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RNS
Brewin Dolphin Holdings PLC  -  BRW   

Interim Management Report for the Half Year

Released 07:00 17-May-2017

RNS Number : 3511F
Brewin Dolphin Holdings PLC
17 May 2017
 

17 May 2017

Brewin Dolphin Holdings PLC

 

Interim Management Report

For the Half Year Ended 31 March 2017

 

Highlights1

 

·     Another strong period of organic fund inflows as we continue to deliver against our strategic plan.

·     Total funds stood at £37.8bn, as at 31 March 2017, an increase of 6.8% (FY 2016: £35.4bn).

Discretionary funds of £31.5bn, increased by 9.4% (FY 2016: £28.8bn).

This compares to an increase of 6.1% in the FTSE 100 Index and a 5.4% increase in the MSCI WMA Private Investor Balanced Index.

Record net discretionary funds inflows, including transfers, of £1.1bn (H1 2016: £0.4bn) representing an annualised growth rate of 7.6% (H1 2016: 3.2%, FY 2016: 4.4%).

·     Total income for the period of £147.4m (H1 2016: £137.2m).

Core2 income of £140.3m increased by 11.3% (H1 2016: £126.1m).

Fee income of £104.7m (H1 2016: £92.7m), increased by 12.9% representing 71.0% of total income (H1 2016: 67.6%); commission income was £33.0m (H1 2016: £33.4m).

·     Adjusted3,5 profit before tax of £32.4m increased by 14.1% (H1 2016: £28.4m).

Adjusted3,5 profit before tax margin 22.0% (H1 2016: 20.7%).

·     Statutory profit before tax of £28.4m, 32.1% higher than H1 2016 (£21.5m).

·     Adjusted3 earnings per share:

Basic earnings per share increased by 13.1% to 9.5p (H1 2016: 8.4p).

Diluted earnings per share4 increased by 15.2% to 9.1p (H1 2016: 7.9p).

·     Statutory earnings per share:

Basic earnings per share of 8.2p (H1 2016: 6.3p).

Diluted earnings per share of 7.9p (H1 2016: 6.1p).

·     Interim dividend of 4.25p per share announced, an increase of 10.4% (H1 2016: 3.85p per share).

·     Successful acquisition of Duncan Lawrie Asset Management reflecting progress towards our growth strategy and strategic objectives.

 

 

1 Continuing operations.

2 Core income is defined as income derived from discretionary investment management, financial planning, Brewin Portfolio Service ("BPS") and execution only services.

3 These figures have been adjusted to exclude redundancy costs - £0.1m (H1 2016: £1.9m), onerous contracts - £0.1m (H1 2016: £0.3m), amortisation of client relationships - £2.6m (H1 2016: £3.3m), one-off migration costs - £nil (H1 2016: £1.5m), acquisition costs - £1.2m (H1 2016: £nil) and disposal of available-for-sale investments - £nil (H1 2016: £0.0m).

4 See note 6.

5 See Annual Report and Accounts 2016 page 42 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

 

Declaration of Interim Dividend

The Board declares an interim dividend of 4.25p per share. The interim dividend is payable on 16 June 2017 to shareholders on the register at the close of business on 26 May 2017 with an ex-dividend date of 25 May 2017.

 

David Nicol, Chief Executive, said:

"The Group has had a successful first half of 2017 in a period with a favourable market environment. The delivery against our growth strategy has contributed to an excellent financial performance, with underlying earnings growth of 14.1%. We are exceeding the organic growth targets we set as net inflows into our core discretionary service were £1.1bn, in the period, a record and helping drive year-on-year growth of 22.1% in discretionary funds.

 

In particular we are capturing the near-term growth opportunities in intermediary business as a direct result of current growth initiatives which are delivering tangible results. Whilst continuing to invest in other initiatives aimed at driving further longer term growth. The strength of our business and confidence in our strategy helped us in the successful acquisition of Duncan Lawrie Asset Management Limited during the period, which has been financed by surplus capital reserves and cements our position as a market leading discretionary wealth manager."

 

For further information:

 

Brewin Dolphin

David Nicol, Chief Executive                                       Tel: +44 (0)20 7248 4400

Andrew Westenberger, Finance Director                   Tel: +44 (0)20 7248 4400

 

FTI

David Waller                                                               Tel: +44 (0)20 3727 1651

Ed Berry                                                                      Tel: +44 (0)20 3727 1046

 

Notes to Editors:

About Brewin Dolphin

 

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

 

Our focus on discretionary investment management has led to growth in client funds and we now manage £31.5 billion on a discretionary basis. In line with the premium we place on personal relationships, we have built a network of offices across the UK, Channel Islands and the Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients' needs at the core.

 

Interim Management Report

To the members of Brewin Dolphin Holdings PLC

 

First half review

The business has made very good progress during the first half of financial year 2017, against a favourable investment market backdrop. Adjusted diluted earnings per share has increased by 15.2% compared to the comparative period last year.

 

Total funds in our core discretionary service grew by 9.4% in the half to £31.5bn, with record net inflows and positive returns generated for our clients. As a result our discretionary funds are 22.1% higher than 12 months ago representing an annualised growth rate of 7.6%.

 

We continued to see strong growth in our intermediaries services, both Managed Portfolio Services ("MPS") and bespoke portfolios, during the first half, with £0.9bn of combined net inflows achieved (H1 2016: £0.5bn), representing an annualised growth rate of 23.4%.

 

Our success and current strong growth in our intermediary discretionary business reflects not only the current exceptionally high levels of demand but also the impact of our strategic initiatives. These include developing our service to meet the needs of agent clients and a structured, focused approach to sales. Favourable market dynamics such as pension freedoms and transfers from defined benefit pensions, coupled with the continuing trend for independent advisers to outsource investment management to better manage regulatory compliance is driving higher demand for these services.

 

The growth in MPS has been exceptionally strong, with £0.5bn of net inflows in the first half, double the net inflow of 2016. We now manage £1.8bn for intermediaries across 11 investment platforms. To support this growth, investment continued in this half with the further enhancement of the existing product range and work is ongoing to further expand across broader investment mandates.

 

In addition to attracting business from new advisers, the majority of the business arose from existing relationships developed over the past couple of years. We now have active relationships with over 1,500 intermediaries, approximately 350 of whom use both the MPS and bespoke discretionary service.

 

Net inflows into our direct discretionary service were £0.2bn compared to H1 2016 which saw net outflows of £0.1bn. Gross inflows half on half remained stable at £0.5bn, with approximately one-third of this into our integrated wealth management service.

