Brewin Dolphin Holdings PLC
29 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 robust
figures. While market conditions have been favourable there are a number of
other factors which have been significant in achieving the progress that we have
made. We have enjoyed the benefit of new teams joining us both in London and
elsewhere in our branch network. We have also seen further migration from
advisory to discretionary management as well as enjoying a steady inflow of new
clients.'
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 robust
figures. While market conditions have been favourable there are a number of
other factors which have been significant in achieving the progress that we have
made. We have enjoyed the benefit of new teams joining us both in London and
elsewhere in our branch network. We have also seen further migration from
advisory to discretionary management as well as enjoying a steady inflow of new
clients.
Our Corporate Broking operations produced a very strong performance across the
board. Not only has there been an increased level of activity but also a marked
increase in the size of mandates won.
All this strengthens our conviction and belief in our branch network and our
emphasis on our clients having both the freedom of choice and the ability to
communicate directly with the individual manager who looks after their
interests. During the year we opened an office in Keswick and since the year
end 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 an
ever improving service to clients. The year under review has seen a material
investment in our systems and in particular in the eXimius Data Management
service.
After some twenty five years we had to accept that we had finally outgrown our
old London premises at 5 Giltspur Street and we have been able to move to new
premises at 12 Smithfield Street. While we remain in the same locale the new
premises offer a much improved working environment both in which to meet and to
look after clients. It is a great credit to our personnel that this major move
was achieved with minimal disruption to the firm's efficient operations.
Your Group remains committed to the attainment of the highest standards of
business practice and is very conscious of the need to meet the requirements of
the Financial Services Authority. At the same time we share the widely held
view that regulation must be constructed and administered in a manner that is
sensible, practical and relevant. To this end we are committed to working
closely with the Regulator and Government at various levels. We welcome the
FSA'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 appointment
of David McCorkell to the Board and he is already making a significant
contribution to the affairs of your Company. As a new appointment he will be
standing for election at the Annual General Meeting on 23 February 2007.
Standing for re-election will be Michael Williams, our director responsible for
the Group's legal matters who orchestrated the superb deal which enabled us to
move 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 of
the 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 we
are confident he will make a significant contribution in the leadership of our
industry. APCIMS has recently been at the forefront of negotiations in Brussels
and with the FSA, in seeking to reduce the impact of the introduction of MiFID
and increase the relevance of the proposals.
As ever it would be foolhardy to become overly involved in short term
predictions about our markets but we remain committed to pursuing the Company's
objective of achieving steady growth and returns for Shareholders through the
provision of a quality service to our clients.
As is always the case, the results achieved in the year under review have been
done so thanks to the hard work of our people and the continued support of our
clients. Once again your Company is firmly committed to pursuing the
achievement of a satisfactory outcome for the year ahead.
Jamie Matheson
28 November 2006
Chief Executive's Report
Some years it is much easier to write the report to shareholders than others and
the past 12 months certainly comes into this category. The investment climate
throughout the period has remained relatively benign. The market's performance
as measured by the FTSE 100 Index has risen by less than 10% but if one ignores
a blip in May and June, it has in fact presented a relatively stable background
against which to advise our clients. We have however strengthened your Group
in a number of ways and broadened the offering to our clients and this has shown
through in our results. The group's profits before tax for the year ending 30
September 2006 amounted to £32m against £24.6m (before exceptional item) a year
ago, 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 which
our Chairman alludes in his statement and if one were to add that back the
increase would be 35%. These profits were earned on total income of £174m
against £145m last year, an increase of 20%.
We have, as in previous years, made two interim dividend payments rather than an
interim 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 on
6 April 2006. A second interim dividend was paid on 25 October 2006 of 2.75p
per share against 2.5p per share the previous year, making a total for the year
of 5.25p per share against 4.5p per share in the previous year, an increase of
17%.
Fully diluted earnings per share were 10.6p which compares with 8.3p if last
year's exceptional item is excluded, an increase of 28%; 33% if one adjusts for
moving costs. Basic earnings per share were 11.1p which compares with 6.2p per
share previously, an increase of 79%.
During the past year we have made further good progress in building the
discretionary funds that we manage. In my report a year ago, I outlined the
case for discretionary management and there is no doubt that it enables us to
give a better service to our clients and at the same time, by switching the
emphasis to a fee based charge, we are underpinning our earnings for
shareholders. 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 of
28%. This highly satisfactory performance reflects in part a rise in the
underlying values, although the FTSE 100 Index only rose 8.8% over the same
period, and in part switching from advisory to discretionary management.
However, by far the largest reason for this excellent performance was the
winning of new mandates and clients following those who have joined us from
other houses.
