Brewin Dolphin Holdings PLC
30 November 1999
Brewin Dolphin Holdings PLC
Preliminary Results for the 52 weeks ended 26 September 1999
Highlights
- Pre-tax profit £17.5m - up 57%*
- Earnings per share 35.1p - up 29%*
- Dividends in the year of 13.0p - up 30%
- Funds under management approximately £14bn, of which £3.2bn
is on a fully discretionary basis
- Acquisition of private client team from Williams de Broe
with £400m funds under management
* After proportionately adjusting for the 9 month period in 1998
'Brewin Dolphin has had an outstanding year, reflecting strong
organic growth in all its activities, complemented by a full year
contribution from the acquisition of Wise Speke, which joined the
Group in June 1998.'
'The current year has got off to a good start. I am confident
that the Group is well positioned to make further progress and I
look forward to the future with confidence.'
Sir David Rowe-Ham, Chairman
Enquiries:
John Hall, Managing Director
Brewin Dolphin Holdings PLC Tel: 0171 248 4400
Bob Gregory
Bell Pottinger Financial Tel: 0171 353 9203
Brewin Dolphin Holdings PLC
Chairman's Statement
I am pleased to report that Brewin Dolphin has had an outstanding
year, reflecting strong organic growth in all its activities
complemented by a full year contribution from the acquisition of
Wise Speke, which joined the Group in June 1998.
These results mark the fifth anniversary of the company becoming
publicly quoted on the London Stock Exchange and is therefore an
appropriate moment to reflect on progress to date.
In 1994 we had a pre tax profit of £4.03m, whilst in the year
ended 26 September 1999 this had grown to £17.5m - an increase of
430%. Earnings per share rose three times from 12.5p five years
ago to 35.1p with total funds under management increasing from
£5bn to £14bn, of which some £3.2bn is under discretionary
management. None of this success would have been achieved without
the enthusiasm and dedication of all my colleagues, and on your
behalf I thank them most sincerely
We are one of the largest private client fund managers and
stockbrokers in the United Kingdom, with well over 70,000 clients
operating from some 23 offices. Today we offer our clients a
range of services covering discretionary, advisory, on-line and
execution only. There is an exciting future for dealing over the
Internet and the service we offer through Stocktrade has been
especially well received. However, demand for our investment
management services also continues to be buoyant and we believe
both aspects of our business can continue to flourish and that
they are not mutually exclusive. Indeed, our experience to date
is that Internet dealing appeals to a different client base from
our traditional business.
In addition to this core activity we have built up a strong
position providing financial advice to the smaller company. We
act as broker or financial adviser to over 135 companies making
us the leading broker in this area.
The past five years have also seen an unparalleled advance in
computer systems and information technology. All our offices are
linked to a central system and we have invested £6m this year
alone. This whole technology area is vital to the firm's future,
and our investment programme is on-going. Clients are entitled
to receive the highest possible service from their financial
advisers and we are determined to provide it.
Although we have grown significantly in the past five years the
Board is constantly exploring further acquisition opportunities,
both of people and firms. Since the year end, we are delighted
to have reached agreement with Williams de Broe Plc for eleven
client executives and support staff to join us. They currently
handle some £400m of funds under management, most of which is on
a discretionary basis. Full details of this transaction will be
found in the Managing Director's Review.
The current year has got off to a good start. Whilst the market
is expecting subdued 'Millennium' trading in December and early
January I am confident that the Group is well positioned to make
further progress and I look forward to the future with
confidence.
Sir David Rowe-Ham
MANAGING DIRECTOR'S REVIEW
This has proved to be another highly successful year for the
company with progress on many fronts. The acquisition of Wise
Speke in June of last year has proved a great success and I am
glad to report that the integration of the business has been
completed. Moreover, the economies of scale that we envisaged
have been more than achieved and within a shorter timescale. The
figures we are now reporting contain, for the first time, a full
twelve month contribution from the acquisition.