 

Increasing integration of financial planning, alongside our traditional strength in discretionary investment management, is key to our longer term organic growth targets for direct advised business and it is encouraging to see an increasing amount of inflows also receiving financial planning advice. Over 16% of direct private client funds now receive our wealth management service which combines our financial planning and investment management services.

 

Our strategy, set out at the end of 2015, focuses on generating improved and sustainable organic growth across the range of our services, capitalising on our core competencies of offering advice and investment solutions in a personalised relationship-based model. Key to the strategy is the segmentation of the market and client needs, enhancement and development of our services and a clearer focus on distribution, supported by improved processes and technology both to create more capacity and enhance client service.

 

In addition to the development of our intermediary services, as outlined above, the first half saw the launch of a passive-based version of our award-winning MPS and front end technology enhancements to provide advisers with improved client reporting and bespoke discretionary services.

 

We have continued to expand our client facing headcount during the first half, to create capacity for future growth, with a focus on increasing our financial planning resource, a key initiative to help drive growth in direct private client business.

 

The full automation of client take on and service for our non-advised investment service, Brewin Portfolio Service, was completed during the half.

 

We have also begun to explore the development of a new advice/planning led service aimed at providing a cost effective way for clients with less complex needs to receive quality advice and investments solutions at a competitive price.

 

We continued with targeted expansion and in April we opened a new office in Truro, Cornwall, developing our regional capacity in the South West region.

 

Work continued on improving operational efficiency with improved key business processes and upgrades to our technology, in particular around portfolio management and client reporting, with the aim of creating additional capacity for growth. This is demonstrated by our adjusted profit before  tax margin gradually increasing from 20.7% to 22.0%.

 

We are progressing well in preparing our processes and systems for the introduction of the Markets in Financial Instruments Directive II ("MiFID II") in 2018.

 

The acquisition of Duncan Lawrie Asset Management Limited ("DLAM") announced in December 2016, completed on 10 May 2017. This was financed by surplus capital reserves and will increase the Group's total funds by c.£0.7bn. The acquisition supports the Group's commitment to become the UK's leading provider of personalised wealth and investment management services and represents a sound cultural fit. The Group will benefit from the addition of experienced investment and wealth managers to its London and Bristol offices, as well as the strong private client relationships of DLAM.

 

 

Results and business performance

Adjusted profit before tax of £32.4m increased by 14.1% (H1 2016: £28.4m) for the half year ended 31 March 2017, as a result of growth in total income of 7.4% and an improved adjusted operating margin of 22.0% (H1 2016: 20.6%).

 

Profit before tax for the period was £28.4m (H1 2016: £21.5m), an increase of 32.1% compared to H1 2016 reflecting lower exceptional costs and lower amortisation of previously acquired client relationships.


Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Change

Continuing operations



 

 

 £'m

 £'m

 

Core1 income

 140.3

 126.1

11.3%

Other income

 7.1

 11.1

-36.0%

Total income

 147.4

 137.2

7.4%

 

 

 

 

Fixed staff costs

(55.1)

(53.1)

3.8%

Other operating costs

(34.5)

(33.2)

3.9%

Total fixed operating costs

(89.6)

(86.3)

3.8%

 

 

 

 

Adjusted profit before variable staff costs2,5

 57.8

 50.9

13.6%

Variable staff costs

(25.4)

(22.7)

11.9%

Adjusted operating profit2

 32.4

 28.2

14.9%

Net finance income and other gains and losses

-

 0.2

 

Adjusted profit before tax2,5

 32.4

 28.4

14.1%

Exceptional items3

(1.4)

(3.6)

 

Amortisation of client relationships

(2.6)

(3.3)

 

Profit before tax

 28.4

 21.5

32.1%

Taxation

(6.1)

(4.3)

 

Profit after tax

 22.3

 17.2

 

 

 

 

 

Earnings per share

 

 

 

Basic earnings per share

8.2p

6.3p

30.2%

Diluted earnings per share

7.9p

6.1p

29.5%

Adjusted4 earnings per share

 

 

 

Basic earnings per share

9.5p

8.4p

13.1%

Diluted earnings per share

9.1p

7.9p

15.2%

 

 

1 Core income is defined as income derived from discretionary investment management, financial planning, Brewin Portfolio Service ("BPS") and execution only services.

2 These figures have been adjusted to exclude redundancy costs - £0.1m (H1 2016: £1.9m), onerous contracts - £0.1m (H1 2016: £0.3m), amortisation of client relationships - £2.6m (H1 2016: £3.3m), one-off migration costs - £nil (H1 2016: £1.5m), acquisition costs - £1.2m (H1 2016: £nil) and disposal of available-for-sale investments - £nil (H1 2016: £0.0m).

3 Exceptional costs include redundancy costs, onerous contracts, one-off migration costs and acquisition costs.

4 See note 6.

5 See Annual Report and Accounts 2016 page 42 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

 

 

Income

Core income grew 11.3% to £140.3m (H1 2016: £126.1m) supported by continued organic funds growth, positive investment returns and continued growth in financial planning income.

 

Income is analysed as follows: 


Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

 Change


£'m

£'m


Discretionary investment management

 125.2

 112.3

11.5%

Financial planning

 9.5

 8.1

17.3%

BPS

 0.5

 0.4

25.0%

Execution only

 5.1

 5.3

-3.8%

Core income

 140.3

 126.1

11.3%

 

 

 

 

Advisory investment management

 6.9

 8.1

-14.8%

Trail income

-

 1.8

-100.0%

Interest

 0.2

 1.2

-83.3%

Other income

 7.1

 11.1

-36.0%


 

 

 

Total income

 147.4

 137.2

7.4%

 

 

The Group continues to focus on discretionary wealth management services with core income now more than 95% of total income.

 

Discretionary investment management income grew 11.5% to £125.2m (H1 2016: £112.3m) with strong fee income growth and broadly flat commission levels.

 

Financial planning income increased by 17.3% to £9.5m (H1 2016: £8.1m).

 

Other income reduced by £4.0m to £7.1m (H1 2016: £11.1m) impacted by slowing but continued outflows from our advisory business, the loss of trail income and the continued low interest rate environment.

 

 

Fees and Commissions

 


Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

 Change


£'m

£'m


Core fees1

 99.9

 87.0

14.8%

Core commissions

 30.9

 31.0

-0.3%

Advisory fees

 4.8

 5.7

-15.8%

Advisory commissions

 2.1

 2.4

-12.5%

Total fees

 104.7

 92.7

12.9%

Total commissions

 33.0

 33.4

-1.2%

Financial planning

 9.5

 8.1

17.3%

Other income

 0.2

 3.0

-93.3%

Total income

 147.4

 137.2

7.4%




 

1The average MSCI WMA Private Investor Balanced Index was 1,519 on our quarterly billing dates for H1 2017, compared to 1,303 for H1 2016, an increase of 16.6%.

