Brewin Dolphin Holdings PLC
4 December 2001
4TH DECEMBER 2001
BREWIN DOLPHIN HOLDINGS PLC - PRELIMINARY RESULTS
FULL YEAR ENDED 30 SEPTEMBER 2001
Brewin Dolphin Holdings, the largest independent portfolio manager and
stockbroker in the UK, today announces preliminary results for the 52 weeks
ended 30 September 2001.
Highlights:
* Total income £117 million (2000: £126 million)
* Pre-tax profit before goodwill amortisation of £17.5 million (2000: £
25.1 million)
* Earnings per share 6.1p (2000: 10.0p)*
* Increased total dividend to 3.5p (2000: 3.25p)
* £16.5 billion total funds currently under management (2000: £17.0
billion) of which £4.6 billion is on a discretionary basis (2000: £4.5
billion)
* Continuing to attract new clients and quality teams of portfolio
managers
Sir David Rowe-Ham, Chairman said:
'Much has occurred during the past 12 months which has affected the progress
and prosperity of the financial sector and the savings industry. Against this
background I am pleased to report pre-tax profits of £17.5 million*, an
increased total dividend to 3.5p and sustained growth in our client base. We
have structured our business to continue to operate profitably in current
conditions. The strategy to grow discretionary and fee based business will
underpin the quality of our earnings whilst allowing us to take full benefit
of the market upturn when it occurs.'
* Figures quoted prior to goodwill amortisation
ENQUIRIES
Brewin Dolphin
John Hall Until 2pm 0207 638 9571
Post 2pm 0207 248 4400
Citigate Dewe Rogerson 0207 638 9571
Patrick Donovan
Sarah Gestetner
CHAIRMAN'S STATEMENT
Much has occurred during the past 12 months which has affected the progress
and prosperity of the financial sector and the savings industry. Against this
background I am pleased to report pre-tax profits of £17.5 million, an
increase of 8% in total dividend to 3.5p and sustained growth in our client
base.
Our total income declined by 7% to £117 million, with profit before tax and
goodwill amortisation for the 52 weeks ended September 2001 declining by 30
per cent to £17.5 million. Fully diluted earnings per share on the same basis
were 6.1p, 39% lower. Total funds under management are currently £16.5
billion, of which £4.6 billion are on a discretionary basis. The 3% net fall
in funds under management from last year should be compared with a fall in the
FTSE All Share Index of 16%. Over the past 5 years total funds under
management have increased by 100%.
Organic growth within the Group continues with Brewin Dolphin operating from
32 offices across the United Kingdom. Brewin Dolphin has been built into a
major brand. During the year we have added 8,000 new clients and were joined
by 5 new investment management teams. We continue to develop our institutional
and corporate finance business and currently advise 153 smaller and medium
sized quoted companies and investment trusts in the UK.
I thank my colleagues most warmly for their efforts and achievements on behalf
of the firm and its clients in extremely testing market conditions.
The significantly expanded scope of the FSA's regulatory powers and its many
new and immediate requirements have represented a major challenge and cost to
the Savings Industry. These are added costs that will ultimately be borne by
the consumer, investing public and shareholding base alike. Costs of
regulation within our own business are running some 75% higher than twelve
months ago. These increases will have a disproportionate effect on the smaller
participants in our sector and must lead to further consolidation.
After a period of severe volatility, markets appear to have stabilised albeit
at lower levels than had been predicted a year ago. It is difficult to say
when full confidence will return but we have structured our business to
continue to operate profitably in current conditions. The strategy to grow
discretionary and fee based business will underpin the quality of our earnings
whilst allowing us to take full benefit of the market upturn when it occurs.
At this stage it is too early to predict on the year ahead, however Brewin
Dolphin with its many strengths views the future with confidence.
Sir David Rowe-Ham
4 December 2001
CHIEF EXECUTIVE'S REPORT
OVERVIEW
The last 12 months have been an extremely volatile period for markets with
prices tending downward for much of the time. After a good if brief start to
the year, forecasts of imminent recession in the United States and the
collapse of the TMT sector throughout the spring, were followed by a quiet
summer and ended with the tragic events on 11th September.
Against this background I am pleased to report to shareholders that the Group
traded profitably in each quarter. This was largely due to the quality of our
staff and breadth and depth of our services. In making a direct comparison
with the results for 2000, one must bear in mind the record and unsustainable
market volumes in that year.
