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Brewin Dolphin Hldgs (BRW)

  Print          Annual reports

Wednesday 27 November, 2002

Brewin Dolphin Hldgs

Final Results

Brewin Dolphin Holdings PLC
27 November 2002

27 November 2002

                            The Brewin Dolphin Group

•         Total income £105 million (2001 : £117 million)

•         Pre-tax profit, before goodwill amortisation and exceptional items, of
          £10.5 million  (2001 : £17.5 million)

•         Earnings per share 3.8p (2001 : 6.1p)*

•         Total dividend 3.5p (2001 : 3.5p) per share

•         £13.5 billion total funds currently under management (September 2001:
          £15.3 billion) of which £4.2 billion is on a discretionary basis 
          (September 2001: £4.0 billion)

Sir David Rowe-Ham, Chairman, said:-

'Our policy of investing in high quality people has been justified by our
performance in a very difficult year.  We have increased discretionary funds
under management to £4.2 billion, maintained total income above £100 million and
attracted a number of new senior portfolio managers.'

For further information

John Hall
Brewin Dolphin                                       020 7248 4400

Patrick Donovan
Citigate Dewe Rogerson                               020 7638 9571


* Figures quoted prior to goodwill amortisation and exceptional items

CHAIRMAN'S STATEMENT

Our policy of investing in high quality people has been justified by our
performance in a very difficult year.  We have increased discretionary funds
under management to £4.2 billion, maintained total income above £100 million and
attracted a number of new senior portfolio managers.



We are now in the third year of a recognised bear market, which comes after many
years of economic growth. Recently investors have been experiencing the kind of
markets not seen since the early 1970's. Against this backdrop it is creditable
that we have maintained income at over £100m.  This is testimony to the
dedication and expertise of all staff throughout our Group. We have made further
progress in our efficiency drive and in paring back overheads. At the same time,
we consider it a priority to invest now in our people and our systems to provide
the very best client service, thus ensuring that we continue to build the client
base and strengthen our position in our market.



Total funds under management are currently £13.5bn, of which £4.2bn are managed
on a discretionary basis. This represents a net increase in discretionary funds
of 5% as compared with a 24% fall in the FTSE 100 Index. Our internal growth
continued during the year and, in addition, 5 further teams of portfolio
managers joined us.  We operate from 33 offices across the U.K.



Our institutional and corporate finance businesses service smaller and
medium-sized quoted companies throughout the U.K.  Our success in helping our
142 corporate clients was recognised in the latest Hemscott survey in which we
topped the rankings of advisor to the 'fastest growing companies with the
fastest growing earnings'.



Looking to the future, as one of the UK's leading independent private client
fund managers and stockbrokers, we continue to build on our major strength,
namely a professional and hardworking team, that serves a well spread and
diversified client base on whose best interests we remain entirely focussed.



I have now served as Chairman since the management buy-out of the company in
1992.  Since that time the Company has grown enormously.  In accordance with the
company's policy that non-executives serve in office for no longer than a ten
year period I intend to step down from the chair and the board this February at
the AGM in February 2003.  I am delighted Sir Fred Holliday, who has been a
member of the board since 1998, has agreed to take my place.



I have much enjoyed my time with Brewin Dolphin.  I am glad to have had the
opportunity to play a part in the development of this growing and expanding
business.  I believe the Group is well positioned to take full advantage of any
improvement in the market and I wish Sir Fred and the team all success.


Sir David Rowe-Ham
26 November 2002


Chief Executive's Report



The period under review has been an extremely difficult one for financial
markets worldwide with FTSE 100 Index falling 24% over the period. Accordingly
it will come as no surprise to shareholders that we are reporting lower figures
than those for last year.  However, it is very much to the credit of my
colleagues that we have continued to trade profitably throughout the year and
that includes the summer period, always our quietest quarter, which saw a fall
of 17% in the FTSE 100 Index.  This demonstrates the resilience of our Group.



For the year ended 27th September 2002 our total income amounted to £105m, a
reduction of 10%.  Profit before tax, goodwill amortisation and exceptional
items was £10.5m against £17.5m, whilst earnings per share on the same basis
were 3.8p against 6.1p.  As already announced we took a decision to sell the
Group's holding of London Stock Exchange shares which gave us a profit of £2.2m
over book value.  This has been treated as an exceptional item. Against this we
have made a provision of £2.5m against costs and liabilities in connection with
split capital investment trusts which I refer to in greater detail below.
Goodwill amortisation over the year amounted to £3.9m.