 

Core fee income grew by 14.8% to £99.9m (H1 2016: £87.0m) in line with growth in funds. Core commission income declined marginally to £30.9m (H1 2016: £31.0m) despite the growth in funds as a result of lower transaction volumes in the period.

 

Costs

Fixed operating costs have increased by 3.8% to £89.6m (H1 2016: £86.3m).

 

Fixed staff costs increased by 3.8% to £55.1m (H1 2016: £53.1m) as a result of pay rises and higher cost of sales from the strong intermediary net inflows from H1, offset partially by lower year on year employee numbers. Total employee numbers increased by 11 to 1,594 in the first half, although average headcount remained below H1 2016.

 

Variable staff costs have increased in line with business performance.

 

Other operating costs increased by 3.9% to £34.5m (H1 2016: £33.2m), primarily as a result of higher premises costs, following rent reviews and coupled with above inflationary increases in market data contracts, augmented by the effect of weaker sterling to USD exchange rates.

 

Exceptional costs of £1.4m (H1 2016: £3.6m) are predominantly one-off costs relating to the acquisition of Duncan Lawrie Asset Management Limited.

 

Amortisation of intangible client relationships reduced by 21.2% to £2.6m (H1 2016: £3.3m).

 

Funds

The first six months of the year saw both record gross discretionary funds inflows of £1.6bn (H1 2016: £1.1bn, FY 2016: £2.4bn) and reducing gross outflows of £0.6bn equivalent to a 4.2% annualised outflow rate (FY 2016: 6.0%). 

 

Total funds by service category

 





Change

£'bn

31 March 2016

30 September
2016

31 March
2017

Last
12 months

Last
6 months

Discretionary






Direct

 19.2

 21.1

 22.4

16.7%

6.2%

Intermediaries

 5.7

 6.5

 7.3

28.1%

12.3%

MPS

 0.9

 1.2

 1.8

100.0%

50.0%

Total discretionary

 25.8

 28.8

 31.5

22.1%

9.4%

BPS

 0.1

 0.1

 0.1

0.0%

0.0%

Execution only

 3.6

 3.5

 3.4

-5.6%

-2.9%

Core funds

 29.5

 32.4

 35.0

18.6%

8.0%

Advisory

 3.3

 3.0

 2.8

-15.2%

-6.7%

Total funds

 32.8

 35.4

 37.8

15.2%

6.8%







Indices






MSCI WMA Private Investor Balanced Index

1,318

1,457

1,536

16.5%

5.4%

FTSE 100

6,175

6,899

7,323

18.6%

6.1%

 

Funds flow by service category

 










£'bn

30 Sept
2016

Inflows

Outflows

Internal transfers

Net flows

Growth rate*

Investment performance

31 March
2017

Discretionary









Direct

21.1

 0.5

(0.4)

 0.1

0.2

1.9%

 1.1

22.4

Intermediaries

6.5

 0.6

(0.2)

-

0.4

12.3%

 0.4

7.3

MPS

1.2

 0.5

 -

-

0.5

83.3%

 0.1

1.8

Total discretionary

28.8

 1.6

(0.6)

 0.1

1.1

7.6%

 1.6

31.5

BPS

0.1

  - 

 -

-

-

0.0%

 -

0.1

Execution only

3.5

 0.2

(0.5)

 0.1

(0.2)

(10.8%)

 0.1

3.4

Core funds

32.4

 1.8

(1.1)

 0.2

0.9

5.5%

 1.7

35.0

Advisory

3.0

 -

(0.1)

 (0.2)

(0.3)

(20.0%)

 0.1

2.8

Total funds

35.4

 1.8

(1.2)

-

0.6

3.4%

 1.8

37.8










* annualised









 

Total discretionary funds grew 9.4% driven by record gross funds inflows and a more normalised level of outflows. Discretionary net funds inflows of £1.1bn (FY 2016: £1.1bn, H1 2016: £0.4bn) resulted from strong gross inflows of £1.6bn and gross outflows of £0.6bn. Annualised growth from discretionary funds was 7.6% (H1 2016: 3.2%) with positive net inflows in all discretionary services.

 

Direct discretionary funds grew by 6.2% resulting from £0.5bn of gross funds inflows and outflows slowing significantly. The intermediaries and MPS business continued to grow solidly representing 81.8% (£0.9bn) of net discretionary funds inflows in the period.

 

Execution only funds fell by £0.1bn in the period, primarily due to loss of certain large accounts, in the first quarter of the year, with very low associated fee income loss. The rate of advisory funds net outflows has declined but remains at a 20.0% annualised rate, however the majority of this fall was retained within other service categories.

 

Capital

The Group has a strong balance sheet with cash balances at period end of £152.3m (H1 2016: £117.4m). These underpin its regulatory capital resources which continue to be in significant surplus to requirements.

 

Dividend

The Group's dividend policy is to grow dividends in line with adjusted earnings, with a target payout ratio of 60% to 80% of annual adjusted diluted earnings per share. It is intended that the final dividend will be based on the full year target dividend payout ratio of 60% to 80% of adjusted earnings per share.

 

The interim dividend has been increased to 4.25p per share (2016 interim: 3.85p per share) and will be payable on 16 June 2017 to shareholders on the register at the close of business on 26 May 2017 with an ex-dividend date of 25 May 2017.

 

Going concern

As stated in note 1 to the condensed set of interim financial statements, the Directors believe that the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of possible adverse changes in trading performance, show that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt a going concern basis for the preparation of the condensed interim financial statements. In forming their view, the Directors have considered the Group's prospects for a period exceeding twelve months from the date the condensed interim financial statements are approved.

 

Principal risks and uncertainties

The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Group's performance during the remainder of its financial year remain unchanged from those identified on pages 33 to 37 of the 2016 Annual Report and Accounts available on our website www.brewin.co.uk.

 

Board changes

Angela Knight retired from the Board with effect from 3 February 2017 and the Board is grateful for her significant contribution to the Group's success over the past ten years. All of the Non-Executive Directors are considered by the Company to be independent and the Board is fully compliant with the UK Corporate Governance Code with respect to Board composition.

 

Outlook

We remain confident in the prospects for continued long-term growth in our business, despite the backdrop of political uncertainty in the UK, from the forthcoming General Election and the EU exit negotiations beyond. The underlying structural trends driving demand for our client relationship based advice services are well established.

 

We continue to invest time and resource on our strategic initiatives to deliver our growth targets.