Private Client Investment Management
Value of Funds
2006 2005
£bn £bn
Discretionary portfolio management 8.8 6.9
Advisory portfolio management 10.1 10.0
18.9 16.9
Responding to our clients' requirements we are now providing a broader wealth
management package for those that require it. Our financial planners offer
particular expertise on personal pensions and inheritance tax planning and they
have held a number of highly successful seminars around the country. We have
now established a SIPP administration service through which we provide
personalised portfolios for our clients. Last year the financial planning
team's turnover rose 76%. Their figures are contained within the income earned
on 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 9.6
Advisory 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 client
executives and their clients who have joined us over the past year. It always
takes a few months for these transfers to be completed and accordingly the full
benefit of these additions will not be felt until the current year. London has
benefited the most, where we have welcomed an additional 23 senior client
executives and 10 assistants. In total, we now have 137 client advisers in our
London 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 of
Ireland's Northern Ireland private client investment management business which
will be run by our Belfast office.
In August we agreed the purchase of Aberdeen Private Investors from Aberdeen
Asset Management and the successful transfer of £200 million client funds
followed. This further strengthens our Aberdeen branch and also represents a
valuable addition to our Glasgow branch.
During the year we opened a new branch in Keswick. Since the year end we have
established an office in Oxford and will be opening an office in Hereford in
January 2007. Our policy of establishing branch offices around the country,
staffed by dedicated and enthusiastic professionals who we can support with all
the same technology and investment advice as if they were in London, continues
to 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 and
Administration', being described as being a clear success story. We were
equally delighted that Stocktrade, our execution only arm, came first in the
same category as 'Best On-line Stockbroker'.
We are always updating our technology, but the new eXimius software which is
currently being installed represents a step change to what has been available to
date. It greatly enhances the portfolio management tools for our client
executives, as well as providing the information that will be required under
MiFID.
Corporate Broking
In addition to private client investment management we are now acknowledged as
one of the leading corporate brokers for smaller companies. We act as advisers
to 133 quoted corporate clients as well as a number of private companies. Our
corporate advisers are based in Edinburgh, Glasgow, Birmingham, Leeds,
Manchester and Newcastle branches. Last year was an excellent one for the
Division 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 for
new and secondary issues were strong for virtually all of the year. Our
existing clients were active on the acquisition and fund-raising fronts and we
gained our full share of new clients both from initial public offerings,
flotations and from companies already quoted. Whilst still offering a full
service to smaller and micro cap companies, we have also been increasingly
active with larger clients, a trend that has continued in the new financial
year.
Conclusion
From the foregoing it will be seen that we have made good progress on many
fronts during the past year, particularly in terms of the increase in the number
of clients and amount of funds using discretionary management. At the same
time we are building the number of experienced client executives to give clients
the personalised attention that is our trademark. We expect this trend to
continue and it is a key element of our strategy.
I would like to thank all our staff for their hard work and their commitment to
our clients. It is thanks to them that we can look to the future with
considerable confidence. Additionally, we will have a full year's contribution
from the teams that have joined us during 2006, further strengthened by others
who will be joining us shortly.
John Hall
28 November 2006
Consolidated Income Statement
52 week period ended 30 September 2006
52 weeks to 30 53 weeks to 30
September 2006 September 2005
Note £'000s £'000s
Continuing operations
Revenue 164,594 136,563
Other 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 13,468
Finance income 5,235 4,555
Finance costs (36) (254)
Profit on ordinary activities before
exceptional item 1 32,050 24,600
Exceptional item 2 - (6,831)
Profit before tax 32,050 17,769
Tax 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 operations
Basic 5 11.1p 6.2p
Diluted 5 10.6p 6.0p
Consolidated Statement of Recognised Income and Expense
52 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 1,144
Tax 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 975 200
Deferred tax on share based payments 720 599
Net income recognised directly in equity (500) 934
Profit 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 Sheet
As at 30 September 2006
As at 30 As at 30
September September
2006 2005
£'000s £'000s
ASSETS Note
Non-current assets
Goodwill 66,846 43,624
Property, plant and equipment 16,920 9,168
Available-for-sale investments 10,463 8,954
Other receivables 1,988 1,938
Deferred tax asset 2,473 2,908
98,690 66,592
Current assets
Trading investments 2,470 1,227
Trade and other receivables 251,437 231,717
Cash and cash equivalents 61,576 50,392
315,483 283,336
Total assets 414,173 349,928
LIABILITIES
Current liabilities
Bank overdrafts 3,197 164
Trade and other payables 279,148 250,982
Current tax liabilities 3,256 2,259
Shares to be issued including premium 1,000 2,928
286,601 256,333
Net current assets 28,882 27,003
Non-current liabilities
Retirement benefit obligation 15,422 12,937
Deferred purchase consideration 3,444 538
Shares 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
EQUITY
Called up share capital 6 1,995 1,965
Share premium account 6 82,755 79,287
Revaluation reserve 6 6,805 5,749
Merger reserve 6 4,562 4,562
Profit and loss account 6 (3,911) (14,515)
Equity attributable to equity holders of the parent 6 92,206 77,048
Consolidated Cash Flow Statement
52 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 38,168
Firm's overdraft (3,197) (164)
Firm's net cash 44,635 38,004
Client 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 50,392
Bank 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: private
client investment management and corporate broking. These form the basis for the
primary segment information reported below. All operations are carried out in
the United Kingdom and the Channel Islands.