Total income has risen to £87.6m, an increase of 32% over last
year's figure when adjusted to take account of the fact that
1998 was a nine month period. Pre-tax profits at £17.5m show an
increase of 57% over the last year's figure, similarly adjusted.
Earnings per share in fully diluted form are 35.1p, an
increase of 29%.
During the year we continued our practice of making two dividend
payments, in April and October and we raised the total payment by
30% to 13p against 10p in 1998.
We have seen continued growth in the funds we manage on a fully
discretionary basis which at the year end were valued at £3.2bn
compared to £2.5bn twelve months previously. Total funds under
management are approximately £14bn. The Wise Speke acquisition
brought a significant increase in advisory funds. This is a
quality business both in terms of the service the clients receive
and the recurrent income to us. However, the conversion of a
greater proportion to discretionary management clients remains
the priority, because in today's fast moving markets it is a
great advantage to be in a position to act for clients without
delay.
Given the rapid technological advances taking place, we think
many of our clients will wish to take advantage of the speed and
ease of communication such technology brings in its wake. As part
of the ongoing development of our award-winning website,
www.brewindolphin.co.uk, we are developing the ability for our
clients to access their individual portfolio valuations, dealing
records, etc. as well as market prices, in a carefully controlled
and secure environment. It is important that we keep abreast of
developments in this swiftly changing environment, as the London
Stock Exchange demutualises and possible new markets are
developed, to ensure that we obtain the best execution and
service for our clients.
The management of individual portfolios remains our core
business. However, we are fully alert to the opportunities
presented by the new technology and the Internet. The
announcement of our figures on the 30th November coincides with
the anniversary of the introduction of our Internet trading
service through Stocktrade. We were, the first broker to offer
such a service and we continue to lead in this area being the
only broker to offer next day settlement, as well as real time
prices. Our clients using this service which can be found at
www.stocktrade.co.uk. now have portfolios lodged with Crestco
through ourselves totalling over £400m. Stocktrade has continued
to go from strength to strength not only with its internet
trading but also with its Private Client telephone dealing,
Company Schemes, Corporate PEPs and ISAs and Fund
Management/Agency service operation. It continues to concentrate
on high quality service and immediacy of response.
Continuing on the theme of technology, the announcement that
CREST is to link with the US Depository Trust Company next Spring
is an exciting development and will enable us to settle
transactions in NASDAQ and S&P 500 securities economically. The
difference this link will make to our cost of US trading will be
dramatic and will bring down our commission on US transactions.
During the year we have opened two new branches. One in North
Wales, based in Llandudno and one in Inverness. We have also
expanded a number of our other branches, particularly Dundee,
Manchester, Birmingham, Guernsey and Jersey. These branches are
supported by our UK research resource delivered to each office by
the Intranet and this service is currently being expanded to
cover a selection of the larger European companies. Most
notably, since the year end, we have agreed the acquisition of
the business of eleven client executives and supporting staff who
will be joining us in the London office from Williams de Broe a
member of the ING Group. They will bring with them funds under
management of some £400m of which the great majority is on a
fully discretionary fee paying basis, and they generated an
income of some £3.2m last year. The initial cost will be
approximately £12m, payable to ING and the team which is intended
to be funded largely by a Placing of new ordinary shares raising
up to £11.4m. There are also arrangements whereby the team can
earn a maximum of a further £3m BDH shares if they achieve
certain goals. The business will be earnings enhancing in the
first year. We continue to look for other investment
opportunities as the Retail Market continues to consolidate.
The replacement of PEPs by ISA's has seen a slow start.
Nonetheless, we have a total of £45m in ISA funds and there is no
doubt that in the first year, when clients can invest £7000 in
this medium, it is an attractive proposition. It is a concern
that clients who have been persuaded by their bank or building
society to put £1000 in a cash mini-ISA do not always appreciate
that this prevents them from taking out a full ISA through
ourselves even though they have been accustomed to making an
annual PEP contribution. We are continuing to receive a good
number of PEP transfers and our PEP funds are now over £1
billion.