 

David Nicol     

Chief Executive

16 May 2017

 

 

Condensed Consolidated Income Statement

for the period ended 31 March 2017



Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Audited
period to
30 September
2016


Note

£'000

£'000

£'000

Continuing operations





Revenue


147,185

136,031

280,484

Other operating income


229

1,217

1,866

Income


147,414

137,248

282,350






Staff costs


(80,496)

(75,789)

(152,175)

Redundancy costs


(104)

(1,885)

(2,780)

Onerous contracts


(142)

(315)

(311)

Amortisation of intangible assets - client relationships

8

(2,616)

(3,262)

(6,287)

One-off migration costs


-

(1,468)

(1,596)

Acquisition costs


(1,159)

-

-

Other operating costs


(34,494)

(33,157)

(69,458)

Operating expenses


(119,011)

(115,876)

(232,607)






Operating profit


28,403

21,372

49,743

Finance income

4

102

258

514

Other gains and losses


-

(3)

(3)

Finance costs

4

(123)

(110)

(192)

Profit before tax


28,382

21,517

50,062

Tax

5

(6,065)

(4,354)

(11,095)

Profit for the period from continuing operations


22,317

17,163

38,967






Discontinued operations





Profit for the period from discontinued operations

16

-

36

11,395

Profit for the period


22,317

17,199

50,362






Attributable to:





Equity holders of the parent


22,317

17,199

50,362



22,317

17,199

50,362






Earnings per share





From continuing operations





Basic

6

8.2p

6.3p

14.4p

Diluted

6

7.9p

6.1p

13.9p






From continuing and discontinued operations





Basic

6

8.2p

6.3p

18.6p

Diluted

6

7.9p

6.1p

17.9p

 

 

Condensed Consolidated Statement of Comprehensive Income

for the period ended 31 March 2017

 

 


Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Profit for the period

22,317

17,199

50,362

Items that will not be reclassified subsequently to profit and loss:




Actuarial gain/(loss) on defined benefit pension scheme

9,061

2,336

(7,031)

Deferred tax (charge)/credit on actuarial gain/(loss) on defined benefit pension scheme

(2,142)

(420)

1,109


6,919

1,916

(5,922)

Items that may be reclassified subsequently to profit and loss:




Revaluation of available-for-sale investments

31

(1)

(30)

Deferred tax (charge)/credit on revaluation of available-for-sale investments

(6)

-

6

Exchange differences on translation of foreign operations

(45)

201

559


(20)

200

535

Other comprehensive income/(expense) for the period net of tax

6,899

2,116

(5,387)

Total comprehensive income for the period

29,216

19,315

44,975





Attributable to:




Equity holders of the parent

29,216

19,315

44,975


29,216

19,315

44,975

 

Condensed Consolidated Statement of Changes in Equity

for the period ended 31 March 2017

 


Attributable to the equity holders of the parent


 Share capital

 Share premium account

 Own shares

 Revaluation reserve

 Merger reserve

 Profit and loss account

 Total


 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

Audited balance at 30 September 2015

2,793

142,135

(28,153)

-

70,553

31,823

219,151

 Profit for the period

-

-

-

-

-

17,199

17,199

 Other comprehensive income for the period








 Deferred and current tax on other comprehensive income

-

-

-

-

-

(420)

(420)

 Actuarial gain on defined benefit scheme

-

-

-

-

-

2,336

2,336

 Revaluation of available-for-sale investments

-

-

-

(1)

-

-

(1)

 Exchange differences on translation of foreign operations

-

-

-

-

-

201

201

 Total comprehensive (expense)/income for the period

-

-

-

(1)

-

19,316

19,315

 Dividends

-

-

-

-

-

(22,374)

(22,374)

 Issue of share capital

37

9,644

-

-

-

-

9,681

 Own shares acquired in the period

-

-

(7,141)

-

-

-

(7,141)

 Own shares disposed of on exercise of options

-

-

5,039

-

-

(5,039)

-

 Own shares disposed of

-

-

226

-

-

84

310

 Share-based payments

-

-

-

-

-

3,996

3,996

 Tax on share-based payments

-

-

-

-

-

(598)

(598)

 Unaudited balance at 31 March 2016

2,830

151,779

(30,029)

(1)

70,553

27,208

222,340

 Profit for the period

-

-

-

-

-

33,163

33,163

 Other comprehensive income for the period








 Deferred and current tax on other comprehensive income

-

-

-

6

-

1,529

1,535

 Actuarial loss on defined benefit pension scheme

-

-

-

-

-

(9,367)

(9,367)

 Revaluation of available-for-sale investments

-

-

-

(29)

-

-

(29)

 Exchange differences on translation of foreign operations

-

-

-

-

-

358

358

 Total comprehensive (expense)/income for the period

-

-

-

(23)

-

25,683

25,660

 Dividends

-

-

-

-

-

(10,444)

(10,444)

 Issue of share capital

-

57

-

-

-

-

57

 Own shares acquired in the period

-

-

(79)

-

-

-

(79)

 Own shares disposed of on exercise of options

-

-

814

-

-

(814)

-

 Share-based payments

-

-

-

-

-

4,391

4,391

 Tax on share-based payments

-

-

-

-

-

884

884

 Audited balance at 30 September 2016

2,830

151,836

(29,294)

(24)

70,553

46,908

242,809

 Profit for the period

-

-

-

-

-

22,317

22,317

 Other comprehensive income for the period








 Deferred and current tax on other comprehensive income

-

-

-

(6)

-

(2,142)

(2,148)

 Actuarial gain on defined benefit pension scheme

-

-

-

-

-

9,061

9,061

 Revaluation of available-for-sale investments

-

-

-

31

-

-

31

 Exchange differences on translation of foreign operations

-

-

-

-

-

(45)

(45)

 Total comprehensive income for the period

-

-

-

25

-

29,191

29,216

 Dividends

-

-

-

-

-

(24,996)

(24,996)

 Issue of share capital

3

432

-

-

-

-

435

 Own shares acquired in the period

-

-

(5,741)

-

-

-

(5,741)

 Own shares disposed of on exercise of options

-

-

8,493

-

-

(8,493)

-

 Share-based payments

-

-

-

-

-

4,149

4,149

 Tax on share-based payments

-

-

-

-

-

551

551

 Unaudited balance at 31 March 2017

2,833

152,268

(26,542)

