228 Firm's cash 47,832 38,168Firm's overdraft (3,197) (164) Firm's net cash 44,635 38,004Client settlement cash 13,744 12,224 Net cash and cash equivalents 58,379 50,228 Cash and cash equivalents shown in current assets 61,576 50,392Bank overdrafts (3,197) (164) Net cash and cash equivalents 58,379 50,228 Notes 1. Revenue and segmental information For management purposes, the Group is divided into two business streams: privateclient investment management and corporate broking. These form the basis for theprimary segment information reported below. All operations are carried out inthe United Kingdom and the Channel Islands. 2006 2005 52 weeks 53 weeks £'000s £'000sTotal incomePrivate client investment management Discretionary portfolio management 84,878 69,165 Advisory portfolio management 66,613 61,243 151,491 130,408Corporate broking 22,147 14,252 173,638 144,660 Profit on ordinary activities beforeexceptional item and taxPrivate client investment management Discretionary portfolio management 12,381 9,625 Advisory portfolio management 9,216 7,809 21,597 17,434Corporate broking 5,254 2,865 26,851 20,299Finance income (net) 5,199 4,301 32,050 24,600 Segment assetsPrivate client investment management 319,654 290,270Corporate broking 94,519 59,658 414,173 349,928 Segment liabilitiesPrivate client investment management 227,448 213,222Corporate broking 94,519 59,658 321,967 272,880 2. Exceptional item In December 2004 the Group made a £5m contribution to a fund (Fund DistributionLimited) for those who had lost money in Zero Dividend Shares. The 2005exceptional charge, included within other operating costs and staff costs,represents this payment, less insurance recovery, plus other directlyattributable costs. These charges are considered to be exceptional due to theirsize and the unusual nature of their incidence. 3. Taxation 2006 2005 52 weeks 53 weeks £'000s £'000sUnited Kingdom Current tax 7,723 5,374 Prior year 415 17Overseas tax Current tax 230 127 8,368 5,518United Kingdom deferred tax Current year 2,040 163 Prior year (363) (126) 10,045 5,555 United Kingdom corporation tax is calculated at 30% (2005: 30%) of the estimated assessable taxable profit for the period. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the year can be reconciled to the profit per the income statement as follows: Profit before tax 32,050 17,769 Tax at the UK corporation tax rate of 30% (2005: 30%) 9,615 5,331Tax effect of expenses that are not deductible in determining taxable 285 297profitTax effect of prior year tax 415 17Tax effect of prior year deferred tax (363) (126)Tax effect of options pre November 2002 (88) -Tax effect of deferred tax timing differences (1) (105)Tax effect of leasehold property depreciation 182 141 Tax expense 10,045 5,555 Effective tax rate for the year 31% 31% In addition to the amount charged to the income statement, deferred tax relatingto the revaluation of the Group's available for sale investments amounting to£453,000 (2005: £343,000) has been charged directly to equity and deferred tax relatingto the actuarial loss in the defined benefit pension scheme amounting to£975,000 (2005: £200,000) has been credited directly to equity. 4. Dividends 2006 2005 52 weeks 53 weeks £'000 £'000Amounts recognised as distributions to equity holders in the period:First interim dividend paid 6 April 2006, 2.5p per share (2005: 2.0p) 4,970 3,927Second interim dividend paid 25 October 2006, 2.75p per share (2005: 2.5p) 5,488 4,914 10,458 8,841 5. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Number of shares 2006 2005 '000 '000BasicWeighted average number of shares in issue in the period 198,025 196,227DilutedWeighted average number of options outstanding for the period 4,985 3,070Estimated weighted average number of shares earned under deferred 4,106 5,421consideration arrangements Diluted weighted average number of options and shares for the period 207,116 204,718 Earnings attributable to ordinary shareholders £'000s £'000s Basic profit for the period and attributable earnings 22,005 12,214Exceptional item - 6,831 less tax on exceptional item - (2,049) Adjusted basic profit for the period and attributable earnings 22,005 16,996 From continuing operations Basic 11.1p 6.2p Diluted 10.6p 6.0p From continuing operations excluding exceptional item Basic 11.1p 8.7p Diluted 10.6p 8.3p 6. Reserves and reconciliation of changes in equity Called up Share Revaluation Merger Profit and Total share premium reserve reserve loss account capital account £'000s £'000s £'000s £'000s £'000s £'000sGroup24 September 2004 1,955 79,081 4,948 