Our corporate finance and institutional division have had another
successful year, despite market sentiment against small companies
which form the bulk of our client base. We were, and remain,
particularly active in the split capital investment trust sector,
winning new mandates with innovative ideas. We continue to build
our company client base across the UK offering a wide range of
services and advice on amalgamations, disposals and future
funding, and now act as corporate broker or financial adviser to
over 135 companies, from whom we receive an increasing flow of
recurring income.
Whilst the integration of Wise Speke has been the main focus of
the past year we have also introduced further considerable I.T.
enhancements. We invested no less than £6m on our systems last
year and expect to have a total spend of approaching the same
figure in the current period. By then we will have introduced
new systems to support our executives in providing the best
possible service to our clients.
Against the background of so much change this year, it is a great
credit to all our staff that the momentum has been more than
maintained.
John Hall
Brewin Dolphin Holdings PLC
Consolidated Profit and Loss Account
For the 52 Weeks Ended 26 September 1999 (1998 38 weeks to 27
September)
Note 1999 1998
52 weeks 38 weeks
Continuing Continuing
Operations Operations
£'000 £'000
Turnover 85,618 48,762
Other operating income 1,985 1,085
----------- -----------
TOTAL INCOME 1 87,603 49,847
----------- -----------
Staff costs (39,483) (22,690)
Other operating costs (33,711) (20,493)
----------- -----------
(73,194) (43,183)
----------- -----------
OPERATING PROFIT 14,409 6,664
Profit on disposal of fixed
assets 2 536 -
Other interest receivable and
similar income 2,702 1,842
Interest payable and similar
charges (131) (155)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 1 17,516 8,351
Tax on profit on ordinary
activities (5,707) (2,784)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 11,809 5,567
Dividends 3 (4,093) (1,090)
----------- -----------
RETAINED PROFIT FOR THE PERIOD 7,716 4,477
=========== ===========
EARNINGS PER SHARE
Basic 4 37.6p 21.7p
Diluted 4 35.9p 20.4p
Excluding goodwill
amortisation and profit
on disposal of fixed asset
Basic 4 36.8p 21.7p
Diluted 4 35.1p 20.4p
Brewin Dolphin Holdings PLC
Consolidated Balance Sheet
As At 26 September 1999
26 September 27 September
1999 1998
£'000 £'000
FIXED ASSETS
Intangible assets 409 -
Tangible assets 8,764 5,093
Investments 240 240
------------ ------------
9,413 5,333
============ ============
CURRENT ASSETS
Investments 403 345
Debtors 254,745 195,257
Cash at bank and in hand 40,888 36,720
----------- -----------
296,036 232,322
----------- -----------
CREDITORS: amounts falling due
within one year (276,775) (216,248)
----------- -----------
NET CURRENT ASSETS 19,261 16,074
----------- -----------
TOTAL ASSETS LESS CURRENT
LIABILITIES 28,674 21,407
CREDITORS: amounts falling due
after more than one year (1,439) (1,788)
----------- -----------
27,235 19,619
=========== ===========
CAPITAL AND RESERVES
Called up share capital 1,573 1,559
Shares to be issued including
premium 11,321 10,179
Share premium account 33,158 33,085
Profit and loss account (18,817) (25,204)
---------- -----------
Shareholders' funds 27,235 19,619
========== ===========
Brewin Dolphin Holdings PLC
Consolidated Cash Flow Statement
For the 52 Weeks Ended 26 September 1999 (1998 38 Weeks to 27
September)
1999 1998
52 weeks 38 weeks
£'000 £'000
Cash flow from operating activities 19,177 10,619
Return on investments and servicing
of finance 2,571 1,687
Taxation (6,717) (551)
Capital expenditure (6,520) (2,017)
Acquisitions and disposals net 69 (26,899)