1

70,553

47,310

246,423

Condensed Consolidated Balance Sheet

as at 31 March 2017



Unaudited
as at
31 March
2017

Unaudited
as at
31 March
2016

Audited
as at
30 September
2016


Notes

£'000

£'000

£'000

Assets





Non-current assets





Intangible assets

8

76,462

84,003

81,053

Property, plant and equipment

9

3,975

5,972

4,822

Other receivables


288

395

307

Defined benefit pension scheme

12

3,541

927

-

Net deferred tax asset


4,818

10,420

7,799

Total non-current assets


89,084

101,717

93,981

Current assets





Available-for-sale investments

10

867

820

833

Trading investments

10

1,170

978

1,093

Trade and other receivables


225,035

225,789

218,118

Cash and cash equivalents


152,303

117,856

170,766

Total current assets


379,375

345,443

390,810

Total assets


468,459

447,160

484,791






Liabilities





Current liabilities





Bank overdrafts


-

479

-

Trade and other payables


 208,490

203,907

221,945

Current tax liabilities


4,457

5,195

3,388

Provisions

11

2,759

9,063

3,097

Total current liabilities


215,706

218,644

228,430

Net current assets


163,669

126,799

162,380






Non-current liabilities





Defined benefit pension scheme

12

-

-

6,952

Provisions

11

6,330

6,176

6,600

Total non-current liabilities


6,330

6,176

13,552

Total liabilities


222,036

224,820

241,982

Net assets


246,423

222,340

242,809






Equity





Share capital

13

2,833

2,830

2,830

Share premium account

13

152,268

151,779

151,836

Own shares


(26,542)

(30,029)

(29,294)

Revaluation reserve


1

(1)

(24)

Merger reserve


70,553

70,553

70,553

Profit and loss account


47,310

27,208

46,908

Equity attributable to equity holders of the parent


246,423

222,340

242,809

Condensed Consolidated Cash Flow Statement

for the period ended 31 March 2017



Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Audited
period to
30 September
2016


Note

£'000

£'000

£'000

 Net cash inflow/(outflow) from operating activities

15

 13,006

 (456)

52,033





 Cash flows from investing activities





 Purchase of intangible assets - software


 (988)

(2,501)

(5,238)

 Purchases of property, plant and equipment


 (144)

 (211)

(373)

 Purchase of available-for-sale investments


 (18)

 (722)

(770)

 Proceeds on disposal of discontinued operation


-

-

14,000

 Proceeds on disposal of available-for-sale investments


 15

 38

47

 Net cash (used in)/from investing activities


(1,135)

(3,396)

7,666





 Cash flows from financing activities





 Dividends paid to equity shareholders

7

 (24,996)

 (22,374)

(32,818)

 Purchase of own shares


(5,741)

(7,141)

(7,220)

 Disposal of own shares


-

310

310

 Proceeds on issue of shares


435

376

433

 Net cash used in financing activities


 (30,302)

 (28,829)

(39,295)






 Net (decrease)/increase in cash and cash equivalents


 (18,431)

 (32,681)

20,404





 Cash and cash equivalents at the start of period


 170,766

 149,823

149,823

 Effect of foreign exchange rates


 (32)

235

539

 Cash and cash equivalents at the end of period


 152,303

 117,377

170,766






 Cash and cash equivalents shown in current assets


 152,303

 117,856

170,766

 Bank overdrafts


-

 (479)

-

 Net cash and cash equivalents at the end of period


 152,303

 117,377

170,766

 

For the purposes of the cash flow statement, cash and cash equivalents include bank overdrafts.

 

 

Notes to the Condensed Consolidated Set of Financial Statements

1.   Accounting policies

Basis of preparation

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

 

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

 

The condensed set of financial statements included in this Interim Financial Report for the period ended 31 March 2017 should be read in conjunction with the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2016. 

 

Going concern

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

 

Significant accounting policies and use of estimates and judgements

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the Group's accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2016.

 

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 30 September 2016.

 

Several other new standards and amendments apply for the first time during the period; they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

2.   General information

Brewin Dolphin Holdings PLC (the 'Company') is a public limited company incorporated in the United Kingdom. The shares of the Company are listed on the London Stock Exchange. The address of its registered office is 12 Smithfield Street, London, EC1A 9BD. This Interim Financial Report was approved for issue on 16 May 2017.

 

A copy of this Interim Financial Report including Condensed Financial Statements for the period ended 31 March 2017 is available at the Company's registered office and on the Company's investor relations website (www.brewin.co.uk).

 

The information for the period ended 30 September 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3.   Segmental information

For management reporting purposes the Group currently has a single operating segment.  This forms the reportable segment of the Group for the period. Please refer to the Condensed Consolidated Income Statement and the Condensed Consolidated Balance Sheet, for numerical information.

 

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

 

The accounting policies of the operating segment are the same as those of the Group.

 

4.   Finance income and costs

 


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


 £'000

 £'000

 £'000

Continuing operations




Finance income




Interest on bank deposits

 102

 258

 514


 102

 258

 514





Finance costs




Interest expense on defined pension obligation

 68

 40

 52

Unwind of discounts on provisions

 20

 39

 75

Negative interest and interest on bank overdrafts

 35

 31

 65


 123

 110

 192





Discontinued operations




Finance costs




Unwind of discounts on provisions

-

 72

 134


-

 72

 134





Continuing and discontinued operations




Finance income




Interest on bank deposits

 102

 258

 514


 102

 258

 514





Finance costs




Interest expense on defined pension obligation

 68

 40

 52

Unwind of discounts on provisions

 20

 111

 209

Interest on bank overdrafts

 35

 31

 65


 123

 182

 326

 

5.   Taxation

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


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


 £'000

 £'000

 £'000

Continuing operations




Current tax




United Kingdom:




Charge for the period

4,833

4,915

8,806

Adjustments in respect of prior periods

(49)

318

237

Overseas:




Charge/(credit) for the period

28

(79)

(8)

Adjustments in respect of prior periods

(1)

33

35

Total current tax continuing operations

4,811

5,187

9,070





Deferred tax




United Kingdom:




Charge for the period

1,205

441

2,310

Adjustments in respect of prior periods

49

(1,274)

(285)

Total deferred tax continuing operations

1,254

(833)

2,025





Tax charged to the income statement continuing operations

6,065

4,354

11,095





Discontinued operations




Current tax




United Kingdom:




Charge for the period

-

194

1,355

Adjustments in respect of prior periods

-

-

(395)

Total current tax discontinued operations

-

194

960





Deferred tax




United Kingdom:




Charge for the period

-

-

1,675

Total deferred tax discontinued operations

-

-

1,675





Tax charged to the income statement discontinued operations

-

194

2,635





Continuing and discontinued operations




Current tax




United Kingdom:




Charge for the period

4,833

5,109

10,161

Adjustments in respect of prior periods

(49)

318

(158)

Overseas:




Charge for the period

28

(79)

(8)

Adjustments in respect of prior periods

(1)

33

35

Total current tax continuing and discontinued operations

4,811

5,381

10,030





Deferred tax




United Kingdom:




Charge for the period

1,205

441

3,985

Adjustments in respect of prior periods

49

(1,274)

