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Brewin Dolphin Hldgs (BRW)

  Print          Annual reports

Thursday 13 May, 2021

Brewin Dolphin Hldgs

Interim Management Report

RNS Number : 4592Y
Brewin Dolphin Holdings PLC
13 May 2021
 

This announcement contains inside information for the purposes of the Market Abuse Regulation (596/2014/EU).

13 May 2021

Brewin Dolphin Holdings PLC

Interim Management Report

For the Half Year Ended 31 March 2021

 

Record discretionary fund inflows in Q2 and strong market performance, contributed to H1 income growth of 13.7%.  

Robin Beer, Chief Executive Officer, said:  

"In the first half of 2021 we delivered an excellent set of results driven by record fund inflows in Q2 and the outperformance of our clients' investments during a strong market recovery. Our broad range of propositions and distribution channels has enabled us to reach a wider demographic of people and support those clients who have been able to accumulate higher levels of savings over the last year. The consistency of our inflow performance throughout the pandemic demonstrates we have a resilient business model, a trusted brand and our advice-focused strategy is the right one. The implementation of our custody and settlement system in the Autumn remains on track, which will enable greater efficiencies and support our growth ambitions. Our strong financial momentum and the good progress made on our strategic priorities in the first half of the year gives me confidence for the remainder of the year."

Highlights

Financial

Total funds increased by 10.5% to £52.6bn (FY 2020: £47.6bn). Total discretionary funds were up 10.9% to £45.7bn (FY 2020: £41.2bn) supported by positive net flows and strong discretionary investment performance of 9.5% (MSCI PIMFA Private Investor Balanced Index: 8.7%).

Total discretionary net flows of £0.6bn (annualised growth rate of 2.9%), with gross inflows of £1.6bn (H1 2020: £1.5bn) demonstrating the value of our trusted advice, high client satisfaction and broad range of propositions.

Record total discretionary fund inflows in Q2 of £1bn, with Q2 net flows of £0.5bn, annualised growth rate of 4.5%.

MPS H1 net flows of £0.4bn (annualised growth rate 18.2%), including c.£140m from our recently launched Voyager funds.

Retention rates of our Direct clients increased to 98% in H1 2021 (FY 2020: 97%).

Total income increased by 13.7% to £199.9m (H1 2020: £175.8m), driven by strong market performance and elevated levels of commissions.

Discretionary commission income was 14.8% higher at £38.7m (H1 2020: £33.7m).

Financial planning income grew 16.5% to £19.1m (H1 2020: £16.4m); driven by higher market levels and continued demand for our advice-focused services.

Adjusted PBT1 margin of 23.5% (H1 2020: 20.8%), driven by strong income growth and cost savings of £4.1m associated with COVID-19 restrictions.

Strong cash balance of £145.8m (H1 2020: £144.1m) and capital adequacy ratio of 210%.

Interim dividend per share up 5% to 4.6p (H1 2020: 4.4p).

 

 Unaudited
six months to
31 March
2021
 'm

Unaudited
six months to
31 March
2020
 'm

 Change

Income

199.9

 175.8

13.7%

Profit before tax and adjusted¹,3 items

47.0

 36.5

28.8%

Statutory profit before tax

40.7

 28.2

44.3%

Earnings per share:

 

 

 

Basic

11.1p

7.3p

52.1%

Diluted

10.9p

7.1p

53.5%

Adjusted² earnings per share:

 

 

 

Basic

13.0p

9.9p

31.3%

Diluted

12.5p

9.5p

31.6%

 

1. Adjusted items are amortisation of client relationships and brand - £5.6m (H1 2020: £5.4m), defined benefit pension scheme past service costs - £0.4m (H1 2020: £nil), acquisition costs - £nil (H1 2020: £2.3 m), other gains and losses £0.3m (H1 2020: £nil), incentivisation awards £0.6m (H1 2020: £0.6m) and onerous contracts - £(0.02)m (H1 2020: £(0.04)m).

2. See note 7.

3. See Annual Report and Accounts 2020 page 29 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

 

Delivering on our strategic priorities

The custody and settlement system ('Avaloq') on track to go live in the Autumn.