We made dividend payments in April and October this year amounting to a total of
3.5p per share, the same as in the previous year.  We propose to announce the
interim payment for April 2003 at our AGM on 26th February 2003.



Total income can be broken down as follows:-


                                                                                     2002         2001
                                                                                       £m           £m
Discretionary portfolio management                                                   41.3         34.5
Advisory portfolio management                                                        47.5         59.9
Corporate finance & institutional broking                                            10.6         13.2
Stocktrade                                                                            6.0          9.5



Portfolio management and stockbroking

One of the most encouraging aspects of last year has been the growth of the
funds we manage on a full discretionary basis for clients. These amounted to
£4.2bn, a figure which, although down from its peak, still showed an increase
over the level of twelve months earlier when it stood at £4.0bn despite the
market fall over the period.  This reflects the fact that we continued to
attract new client funds, although in equal measure it reflects a switch from
advisory to discretionary management.  Advisory funds under management are
£9.3bn giving a total of £13.5bn.



I am delighted to say we continue to attract quality teams of portfolio managers
to join us.  Since the year end we have added two new teams to our London
office.  At the interim stage we announced that the long established partnership
of Popes would be joining us.  This agreement was finalised on 5th July. They
are settling in well and we look forward to them making a positive contribution
to the current financial year.



I am pleased to report that our ISA subscriptions held up well and for the third
year running were just over £100m.  We currently manage over £1bn in PEPs and
ISA funds and we are seeing a significant increase in the number of PEP and ISA
transfers to the Group from both new clients and intermediaries.



We continue to concentrate on controlling our costs as well as striving for
greater efficiency. Despite an increase in our senior client executives of 25
over the year, and accordingly our potential earning power, we continue to make
improvements to the cost base with a £7m saving in the 2002's accounts.
Following a decision to integrate fully the Stocktrade division operationally
into the group, we have combined the back office functions in Scotland on one
site.  With other efficiency measures and the re-negotiation of certain
contracts this will reduce annual costs by a further £3m.



Split capital investment trusts have been much in the news recently and, even
though they represent a very small part of our overall business, I would like to
comment on them, particularly in view of the adverse publicity these trusts have
attracted.  In common with the rest of the industry we have bought these stocks
as part of some of our clients' portfolios for over twenty years.  For much of
this time they were successful investments meeting their objectives. A large
number of them continue to trade on a sound basis to this day although, sadly,
some have failed.  When recommending these stocks to certain of our clients we
were not only in line with the rest of the industry, accountancy firms, and
solicitors but we were also following the Association of Investment Trust
Companies line who designated Zero stocks as low risk whilst the Securities
Institute too had them as low risk in the syllabus for their exams.  In cases
where clients have raised concerns about split capital trusts we are looking
into them on an individual basis and in great depth.  We believe we are dealing
with them all equitably. Details of accounting provisions made in respect of
claims and associated costs are set out in note 3 of this announcement.





Corporate finance and institutional broking

Our corporate and institutional broking business operates predominately in the
small cap arena and as such it is pleasing that we have been able to achieve a
satisfactory return from this division despite market conditions.  New issues
work has not been the feature we have seen in recent years but this has been
mitigated by corporate activity and annual retainers from our existing client
base.  We currently act for 142 quoted corporate clients. We were also brokers
to a small number of split capital trusts and, as such, sponsored flotations on
their behalf. We are satisfied that at the time of the issue the trusts were
properly capitalised and the prospectuses complied with the listing rules.





Stocktrade

In the quieter market conditions that have persisted throughout the year trading
for execution only brokers has been particularly difficult. Turnover in the
Stocktrade division fell by 37% over the year but even so, thanks to the drive
for further efficiencies, it is gratifying to be able to report a year end
profit, including interest.  During the year we have increased the number of
quoted companies to which we provide dealing services to over 50 of which 15 are
currently in the FTSE 100. In November 2001 we launched a new on-line trading
platform for private investors and intermediaries which was designed by our own
IT development team.  It has proved successful and extremely reliable and is a
platform we are continually developing to suit the wide variety of our clients.