(285)

Total deferred tax continuing and discontinued operations

1,254

(833)

3,700





Tax charged to the income statement continuing and discontinued operations

6,065

4,548

13,730





6.   Earnings per share

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

 


Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Audited
period to
30 September
2016


'000

'000

'000

Number of shares




Basic




Weighted average number of shares in issue in the period

272,442

270,929

271,072

Diluted




Effect of weighted average number of options outstanding for the period

8,701

9,345

9,984

Diluted weighted average number of options and shares for the period

281,143

280,274

281,056

Adjusted1 diluted




Effect of full dilution of employee share options which are contingently issuable or have future attributable service costs

5,265

6,279

4,637

Adjusted1 diluted weighted average number of options and shares for the period

286,408

286,553

285,693





a) Continuing operations





£'000

£'000

£'000

Earnings attributable to ordinary shareholders




Basic and diluted profit for the period

22,317

17,163

38,967

Redundancy costs

104

1,885

2,780

Onerous contracts costs

142

315

311

Amortisation of intangible assets - client relationships

2,616

3,262

6,287

Acquisition costs

1,159

-

-

One-off migration costs

-

1,468

1,596

Disposal of available-for-sale investments

-

3

3

 less tax effect of above

(398)

(1,387)

(2,042)

Adjusted basic and diluted profit for the period and attributable earnings

25,940

22,709

47,902





Earnings per share




Basic

8.2p

6.3p

14.4p

Diluted

7.9p

6.1p

13.9p





Adjusted2 earnings per share




Basic

9.5p

8.4p

17.7p

Adjusted1 diluted

9.1p

7.9p

16.8p





b) Continuing and discontinued operations





Unaudited period to
31 March
2017

Unaudited period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Earnings attributable to ordinary shareholders




Basic and diluted profit for the period

22,317

17,199

50,362

Redundancy costs

104

1,885

2,780

Onerous contracts

142

315

311

Amortisation of intangible assets - client relationships

2,616

3,262

6,287

Acquisition costs

1,159

-

-

One-off migration costs

-

1,468

1,596

Disposal of available-for-sale investments

-

3

3

 less tax effect of above

(398)

(1,387)

(2,042)

Adjusted basic profit for the period and attributable earnings

25,940

22,745

59,297





Earnings per share




Basic

8.2p

6.3p

18.6p

Diluted

7.9p

6.1p

17.9p





Adjusted2 earnings per share




Basic

9.5p

8.4p

21.9p

Adjusted1 diluted

9.1p

7.9p

20.8p





c) Discontinued operations








The denominators used are the same as those detailed above for both basic and diluted earnings from continuing operations.





Earnings per share




Basic

0.0p

0.0p

4.2p

Diluted

0.0p

0.0p

4.0p





Adjusted2 earnings per share




Basic

0.0p

0.0p

4.2p

Adjusted1 diluted

0.0p

0.0p

4.0p





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

2 Excluding redundancy costs, onerous contracts, amortisation of client relationships, acquisition costs, one-off migration costs and disposal of available-for-sale investments.

7.   Dividends


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Amounts recognised as distributions to equity shareholders in the period:




Final dividend paid 10 March 2017, 9.15p per share (2016: 8.25p per share)

24,996

22,374

22,374

Interim dividend paid 17 June 2016, 3.85p per share

-

-

10,444


24,996

22,374

32,818





 

An interim dividend of 4.25p per share was declared by the Board on 16 May 2017 and has not been included as a liability as at 31 March 2017. This interim dividend will be paid on 16 June 2017 to shareholders on the register at the close of business on 26 May 2017 with an ex-dividend date of 25 May 2017.

8.   Intangible assets

 







 Goodwill

 Client relationships

 Software

 Total


 £'000

 £'000

 £'000

 £'000

 Cost





 At 30 September 2015 (Audited)

 48,637

 107,941

 55,825

 212,403

 Additions

-

(21)

2,737

2,716

 Disposals

-

-

-

-

 Exchange differences

-

 11

-

 11

 At 31 March 2016 (Unaudited)

 48,637

 107,931

 58,562

 215,130

 Additions

-

(44)

2,452

2,408

 Disposals

-

-

(42,808)

(42,808)

 Exchange differences

-

 15

-

 15

 At 30 September 2016 (Audited)

 48,637

 107,902

 18,206

 174,745

 Additions

-

 119

 616

 735

 Disposals

-

-

-

-

 Exchange differences

-

(2)

-

(2)

 At 31 March 2017 (Unaudited)

 48,637

 108,019

 18,822

 175,478






 Accumulated amortisation and impairment





 At 30 September 2015 (Audited)

-

 78,805

 46,609

 125,414

 Amortisation charge for the period

-

3,262

2,101

5,363

 Eliminated on disposal

-

-

-

-

 Exchange differences

-

 5

-

 5

 Impairment losses for the period

-

-

 345

 345

 At 31 March 2016 (Unaudited)

-

 82,072

 49,055

 131,127

 Amortisation charge for the period

-

3,025

2,340

5,365

 Eliminated on disposal

-

-

(42,808)

(42,808)

 Exchange differences

-

 8

-

 8

 Impairment losses for the period

-

-

-

-

 At 30 September 2016 (Audited)

-

 85,105

8,587

 93,692

 Amortisation charge for the period

-

2,616

2,709

5,325

 Eliminated on disposal

-

-

-

-

 Exchange differences

-

(1)

-

(1)

 At 31 March 2017 (Unaudited)

-

 87,720

 11,296

 99,016











 Net book value





 At 31 March 2017 (Unaudited)

 48,637

 20,299

7,526

 76,462

 At 30 September 2016 (Audited)

 48,637

 22,797

9,619

 81,053

 At 31 March 2016 (Unaudited)

 48,637

 25,859

9,507

 84,003

 At 30 September 2015 (Audited)

 48,637

 29,136

9,216

 86,989











 

9.   Property, plant and equipment


Leasehold Improvements

Office Equipment

Motor
Vehicles

Computer Equipment

Total


£'000

£'000

£'000

£'000

£'000

Cost






At 30 September 2015 (Audited)

 13,003

 13,150

 30

 43,666

 69,849

Additions

66

 54

-

 105

 225

Exchange differences

13

 40

 2

-

 55

Disposals

-

-

 (32)

-

 (32)

At 31 March 2016 (Unaudited)

 13,082

 13,244

-

 43,771

 70,097

Additions

132

 84

-

 22

 238

Exchange differences

18

 51

 3

-

 72

Disposals

 (42)

 (87)

(3)

(9,680)

(9,812)

At 30 September 2016 (Audited)