As reported in the year ended 30 September 2001, total income was £117
million, a decrease of just 7%. However, included in this figure is a full
year's contribution from Hill Osborne together with other small acquisitions,
so on a like for like basis the reduction would be 16%. Profit before tax but
excluding goodwill amortisation, was £17.5 million, against £25.1 million last
year, a decrease of 30%. Earnings per share calculated on the same basis, were
6.1p against 10.0p, which represents a decrease of 39%. Goodwill amortisation
this year amounted to £2.8 million.
During the year we continued our practice of making two dividend payments, in
April and October, totalling 3.5p per share against the equivalent of 3.25p
the previous year. We intend to announce the proposed interim payment for
April 2002, at our AGM on the 27th February 2002.
Total income can be broken down as follows:
2001 2000
£m £m
Portfolio management and stockbroking
- Discretionary portfolio management 34.5 35.2
- Advisory portfolio management 59.9 59.1
Stocktrade 9.5 12.2
Corporate finance and institutional broking 13.2 19.5
Organic growth remains central to the Group's business development. In
addition we are continuing to hold discussions with a number of external
portfolio managers and their teams with a view to them joining the company and
do not discount the possibility of opening further branches. Hill Osborne, our
last significant acquisition which completed in August 2000, is now
successfully integrated within the Group, making a good contribution to
earnings over the past twelve months as did the new branch in Taunton which
only opened in October 2000. During the year, five new teams joined us with a
further team joining us in Glasgow since the year end.
PORTFOLIO MANAGEMENT AND STOCKBROKING
We have further developed the Brewin Dolphin brand, which is now becoming
widely known as the largest independent portfolio manager in the United
Kingdom both by number of clients and funds under management. During the year,
we gained approximately 8,000 new portfolio clients. Total funds under
management at the end of November 2001 were £16.5 billion, of which £4.6
billion were on a fully discretionary basis. Within these figures PEPs and
ISAs accounted for £1.3 billion.
We have an extremely loyal client base, which continues to grow at an average
of over 150 per week. We are broadening the scope of the financial services
division to provide further services to our clients. In the last fiscal year,
we attracted a record £115 million of new money in to ISAs.
New services have been introduced to enable clients and their financial
advisers to access portfolios online and development of our online capability
has made substantial progress during the year. The ability to provide online
services has become a key marketing strength especially to personal financial
advisers and solicitors who introduce new clients to us. Approximately one
third of our new business comes to us from referrals of this nature.
Brewin Dolphin continues to attract quality investment managers and advisers.
During the year we significantly expanded our Birmingham office where two new
teams joined us. We also acquired additional teams in London, Leeds and
Manchester. Since the year end a team has joined the Group in Glasgow. We are
delighted to welcome all our new colleagues and look forward to their
contribution in the coming years.
Having increased our resources to handle last year's exceptional market
volumes, we have implemented a number of cost reduction and rationalisation
measures. A number of system improvements have also been implemented. This has
enhanced overall operating efficiency and should result in annual cost savings
of £6 million. The drive to reduce costs and improve efficiency continues but
in no way will we impair our ability to capitalise upon the market recovery
whenever it may occur.
STOCKTRADE
Following the success of measures taken as early as January to counter the
downturn in on-line and execution only trading volumes, Stocktrade achieved
profitability at an operational level in the second half of the year which is
a remarkable achievement given the market conditions.
Stocktrade maintains its excellent reputation and ability to attract clients.
During the year Stocktrade provided employee share trading services (AESOPs)
to 21 FTSE 100 companies. Twelve leading fund managers have adopted Stocktrade
for share exchanges, including Henderson Global Investors, Scottish Widows and
JPMorgan Fleming Asset Management.
CORPORATE FINANCE AND INSTITUTIONAL BROKING
Our corporate finance and broking department has had a strong year raising
over £270 million total equity. We also sponsored several VCT flotations which
raised £94 million in total. This business operates from offices in
Birmingham, Edinburgh, Glasgow, Leeds and Manchester and provides a full
corporate broking service in conjunction with the institutional sales and
research teams based in Glasgow and Newcastle. Brewin Dolphin is one of the
leading smaller companies specialists in the United Kingdom and advises 153
quoted companies. By combining corporate finance, institutional sales and
research skills we are able to provide a seamless, comprehensive service to our
clients.
Since its inception, we have accumulated considerable experience in the AIM
market, which was designed for young and smaller companies. We are actively
involved in the campaign against the proposed EU Prospectus Directive which we
believe would add significantly to costs for these smaller quoted companies if
implemented.