Continued innovation with the launch of new ESG solutions; '1762 Responsible Progress' through 1762 from Brewin Dolphin and 'Sustainable MPS' for the intermediaries market.

Launched new BPS client onboarding journey; doubled conversion rates to 40% and new clients in Q2 up 74% year on year.

Expanded our distribution channels; Voyager funds have increased our platform coverage from 15 to 23.

Outlook

Strong first half year performance, increased confidence in full year outlook.

Commission income expected to reduce in H2.

Operating costs expected to increase in H2 due to the holiday accrual reversal more than offset by reduced cost savings associated to COVID-19 restrictions and the FSCS levy which was £4.8m in FY 2020.

No change to our opex guidance of mid-single digit growth and full year capex guidance of around £30m.

Change in Avaloq FY21 capex guidance from c.£19m to c.£24m.

 

Declaration of Interim Dividend

The Board declares an interim dividend of 4.6p per share. The interim dividend is payable on 11 June 2021 to shareholders on the register at the close of business on 21 May 2021 with an ex-dividend date of 20 May 2021.

For further information:

 

Brewin Dolphin Holdings PLC

Carla Bloom, Head of Investor Relations

Tel: +44 (0)20 7248 4400

[email protected]

 

Camarco

Ben Woodford / Geoffrey Pelham-Lane

Tel: +44 (0) 799 065 3341 / +44 (0) 773 312 4226

 

The Interim Results presentation will be held at 9.00am on 13 May 2021 and available to watch via an audio webcast. The audio

link can be found on the corporate website (www.brewin.co.uk/group/investor-relations). Investors and analysts are also able to

dial in to the call using UK & International: +44 (0) 33 0551 0200 or UK toll-free: 0808 109 0700

 

LEI: 213800PS7FS5UYOWAC49

NOTES TO EDITORS:

About Brewin Dolphin:

Brewin Dolphin is one of the UK and Ireland's leading independent providers of discretionary wealth management. We continue to focus on discretionary investment management, and we manage £45.7 billion of funds on a discretionary basis. In line with the premium we place on personal relationships, we have built a network of offices across the UK, Channel Islands and the Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients' needs at the core.

 

 

Interim Management Report

To the members of Brewin Dolphin Holdings PLC

First half review

 

H1 business and operational review

We have made good progress on our strategic priorities which we outlined in our strategy update in November last year.

1. Innovating our propositions

Being a responsible business is firmly embedded within our organisation. One of our key sustainability pillars is about responsible investment, ensuring we can offer our clients the right investment choice. We have made a significant amount of progress in our approach to responsible investment and successfully launched our first ESG solution through our 1762 from Brewin Dolphin proposition. "1762 Responsible Progress" is a modelled portfolio with an ethically biased approach. In April 2021, we launched a sustainable MPS for the intermediaries market. Market trends suggest the demand for ESG solutions will only increase and these solutions will allow us to capture an ever-growing segment in the market.

Our half year results have demonstrated the benefit of continued innovation, as we saw £0.9bn of fund inflows through our indirect business, of which £0.4bn was through our MPS solution. In October 2020, we launched our Voyager fund range, part of our MPS solution, which has seen strong early momentum and at the end of the half year period it had just under £140m of funds.

2. Accelerate our digital agenda

We launched a new BPS user-experience in late 2020, which has significantly improved our client onboarding process. Client conversion rates have almost doubled to around 40% and we saw strong growth in fund inflows, up 63% year on year. New accounts in Q2 were up 74% to 888 (Q2 2020: 510) and we now have 7,200 accounts on our BPS platform. The average age of our BPS clients (excluding JISAs and Trusts) over the last 6 months was 44 which is 20 years younger than our average age of our Core and 1762 clients. These early signs of improved performance demonstrate that progress in our digital investments keeps us relevant and supports our growth ambitions.

For intermediaries, we continue to roll out our new 'Client Valuation Data Service' designed to deliver automated client valuations. We are now piloting a digital onboarding solution, which we will launch later this year. This will be the final digitally enabled process, which means IFAs end-to-end journey with Brewin will be paperless.   