 13,190

 13,292

-

 34,113

 60,595

Additions

24

 40

-

 97

 161

Exchange differences

 (3)

(8)

-

-

 (11)

Disposals

-

(6)

-

-

(6)

At 31 March 2017 (Unaudited)

 13,211

 13,318

-

 34,210

 60,739







Accumulated depreciation and impairment






At 30 September 2015 (Audited)

 8,685

 11,988

 27

 40,961

 61,661

Charge for the period

684

 366

-

 1,059

 2,109

Exchange differences

13

 34

 2

-

 49

Impairment of assets

-

-

-

 335

 335

Eliminated on disposal

-

-

 (29)

-

 (29)

At 31 March 2016 (Unaudited)

 9,382

 12,388

-

 42,355

 64,125

Charge for the period

583

 276

-

 537

 1,396

Exchange differences

17

 44

 3

-

 64

Eliminated on disposal

 (42)

 (87)

(3)

(9,680)

(9,812)

At 30 September 2016 (Audited)

 9,940

 12,621

-

 33,212

 55,773

Charge for the period

500

 240

-

 265

 1,005

Exchange differences

 (2)

(6)

-

-

(8)

Eliminated on disposal

-

(6)

-

-

(6)

At 31 March 2017 (Unaudited)

 10,438

 12,849

-

 33,477

 56,764







Net book value






At 31 March 2017 (Unaudited)

 2,773

 469

-

 733

 3,975

At 30 September 2016 (Audited)

 3,250

 671

-

 901

 4,822

At 31 March 2016 (Unaudited)

 3,700

 856

-

 1,416

 5,972

At 30 September 2015 (Audited)

 4,318

 1,162

 3

 2,705

 8,188













 

10.  Investments

Trading investments (Level 1)


Listed investments

£'000

At 31 March 2017 (Unaudited)

 1,170

At 30 September 2016 (Audited)

 1,093

At 31 March 2016 (Unaudited)

978

At 30 September 2015 (Audited)

945

 

The trading investments are measured at fair value which is determined directly by reference to published prices in an active market where available. They are held in an unregulated subsidiary, Brewin Dolphin MP, whose sole objective is to provide seed capital to the model portfolios managed under an investment mandate by Brewin Dolphin Limited.

 

Available-for-sale investments (Level 3)






Unaudited
as at
31 March
2017

Unaudited
as at
31 March
2016

Audited
as at
30 September
2016


£'000

£'000

£'000

At start of period

833

140

140

Additions

18

722

770

Net gain/(loss) from changes in fair value recognised in equity

31

 (1)

 (30)

Disposals

 (15)

 (41)

 (47)

At end of period

867

820

833





Current assets




Available-for-sale investments




 - Equity

127

106

128

 - Asset-backed security

740

714

705

Total investments

867

820

833

 

The asset-backed security is a USD fixed rate note, due to mature on 23 September 2019. The available-for-sale investments are held at fair value.

 

Fair value measurement recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

 

•           Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

•           Level 2 fair value measurements are those derived from inputs other than the quoted price included within Level 1 that are observable for the asset or a liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•           Level 3 fair value measurements are those derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

Fair value of the Group's financial assets and liabilities that are measured at fair value on a recurring basis

Some of the Group's financial assets and liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and liabilities are determined.

 


Unaudited fair value
as at
31 March 2017
£'000

Unaudited fair value as at
31 March 2016
£'000

Audited

fair value

as at
30 September 2016
£'000

Valuation technique(s)
and key input(s)

Significant unobservable input(s)

Relationship of unobservable inputs to fair value

Level 1







Trading investments

1,170

978

1,093

Quoted bid prices in an active market

n/a

n/a

Level 3







Available-for-sale investments - Equity

127

106

128

The valuation is based on published monthly NAVs where available.

 

Where not available the valuation is based on the net assets reported in the latest audited accounts less the intangible assets.

 

A marketability discount is applied as this investment is highly illiquid.

Marketability discount ranging between 30-50%

As the marketability discount increases the valuation decreases.

Available-for-sale investments - Asset-backed securities

740

714

705

The valuation is based on the discounted expected cash flows, which is extracted from the latest audited accounts.

A marketability discount is applied as this investment is highly illiquid.

Marketability discount ranging between 30-50%

As the marketability discount increases the valuation decreases.

 

Sensitivity analysis

A sensitivity analysis of the significant unobservable inputs used in valuing the Level 3 financial instruments is set out below:

 








Financial asset

Assumption


Change in assumption

Impact on valuation

Current assets - Available-for-sale investments - Equity

Marketability discount

Increase by 5%

Decrease by £2,000

Current assets - Available-for-sale investments - Asset-backed securities

Marketability discount

Increase by 5%

Decrease by £57,000

11.  Provisions


Sundry claims and associated costs

Onerous contracts

Social Security contributions on share options

Leasehold dilapidations

Unaudited
period to
31 March
2017

Unaudited
 period to
31 March
2016

Audited
period to

30 September

2016


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At start of period

1,022

4,308

2,431

1,936

9,697

21,539

21,539

Additions

273

142

863

38

1,316

1,616

2,467

Utilisation of provision

(152)

(750)

(657)

-

(1,559)

(6,852)

(12,571)

Unwinding of discount

-

11

-

9

20

111

209

Unused amounts reversed during the period

(318)

-

(24)

(43)

(385)

(1,175)

(1,947)

At end of period

825

3,711

2,613

1,940

9,089

15,239

9,697









Included in current liabilities

825

486

1,405

43

2,759

9,063

3,097

Included in non-current liabilities

-

3,225

1,208

1,897

6,330

6,176

6,600


825

3,711

2,613

1,940

9,089

15,239

9,697

 

The Group recognises a provision for settlements of sundry claims and associated costs. The timing of the settlements is unknown, but it is expected that they will be resolved within 12 months.

 

The onerous contracts provision is in respect of surplus office space. The valuation of an onerous contract is based on the best estimate of the likely costs discounted to present value. Where the provision is in relation to leasehold obligations on 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.

 

Provision of £3.7 million (30 September 2016: £4.1 million) has been made for surplus office space, which the Group may not be able to sublet in the short-term. The maximum exposure is the current estimated amount that the Group would have to pay to meet the future obligations under these lease contracts which is approximately £11.0 million as at 31 March 2017 (30 September 2016: £11.3 million), if the assumption regarding future sublets is removed and the time value of money is ignored. The longest lease term covered by the provision has 16 years remaining and accounts for £3.4 million of the provision.

 

Provision of £nil million (30 September 2016: £0.2 million) has been made in relation to onerous contracts resulting from discontinued operations.