Equity dividends paid (3,610) (1,501)
----------- -----------
CASH INFLOW/(OUTFLOW) BEFORE
MANAGEMENT OF LIQUID RESOURCES AND
FINANCING 4,970 (18,662)
Financing (443) 26,379
----------- -----------
INCREASE IN CASH IN THE PERIOD 4,527 7,717
=========== ===========
RECONCILIATION OF OPERATING PROFIT TO
OPERATING CASH FLOW
Operating profit 14,409 6,664
Depreciation 2,491 1,312
Loss on sale of fixed assets and
lease finance 359 26
(Increase)/Decrease in investments (58) 74
Increase in debtors (60,192) (76,251)
Increase in creditors 58,701 75,035
Increase in other creditors 3,467 3,759
----------- -----------
Net cash inflow from operating
activities 19,177 10,619
=========== ===========
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET FUNDS
Increase in cash in the period 4,527 7,717
Cash movement from change in lease
financing 529 160
----------- -----------
Change in net funds resulting from
cash flows 5,056 7,877
Cash net of finance leases acquired
with Wise Speke Group PLC - 8,784
Net funds at start of year 35,327 18,666
----------- -----------
Net funds at end of year 40,383 35,327
=========== ===========
Brewin Dolphin Holdings PLC
Notes to the Accounts
1. TOTAL INCOME AND PROFIT BEFORE TAX
1999 Year 1998 Nine Months
Total Profit Total Profit
before before
income taxation income taxation
£'000 £'000 £'000 £'000
Discretionary
portfolio management 31,761 6,515 17,501 3,166
Advisory portfolio
management and
other 48,769 8,567 26,455 3,574
Corporate finance 7,073 1,898 5,891 1,611
-------- --------
16,980 8,351
Profit on disposal
of fixed assets 536 -
-------- -------- -------- --------
87,603 17,516 49,847 8,351
======== ======== ======== ========
2. PROFIT ON DISPOSAL OF FIXED ASSETS
1999 1998
£'000 £'000
Year Nine Months
Profit on sale of management
contracts of Pilgrim Unit Trust
Managers Limited net of
goodwill write off of £333,000 536 -
========= =========
3. DIVIDENDS
First interim dividend of 8p
paid 6 April 1999 2,520 -
Second dividend of 5p per share
paid 1 October 1998 (1998: 3.5p) 1,573 1,090
-------- --------
4,093 1,090
======== ========
4. EARNINGS PER SHARE
1999 1998
Earnings per share is calculated in No. No.
accordance with FRS 14 based on the
following figure
Basic
Weighted average number of shares in
issue in the period 31,394,588 25,698,902
Diluted
Weighed average number of options
outstanding for the period 601,104 1,340,330
Estimated weighted average number of
shares earned under deferred
consideration arrangements
Wise Speke 661,053 -
Other acquisitions 273,955 275,575
----------- -----------
Diluted weighted average number of
shares in issue in the period 32,930,700 27,314,807
=========== ==========
£'000 £'000
Basic profit for the period and
attributable earnings 11,809 5,567
Goodwill amortisation 8 -
Profit on sale of fixed assets (536) -
Taxation thereon 269 -
-------- --------
Adjusted Basic profit for the period
and attributable earnings 11,550 5,637
======== ========
5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS.
£'000
At 28 September 1998 19,619
Issue of shares 87
Estimated movement in value of shares (355)
to be issued
Prior year goodwill (165)
Disposal of goodwill 333
Profit for the period 11,809
Dividends (4,093)
----------
At 26 September 1999 27,235
----------
6. The financial information set out above does not constitute
the company's statutory accounts for the year ended 26
September 1999 or the nine month period ended 27 September
1998, but is derived from those accounts. Statutory
accounts for 1998 have been delivered to the Registrar of
Companies, and those for 1999 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)
or the Companies Act 1985.
7. The Annual General Meeting will be held at 12 noon on 24
February 2000.