The Board

As you will have read in his Chairman's statement, Sir David Rowe-Ham has
indicated that he will not be standing for re-election at the AGM in February
2003. Sir David joined the Board as Chairman in March 1992 at the time of the
buy-out. Since that time we have seen a period of quite exceptional expansion,
the acquisition of Bell Lawrie in 1993, the flotation in 1994, and the
acquisition of Wise Speke in 1998.  In the period the Group's turnover has
increased from £13.3m to over £100m.  His enthusiasm and wholehearted support
has been enormously appreciated by me and the entire executive team and we will
miss him greatly. The process for appointing a new Non-Executive Director
through the Nominations Committee is now well advanced and whilst the
appointment will be with a view to taking up the Chairmanship in due course we
are delighted that Sir Fred Holliday, the senior Non-Executive Director, has
agreed to take over the Chairmanship at the AGM.



We are extremely grateful to David for his great contribution.  We agree with
him that as he leaves the Group it is well positioned to take full benefit from
the upturn in prices and market activity when it arrives, which it surely will.



John Hall

26 November 2002


CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE 52 WEEKS ENDED 27 SEPTEMBER 2002 (2001 52 WEEKS TO 30 SEPTEMBER)






                                                         Note                    2002                      2001
                                                                             52 Weeks                  52 Weeks

                                                                Continuing                Total      Continuing
                                                                operations                           operations
                                                              acquisitions
                                                                    £000's   £000's      £000's          £000's

Turnover                                                            97,421    1,635      99,056         111,591
Other operating income                                               6,372       67       6,439           5,576

TOTAL INCOME                                              1        103,793    1,702     105,495         117,167

Staff costs                                               2       (51,974)  (1,055)    (53,029)        (55,399)
Other operating costs
operating costs                                                   (42,624)  (1,168)    (43,792)        (47,238)
goodwill amortisation                                              (3,614)    (250)     (3,864)         (2,775)
exceptional provision for split capital trust             3        (2,500)        -     (2,500)               -
liabilities
                                                                  (48,738)  (1,418)    (50,156)        (50,013)
                                                                 (100,712)  (2,473)   (103,185)       (105,412)

OPERATING PROFIT                                                     3,081    (771)       2,310          11,755

Profit on disposal of fixed assets (exceptional)          3                               2,206               -
Other interest receivable and similar income                                              1,999           3,269
Interest payable and similar charges                                                      (124)           (298)
Profit on ordinary activities before
goodwill amortisation and exceptional items                                              10,549          17,501
Goodwill amortisation                                                                   (3,864)         (2,775)
Exceptional items                                         3                               (294)               -
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION                                           1                               6,391          14,726

Tax on profit on ordinary activities                      4                             (2,626)         (5,599)

PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION                                                                            3,765           9,127

Equity dividends                                          5                             (6,544)         (6,354)

                                                                                        (2,779)           2,773

EARNINGS PER SHARE
Basic                                                     6                                 2.0p            5.0p
Diluted                                                   6                                 1.9p            4.7p
Excluding goodwill amortisation and exceptional
items
Basic                                                     6                                 4.0p            6.6p
Diluted                                                   6                                 3.8p            6.1p




CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the 52 weeks to 27 September 2002 (2001 52 weeks to 30 September)



                                                                         Note
                                                                                       2002              2001
                                                                                     £000's            £000's

Profit for the period                                                                 3,765             9,127
Revaluation of London Stock Exchange shares                                               -               209
                                                                                          
Deferred tax on revaluation                                                               -              (63)
                                                                                          
Total recognised gains for the period                                                 3,765             9,273

CONSOLIDATED BALANCE SHEET AS AT 27 SEPTEMBER
FIXED ASSETS

Intangible assets                                                                    43,323            51,840
Tangible assets                                                                      14,017            13,998
Investments                                                                             431             6,354

                                                                                     57,771            72,192

CURRENT ASSETS
Investments                                                                             494               649
Debtors                                                                             159,169           165,035
Cash at bank and in hand                                                             33,162            41,545

                                                                                    192,825           207,229

CREDITORS: amounts falling due within one year                                    (167,682)         (180,380)