 

The Group recognises a provision of £1.9 million (30 September 2016: £1.9 million) for leasehold dilapidations. These costs are expected to arise at the end of the lease. The leases covered by the provision have a maximum remaining term of 16 years.

12.  Defined benefit scheme

The main financial assumptions used in calculating the Group's defined benefit scheme are as follows:


As at
31 March
2017

As at
31 March
2016

As at
30 September 2016

Discount rate

2.60%

3.60%

2.20%

RPI Inflation assumption

3.30%

3.10%

3.10%

CPI Inflation assumption

2.30%

2.10%

2.10%

Rate of increase in salaries

3.30%

3.10%

3.10%

LPI Pension Increases

3.20%

3.00%

3.00%





Average assumed life expectancies for members on retirement at age 65.


Retiring today




Males

88.8 years

88.6 years

88.7 years

Females

90.0 years

89.9 years

88.9 years

Retiring in 20 years' time




Males

90.5 years

89.9 years

90.4 years

Females

91.8 years

91.4 years

91.7 years





 

A full actuarial valuation was carried out as at 31 December 2014 and the results of this valuation have been updated to 31 March 2017 by a qualified independent actuary.

 

13.  Called up share capital

The following movements in share capital occurred during the period:

 


Date

No. of Fully Paid Shares

Exercise/

Issue Price
(pence)

Share
capital

Share premium account

Total





£'000

£'000

£'000

At 30 September 2016


 283,026,606


2,830

 151,836

 154,666

Issue of options

Various

271,476

103.5p-175.25p

 3

432

435

At 31 March 2017


 283,298,082


2,833

 152,268

 155,101

 

14.  Share-based payments

In December 2016, 1,226,504 share options were granted to senior executives and the Directors under the Long Term Incentive Plan ('LTIP'). The options vest on the third anniversary of the date of grant provided certain performance conditions and targets, set prior to the grant, have been met. If the performance conditions are not met the options lapse. The fair value at grant date is estimated using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. There is no cash settlement of the options. The fair value of options granted during the period ended 31 March 2017 was estimated on the date of grant using the following assumptions:

 

Weighted average share price

287.4p

Weighted average exercise price

0.0p

Expected volatility

35.00%

Expected life (yrs)

3

Risk free rate

0.76%

Expected dividend yield

5.73%

 

The Group recognised total expenses in the period of £4,149,000 (31 March 2016: £3,996,000, 30 September 2016: £8,387,000) related to equity-settled share-based payment transactions.

 

15.  Note to the cash flow statement


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Operating profit from continuing operations

28,403

21,372

49,743

Adjustments for:




Profit from discontinued operations

-

230

14,030

Depreciation of property, plant and equipment

1,005

2,109

3,505

Amortisation of intangible assets - client relationships

2,616

3,262

6,287

Amortisation of intangible assets - software

2,709

2,101

4,441

Impairment of intangible assets and tangible assets

-

680

680

Loss on disposal of property, plant and equipment

-

3

-

Profit on disposal of discontinued operation

-

-

(14,000)

Defined benefit scheme

(1,500)

(1,500)

(3,000)

Share-based payment expense

4,149

3,996

8,387

Translation adjustments

(11)

(34)

(8)

Interest income

102

258

514

Interest expense

(35)

(31)

(65)

Operating cash flows before movements in working capital

37,438

32,446

70,514

Decrease in payables and provisions

(13,852)

(58,204)

(45,478)

(Increase)/decrease in receivables and trading investments

(6,975)

28,266

35,910

Cash generated by operating activities

16,611

2,508

60,946

 Tax paid

(3,605)

(2,964)

(8,913)

Net cash inflow/(outflow) from operating activities

13,006

(456)

52,033

 

Cash and cash equivalents comprise cash at bank and bank overdrafts.

16.  Discontinued operations

The disposal of Stocktrade (discontinued operation) completed in the year to 30 September 2016. The results of the discontinued operation, included in the Consolidated Income Statement, were as follows:


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Revenue

-

3,234

3,379

Expenses

-

(2,691)

(3,339)

Operating profit

-

543

40

Costs of separation

-

(313)

(10)

Profit before tax

-

230

30

Attributable tax expense

-

(194)

(43)

Profit/(loss) after tax

-

                    36

(13)

Profit on disposal of discontinued operations

-

-

14,000

Attributable tax expense

-

-

(2,592)

Net profit attributable to discontinued operations (attributable to the equity holders of the parent)

-

                    36

11,395

 

Costs of separation consist of the following items:


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Impairment




 - Intangible - see note 8

-

(345)

(345)

 - Tangible - see note 9

-

(335)

(335)

Onerous contract release

-

448

680

Other

-

(81)

(10)

Total costs of separation

-

(313)

(10)





 

Stocktrade contributed the following cash flows included within the Consolidated Cash Flow Statement:


Unaudited period to
31 March
2017

Unaudited
period to
31 March
2016

Audited
period to
30 September
2016


£'000

£'000

£'000

Net cash outflows from operating activities

-

(2,490)

(8,206)

Net cash flows from investing activities

-

-

14,000

Net (decrease)/increase in cash and cash equivalents

-

(2,490)

5,794

 

17.  Related party transactions

There have been no related party transactions that have taken place in the period that have materially affected the financial position or the performance of the Group during the period and no changes to related party transactions from those disclosed in the 2016 Annual Report and Accounts available via our website www.brewin.co.uk that could have a material effect on the financial position or the performance of the Group. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed. There were no other transactions with related parties which were not part of the Group during the period, with the exception of remuneration paid to key management personnel.  

18.  Post balance sheet events

On 19 December 2016, the Group announced that its wholly owned principal operating subsidiary, Brewin Dolphin Limited had agreed to acquire the UK private client investment management business of Duncan Lawrie through the acquisition of Duncan Lawrie Asset Management Limited. The transaction completed on 10 May 2017 for a cash consideration of £28.0m and will be subject to an amendment for working capital.

 

Cautionary statement

The Interim Management Report (the 'IMR') for the period ended 31 March 2017 has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

 

The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

 

a)   the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

 

b)   the interim management report includes a fair view of the information required by Disclosure and Transparency Rules ('DTR') 4.2.7 R (indication of important events during the period ended 31 March 2017 and their impact on the condensed set of financial statements; and description of principal risks and uncertainties for the remaining six months of the year); and

 

c)   the interim management report includes a fair view of the information required by DTR 4.2.8R (disclosures of related parties' transactions and changes therein).

 

By order of the Board

           

 

David Nicol

Chief Executive             

16 May 2017

Independent Review Report to Brewin Dolphin Holdings PLC

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the period ended 31 March 2017 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and related notes 1 to 18. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the period ended 31 March 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

16 May 2017


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Interim Management Report for the Half Year - RNS