2006 2005
52 weeks 53 weeks
£'000s £'000s
Total income
Private client investment management
Discretionary portfolio management 84,878 69,165
Advisory portfolio management 66,613 61,243
151,491 130,408
Corporate broking 22,147 14,252
173,638 144,660
Profit on ordinary activities before
exceptional item and tax
Private client investment management
Discretionary portfolio management 12,381 9,625
Advisory portfolio management 9,216 7,809
21,597 17,434
Corporate broking 5,254 2,865
26,851 20,299
Finance income (net) 5,199 4,301
32,050 24,600
Segment assets
Private client investment management 319,654 290,270
Corporate broking 94,519 59,658
414,173 349,928
Segment liabilities
Private client investment management 227,448 213,222
Corporate 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 Distribution
Limited) for those who had lost money in Zero Dividend Shares. The 2005
exceptional charge, included within other operating costs and staff costs,
represents this payment, less insurance recovery, plus other directly
attributable costs. These charges are considered to be exceptional due to their
size and the unusual nature of their incidence.
3. Taxation
2006 2005
52 weeks 53 weeks
£'000s £'000s
United Kingdom
Current tax 7,723 5,374
Prior year 415 17
Overseas tax
Current tax 230 127
8,368 5,518
United 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 5,331
Tax effect of expenses that are not deductible in determining taxable 285 297
profit
Tax effect of prior year tax 415 17
Tax 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 relating
to 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 relating
to 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 £'000
Amounts 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 3,927
Second 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 the
following data:
Number of shares
2006 2005
'000 '000
Basic
Weighted average number of shares in issue in the period 198,025 196,227
Diluted
Weighted average number of options outstanding for the period 4,985 3,070
Estimated weighted average number of shares earned under deferred 4,106 5,421
consideration 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 12,214
Exceptional 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 £'000s
Group
24 September 2004 1,955 79,081 4,948 3,929 (18,827) 71,086
Profit for the period - - - - 12,214 12,214
Goodwill previously written off - - - - 312 312
Dividends paid - - - - (8,841) (8,841)
Issue of shares 10 206 - 633 - 849
Revaluation - - 1,144 - - 1,144
Deferred tax on items taken - - (343) - 799 456
directly to equity
Share based payments - - - - 494 494
Actuarial loss on defined benefit - - - - (666) (666)
pension scheme
30 September 2005 1,965 79,287 5,749 4,562 (14,515) 77,048
Profit for the period - - - - 22,005 22,005
Dividends paid - - - - (10,458) (10,458)
Issue of shares 30 3,468 - - - 3,498
Revaluation - - 1,509 - - 1,509
Deferred tax on items taken - - (453) - 1,695 1,242
directly to equity
Share based payments - - - - 613 613
Actuarial 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 £'000s
Group
Operating profit 26,851 13,468
Adjustments 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 of
claims for costs already incurred and expensed in relation to legal actions,
mainly relating to split capital trusts. Insurance debtors, based upon a prudent
estimate of amounts which are regarded as virtually certain to be received, are
included in other debtors. An estimate of the potential favourable financial
effect of the receipt of additional reimbursements is not disclosed as the
Directors consider that any such disclosure would seriously prejudice their
ongoing negotiations with insurers.
Various legal actions and complaints have been made against the Group for which
legal proceedings are in progress. Provision for any estimated payments arising
from these claims have been made and are included within trade and other
payables. These items are not disclosed separately as provisions, as the
Directors consider that disclosure of any further information would seriously
prejudice the position of the Group. The Directors believe that should any of
these claims result in a more significant loss than that provided, that any
further 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 6.5
Stock 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 6.7
Other funds where valuations are carried out but 2.9 3.3
where 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 2.0
Stock not held in Group's nominee 0.3 0.3
Execution only stock 2.7 2.3
Total funds 21.6 19.2
Stock
In Group's nominee or sponsored member 18.2 15.2
Stock 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 are
consistent with those, which will be published in the full financial statements
and which were set out in the Preliminary IFRS Financial Information included in
the Group's Annual Report and Accounts for 2005.
The financial information in this press release does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985, but is
derived from these accounts. Statutory accounts for 2005 have been delivered to
the Register of Companies, and those for 2006 will be delivered following the
Company'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 has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply 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 International
Financial Reporting Standards (IFRSs). The comparative results for the year to
30 September 2005, which were originally reported in accordance with UK
Generally Accepted Accounting Practice (UK GAAP), have been restated
accordingly.
The Annual General meeting will be held at 12 noon on 23 February 2007 at
Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.
This information is provided by RNS
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