 NET CURRENT ASSETS                                                                  25,143            26,849

TOTAL ASSETS LESS CURRENT LIABILITIES                                                82,914            99,041

PROVISION FOR LIABILITIES AND CHARGES                                               (3,985)           (1,485)
NET ASSETS
                                                                                     78,929            97,556

CAPITAL AND RESERVES
                 Called up share capital                                              1,910             1,837
                 Shares to be issued including premium                                3,000            24,757
                 Share  premium account                                              77,965            71,462
                 Merger reserve                                                       1,967             1,504
                 Revaluation reserve                                                      -             4,259
                                                                                          
                 Profit and loss account                                            (5,913)           (6,263)

EQUITY SHAREHOLDERS' FUNDS                                                  7        78,929            97,556




CONSOLIDATED CASH FLOW STATEMENT
FOR THE 52 WEEKS TO 27 SEPTEMBER 2002 (2001 52 WEEKS TO 30 SEPTEMBER)


                                                                                   2002             2001
                                                                               52 weeks         52 weeks
                                                                                 £000's           £000's

Cash flow from operating activities (see below)                                  19,929            7,151
Return on investments and servicing of finance                                    1,875            2,971
Taxation                                                                        (6,657)          (6,243)
Capital expenditure                                                             (5,791)          (7,609)
Purchase of fixed asset  investments                                              (161)                -
                                                                                                       
Acquisitions                                                                   (11,718)          (1,586)
Equity dividends paid                                                           (6,440)          (5,836)

CASH OUTFLOW BEFORE FINANCING                                                   (8,963)         (11,152)

Financing (see below)                                                               242              698

DECREASE IN CASH  IN THE PERIOD                                                 (8,721)         (10,454)

NOTES TO THE CASH FLOW STATEMENT

RECONCILIATION OF OPERATING PROFIT
TO OPERATING CASH FLOW
Operating profit                                                                  2,310           11,755
Depreciation and amortisation                                                     9,635            7,625
Sale of fixed assets  investments                                                 8,290               96
Decrease/(increase) in current asset investments                                    155              (4)
Decrease in debtors                                                               5,866          143,497
Decrease in creditors                                                           (8,827)        (155,818)
Increase in provisions                                                            2,500                -

Net  cash inflow from operating  activities                                      19,929            7,151

Financing
Issue of shares for cash                                                            242              794
Repayment of finance leases                                                           -             (96)
                                                                                    242              698

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET FUNDS
Decrease  in cash in the period                                                 (8,721)         (10,454)
Cash movement  from change in lease financing                                         -               96
                                                                                     

Change in net funds resulting from cash flows                                   (8,721)         (10,358)
Net funds at start of period                                                     40,742           51,100

Net funds at end of period                                                       32,021           40,742

ANALYSIS OF NET FUNDS
                                                                        2002 Cash flow              2001
                                                                      £000's    £000's            £000's
Firm's Cash                                                           20,617     1,574            19,043
Firm's Overdraft                                                     (1,141)     (338)             (803)
Firm's net cash                                                       19,476     1,236            18,240
Client settlement cash                                                12,545   (9,957)            22,502

Net cash                                                              32,021   (8,721)            40,742


NOTES

1. TOTAL INCOME AND PROFIT BEFORE TAX


                                                                            2002                           2001
                                                                        52 weeks                       52 weeks

                                                               Total      Profit       Total             Profit
                                                                          before                         before
                                                              income    taxation      income           taxation
                                                              £000's      £000's      £000's             £000's

Discretionary portfolio management                            41,280       4,419      34,514              6,473
Advisory portfolio management                                 47,557       2,884      59,894              5,012
Stocktrade                                                     6,055       (953)       9,518            (1,872)
Corporate finance and institutional                           10,603       2,324      13,241              4,917
OPERATING PROFIT BEFORE goodwill amortisation and                          8,674                         14,530
exceptional items
Interest                                                                   1,875                          2,971
PROFIT BEFORE TAX, goodwill amortisation and exceptional                  10,549                         17,501
items
Exceptional items (note 3)                                                 (294)                              -
Goodwill amortisation                                                    (3,864)                        (2,775)

                                                             105,495       6,391     117,167             14,726

2. SALARIES
                                                                                        2002               2001
                                                                                    52 weeks           52 weeks
                                                                                      £000's             £000's
Include payments under  profit share schemes of                                        7,738              8,529