3,929 (18,827) 71,086Profit for the period - - - - 12,214 12,214Goodwill previously written off - - - - 312 312Dividends paid - - - - (8,841) (8,841)Issue of shares 10 206 - 633 - 849Revaluation - - 1,144 - - 1,144Deferred tax on items taken - - (343) - 799 456directly to equityShare based payments - - - - 494 494Actuarial loss on defined benefit - - - - (666) (666)pension scheme 30 September 2005 1,965 79,287 5,749 4,562 (14,515) 77,048Profit for the period - - - - 22,005 22,005Dividends paid - - - - (10,458) (10,458)Issue of shares 30 3,468 - - - 3,498Revaluation - - 1,509 - - 1,509Deferred tax on items taken - - (453) - 1,695 1,242directly to equityShare based payments - - - - 613 613Actuarial loss on defined benefit - - - - (3,251) (3,251)pension scheme 30 September 2006 1,995 82,755 6,805 4,562 (3,911) 92,206 7. Notes to the cash flow statement 2006 2005 52 weeks 53 weeks £'000s £'000sGroupOperating profit 26,851 13,468Adjustments for: Depreciation of property, plant and equipment 3,771 4,312 Retirement benefit obligation (766) (671) Share based payment cost 613 494 Interest income 4,987 4,334 Interest expense (36) (15) Operating cash flows before movements in working capital 35,420 21,922 Increase in receivables and trading investments (21,014) (34,757) Increase in payables 27,407 35,020 Cash generated by operating activities 41,813 22,185 Tax paid (7,371) (6,110) Net cash flow from operating activities 34,442 16,075 8. Insurance reimbursements and provisions The Directors remain in discussion with the Group's insurers in respect ofclaims for costs already incurred and expensed in relation to legal actions,mainly relating to split capital trusts. Insurance debtors, based upon a prudentestimate of amounts which are regarded as virtually certain to be received, areincluded in other debtors. An estimate of the potential favourable financialeffect of the receipt of additional reimbursements is not disclosed as theDirectors consider that any such disclosure would seriously prejudice theirongoing negotiations with insurers. Various legal actions and complaints have been made against the Group for whichlegal proceedings are in progress. Provision for any estimated payments arisingfrom these claims have been made and are included within trade and otherpayables. These items are not disclosed separately as provisions, as theDirectors consider that disclosure of any further information would seriouslyprejudice the position of the Group. The Directors believe that should any ofthese claims result in a more significant loss than that provided, that anyfurther claims will be covered by insurance. 9. Funds At 30 September At 30 September 2006 2005 £ Billion £ Billion In Group's nominee or sponsored member 8.6 6.5Stock not held in Group's nominee 0.2 0.4 Discretionary funds under management 8.8 6.9 In Group's nominee or sponsored member 7.2 6.7Other funds where valuations are carried out but 2.9 3.3where the stock is not under the Group's control Advisory funds under management 10.1 10.0 Managed funds 18.9 16.9 In Group's nominee or sponsored member 2.4 2.0Stock not held in Group's nominee 0.3 0.3 Execution only stock 2.7 2.3 Total funds 21.6 19.2 StockIn Group's nominee or sponsored member 18.2 15.2Stock not held in Group's nominee 3.4 4.0 21.6 19.2 10. Additional Information The accounting policies used in arriving at the preliminary figures areconsistent with those, which will be published in the full financial statementsand which were set out in the Preliminary IFRS Financial Information included inthe Group's Annual Report and Accounts for 2005. The financial information in this press release does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985, but isderived from these accounts. Statutory accounts for 2005 have been delivered tothe Register of Companies, and those for 2006 will be delivered following theCompany's Annual General Meeting. The Auditors have reported on those accounts;their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company's 2006 statutory accounts do comply with IFRSs ;it is expected that they will be published in full in January 2007. All financial information has been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs). The comparative results for the year to30 September 2005, which were originally reported in accordance with UKGenerally Accepted Accounting Practice (UK GAAP), have been restatedaccordingly. The Annual General meeting will be held at 12 noon on 23 February 2007 atMerchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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