Overall it has been a difficult period during which to manage portfolios and
advise our clients. The rate at which new clients and indeed client executives
have been joining us is very heartening but most of all it is the great
loyalty and support of our existing clients that is most encouraging and I do
thank them. Also my thanks and appreciation goes all our staff for their hard
work over the year.
John Hall
4th December 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE 52 WEEKS ENDED 30 SEPTEMBER 2001 (2000 53 WEEKS TO 30 SEPTEMBER)
Note 2001 2000
52 Weeks 53 Weeks
Continuing operations Continuing
acquisitions Total operations
£000's £000's £000's £000's
Turnover 109,652 1,939 111,591 122,083
Other operating income 1 5,551 25 5,576 3,893
TOTAL INCOME 2 115,203 1,964 117,167 125,976
Staff costs 3 (54,625) (774) (55,399) (55,439)
Other operating costs (49,274) (739) (50,013) (49,609)
(103,899) (1,513) (105,412) (105,048)
OPERATING PROFIT 11,304 451 11,755 20,928
Other interest receivable 3,269 3,888
and similar income
Interest payable and similar (298) (607)
charges
Profit on ordinary
activities before
Goodwill amortisation 17,501 25,137
Goodwill amortisation (2,775) (928)
PROFIT ON ORDINARY
ACTIVITIES
BEFORE TAXATION 2 14,726 24,209
Tax on profit on ordinary 4 (5,599) (7,411)
activities
PROFIT ON ORDINARY
ACTIVITIES
AFTER TAXATION 9,127 16,798
Equity dividends 5 (6,354) (5,573)
RETAINED PROFIT FOR THE 2,773 11,225
PERIOD
EARNINGS PER SHARE
Basic 6 5.0 p 10.0p
Diluted 6 4.7 p 9.5p
Excluding goodwill
amortisation
Basic 6 6.6 p 10.6p
Diluted 6 6.1 p 10.0p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the 52 week period ended 30 September 2001 (2000 53 week period ended 30
September)
£000's £000's
Profit for the period 9,127 16,798
Revaluation of Stock Exchange Shares 209 5,875
Deferred tax on revaluation (63) (1,763)
Total recognised gains for the period 9,273 20,910
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2001
Note 30 September 30 September
2001 2000
£000's £000's
FIXED ASSETS
Intangible assets 51,840 49,864
Tangible assets 13,998 11,335
Investments 6,354 6,145
72,192 67,344
CURRENT ASSETS
Investments 649 645
Debtors 165,035 308,532
Cash at bank and in hand 41,545 52,345
207,229 361,522
CREDITORS: amounts falling due (180,380) (334,677)
within one year
NET CURRENT ASSETS 26,849 26,845
TOTAL ASSETS LESS CURRENT 99,041 94,189
LIABILITIES
CREDITORS: amounts falling due - (1,038)
after more than one year
PROVISION FOR LIABILITIES AND CHARGES (1,485) (2,628)
97,556 90,523
CAPITAL AND RESERVES
Called up share capital 1,837 1,790
Shares to be issued including 24,757 25,621
premium
Share premium account 71,462 67,826
Merger reserve 1,504 -
Revaluation reserve 4,259 4,113
Profit and loss account (6,263) (8,827)
Equity shareholders' funds 7 97,556 90,523
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FIFTY TWO WEEKS ENDED 30 SEPTEMBER 2001
(2000 FIFTY THREE WEEKS TO 30 SEPTEMBER)
2001 2000
52 weeks 53 weeks
£000's £000's
Cash flow from operating activities (see below) 7,151 25,452
Return on investments and servicing of finance 2,971 3,281
Taxation (6,243) (6,295)
Capital expenditure (7,609) (5,902)
Acquisitions and disposals net (1,586) (2,959)
Equity dividends paid (5,836) (4,908)
CASH (OUTFLOW)/ INFLOW BEFORE FINANCING (11,152) 8,669
Financing (see below) 698 (685)
(DECREASES)/INCREASE IN CASH IN THE PERIOD (10,454) 7,984
NOTES TO THE CASH FLOW STATEMENT
RECONCILIATION OF OPERATING PROFIT
TO OPERATING CASH FLOW
Operating profit 11,755 20,928
Depreciation and amortisation 7,625 4,319
Profit share paid in shares to be issued - 500
Loss on sale of fixed assets and lease finance 96 193
Increase in investments (4) (242)
Decrease/(increase) in debtors 143,497 (13,929)
(Decrease)/increase in trade creditors (150,819) 890
(Decrease)/increase in other creditors (4,999) 12,793
Net cash inflow from operating activities 7,151 25,452
Financing
Issue of shares 794 27