3. EXCEPTIONAL ITEMS                                                                    2002               2001
                                                                                    52 weeks           52 weeks
                                                                                      £000's             £000's
Profit on disposal of fixed assets  see (i) below
Proceeds of sale                                                                       8,290                  -
Revalued carrying value at 1 October 2001                                            (6,084)                  -
                                                                                       2,206                  -
Provision for split capital trusts liabilities, see (ii)                             (2,500)                  -
below                                                                                                         
                                                                                       (294)                  -
                                                                                                              





i)  The group owned 1,800,000 London Stock Exchange shares with a historical
cost of nil. These shares were sold in February 2002. The revalued carrying
value of £6,084,000 less deferred tax has been transferred to the profit and
loss account through reserves




ii)   By mid November 2002 the Group's principal subsidiary, Brewin Dolphin
Securities Limited, had received 800 complaints in respect of advice given to
clients where their portfolios contained some split capital trusts; the total
losses suffered by these clients were approximately £35 million. Each of these
complaints is assessed in accordance with the Group's complaints procedures
within the guidelines set down by the Financial Services Authority.  To date the
Group has found that in fewer than 5% of cases reviewed that there may be some
grounds for compensation, and based on the detailed work done so far, the
directors believe that the majority of complaints will not be sustained.
However, in circumstances where the Group is found to be liable the directors
are satisfied that such claims would fall within the level of the Group's
insurance cover.



Nevertheless costs will be incurred in assessing the complaints and defending
the Group's position, and on this basis a £2.5m provision has been made against
costs and claims. It is anticipated that these costs will be paid out over the
next two years.





4. TAX ON PROFIT ON ORDINARY ACTIVITIES


                                                                                            2002             2001
                                                                                        52 weeks         52 weeks
                                                                                          £000's           £000's
United Kingdom corporation tax based on the taxable profit
for the period at 30% (2001 30%)
Current                                                                                    4,648            6,769
Prior year                                                                               (2,063)             (51)
Deferred -  UK only                                                                      (1,677)          (1,205)
Prior year deferred - UK only                                                              1,677                -
                                                                                                                
Overseas tax                                                                                  41               86

                                                                                           2,626            5,599

                                                                                            2002             2001
5. DIVIDENDS                                                                            52 weeks         52 weeks
                                                                                          £000's           £000's

First interim dividend paid on 6th April 2002 of  2p  (2001 2p) paid 6 April 2002          3,684            3,598
Second interim dividend  of  1.5p  per share paid  1 October 2002 (2001 1.5p)              2,860            2,756

                                                                                           6,544            6,354




In accordance with the Group's stated dividend policy there are two interim
dividends paid and no final dividend.



6. EARNINGS PER SHARE


                                                                                              No               No
                                                                                           000's            000's
Basic
Weighted average number of shares in issue in the period                                 187,500          181,011

Diluted
Weighted average number of options outstanding for the period                                557            4,244
Estimated weighted average number of shares earned under
   deferred consideration arrangements                                                     7,709           10,102

Diluted weighted average number of shares in issue in the period                         195,766          195,357


                                                                                          £000's           £000's
Basic profit for the period and attributable earnings                                      3,765            9,127
Goodwill amortisation                                                                      3,864            2,775
     less tax on goodwill amortisation                                                     (346)                -
exceptional items                                                                            294                -
     less tax on exceptional items                                                          (88)                -
                                                                                                                
Adjusted basic profit for the period and attributable earnings                             7,489           11,902





7 .RECONCILIATION  OF MOVEMENTS IN SHAREHOLDERS' FUNDS


At 1 October 2001                                                                         97,556          90,523
Issue of shares in period of  £7,039,000 less reduction in 'shares to be issued' of
    £10,257,000.                                                                         (3,218)           2,403
New shares to be issued created
    in period                                                                                  -           2,000
                                                                                               
Estimated  movement in
    value of shares to be issued                                                        (11,500)            (80)
Prior period acquisitions                                                                (1,130)           (209)
Revaluation                                                                                    -             146
Profit for the period                                                                      3,765           9,127
Dividends                                                                                (6,544)         (6,354)

At 27 September 2002                                                                      78,929          97,556



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 those accounts. Statutory accounts for 2001 have been delivered to
the Register of Companies, and those for 2002 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 26 February 2003.



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