Repayment of finance leases (96) (712)
698 (685)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET FUNDS
(Decrease)/Increase in cash in the period (10,454) 7,984
Cash movement from change in lease financing 96 234
Change in net funds resulting from cash flows (10,358) 8,218
Client cash arising as part of acquisitions - 2,499
Net funds at start of period 51,100 40,383
Net funds at end of period 40,742 51,100
ANALYSIS OF NET FUNDS
2001 Cash flow 2000
£000's £000's £000's
Cash 41,545 (10,800) 52,345
Overdraft (803) 346 (1,149)
Finance lease - 96 (96)
40,742 (10,358) 51,100
NOTES
2001 2000
1. OTHER OPERATING INCOME 52 weeks 53 weeks
£000's £000's
Interest receivable on clients' free money 29,605 23,524
Interest payable on clients' free money (24,029) (19,631)
5,576 3,893
2. TOTAL INCOME AND PROFIT BEFORE TAX 2001 2000
52 weeks 53 weeks
Total Profit Total Profit
before before
income taxation income taxation
£000's £000's £000's £000's
Discretionary portfolio management 34,514 6,473 35,216 7,159
Advisory portfolio management 59,894 5,012 59,069 7,884
Stocktrade 9,518 (1,872) 12,195 (256)
Corporate finance and institutional 13,241 4,917 19,485 7,069
OPERATING PROFIT BEFORE GOODWILL 14,530 21,856
AMORTISATION
Interest net 2,971 3,281
PROFIT BEFORE TAX AND GOODWILL 17,501 25,137
AMORTISATION
Goodwill amortisation (2,775) (928)
117,167 14,726 125,976 24,209
In the 2000 financial statements the Group's institutional business was
included within advisory portfolio management and other. The Directors now
consider that the institutional business is more closely aligned to the
corporate finance business segment and have aggregated the institutional
business with the corporate finance business and restated the 2000
comparatives accordingly.
2001 2000
3. EMPLOYEES 52 53
weeks weeks
£000's £000's
The aggregate payroll costs were as follows:
Wages and salaries 47,548 47,289
Social security costs 3,101 2,823
Other pension costs 4,750 5,327
55,399 55,439
The above figures include payments under staff bonus and profit 8,529 17,646
share schemes of :-
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
United Kingdom corporation tax based on the taxable profit
for the period at 30% (2000 30%)
Current 6,769 6,486
Prior year (51) (162)
Deferred - UK only (1,205) 1,098
Prior year deferred - UK only - (233)
Overseas tax 86 222
5,599 7,411
5. DIVIDENDS
First interim dividend of 2p (2000 2p) paid 6 April 2001 3,598 3,335
Second interim dividend of 1.5p per share paid 1 October 2001 2,756 2,238
(2000 1.25p)
6,354 5,573
In accordance with the Groups stated dividend policy there are two interim
dividends paid and no final dividend.
6. EARNINGS PER SHARE
2001 2000
52 week period 53 weeks
No No
000's 000's
Basic
Weighted average number of shares in issue in 181,011 167,368
the period
Diluted
Weighted average number of options outstanding 4,244 4,817
for the period
Estimated weighted average number of shares
earned under
deferred consideration arrangements 10,102 4,970
Diluted weighted average number of shares in 195,357 177,155
issue in the period
£000's £000's
Basic profit for the period and attributable 9,127 16,798
earnings
Goodwill amortisation 2,775 928
Adjusted basic profit for the period and 11,902 17,726
attributable earnings
7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS
At 30 September 2000 90,523 27,235
Issue of shares in period 2,403 31,968
New shares to be issued created in period 2,000 16,000
Estimated movement in
Value of shares to be issued (80) 1,217
Prior period acquisitions (209) (1,235)
Revaluation 146 4,113
Profit for the period 9,127 16,798
Dividends (6,354) (5,573)
At 30 September 2001 97,556 90,523
8. 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 the accounts. Statutory accounts for 2000 have been
delivered to the Register of Companies, and those for 2001 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.
9. The Annual General Meeting will be held at 12 noon on 27 February 2002.