3. Investment in technology

Our focus has shifted to the final stages of Avaloq's implementation and beyond, as we plan for rehearsals, migration and the ongoing support required as we embed the system and processes into the organisation. In the first half of FY 2021 we spent £12.3m on the implementation of Avaloq, which takes the total capex spend to date to £38.8m. We have updated our FY 2021 capex guidance for Avaloq to c.£24m from c.£19m as we work through the final complexities of the systems integration, including the automated interfaces with Client Engage and eXimius. We remain on track for an Autumn delivery when we expect the system to go live. We are taking a prudent approach with the embedding of the system and will phase the deployment of its full functionality once Avaloq is live within Brewin's technology environment. We continue to identify the relevant operational efficiencies which will support improved capacity and capability, better client data and cost savings as we drive scale.

4. Expanding our distribution channels

Prior to launching our Voyager fund range, our intermediaries could access Brewin's MPS solution on 15 platforms. The launch of our Voyager fund range gives IFAs even more choice and has increased their access to 23 platforms and increases our market opportunity by around £200bn.

We have made good progress in the growth of our B2B partnerships. We have secured just over 20 corporate partnerships across the UK to help their employees with their financial wellbeing, through one-on-one interactions or via webinars. The corporates range from boutiques with around 40 employees to large scale with over 10,000 employees. We have benefited from the shift to pure digital communications over the last year, reaching a far wider audience. Since our launch in October 2020, we have presented over 60 seminars to over 1,800 attendees.

Almost a year after the systems integration of Investec Ireland's Wealth & Investment business, Brewin Dolphin Ireland is now one of the largest discretionary wealth managers in Ireland, which positions us well as a scaled player to take market share. Brewin Dolphin Ireland has continued to gain momentum despite COVID-19, and at the end of the first half had grown total funds by 12.0% to €5.6bn (FY 2020: €5.0bn), with discretionary funds up 19.5% to €3.3bn. Discretionary net flows in the half were €0.1bn with an annualised growth rate of 7.4%. Income grew 22.3% to £13.7m (H1 2020: £11.2m), on a normalised basis it grew c.10% year on year. The market opportunities in Ireland are significant: with strong relative economic performance and wealth creation leading to increased demand for wealth management and investment services; the opportunity post Brexit to serve non-UK domiciled EU based clients; and it remains well positioned in light of recent market disruption.

Outlook

Whilst the impact of COVID-19 will continue to create economic and market uncertainty, the successful vaccine programme in the UK and US has accelerated market recovery and consumer confidence. A year of social distance restrictions has enabled some households to accumulate savings and they are looking for ways to safeguard their finances, for what is still an uncertain outlook. Our consistent performance over the last year through a pandemic gives me confidence that our business model is resilient, and our advice-focused strategy is the right one. In times of uncertainty, our trusted brand is even more valuable. Our strong balance sheet and good cash generation give our clients confidence in our long-term sustainability. The continued investment in our technology and infrastructure will give us the ability to adapt to changing environments, keep us relevant with clients and enable us to capture cost efficiencies. We are confident as the lockdown restrictions ease, we are well placed to capture the market growth with our broad range of propositions and multiple distribution channels.

H1 financial results and performance

Profit before tax and adjusted items of £47.0m was 28.8% higher than the first six months last year (H1 2020: £36.5m) driven by strong income growth and ongoing cost savings related to the impact of COVID-19.

Statutory profit before tax for the period was higher than last year at £40.7m (H1 2020: £28.2m). The decrease in adjusted items is driven by the non-recurring acquisition costs last year of £2.3m related to the integration of Investec Capital & Investments (Ireland) Limited.

 

 Unaudited six months to
31 March
2021
 'm

Unaudited
six months to
31 March
2020
 'm

 Change

Income

199.9

 175.8

13.7%

Fixed staff costs

(74.3)

 (70.2)

5.8%

Variable staff costs

(37.7)

 (28.1)

34.2%

Other operating costs excluding adjusted¹ items

(40.0)

 (40.3)

(0.7)%

Operating profit before adjusted¹ items

47.9

 37.2

28.8%

Net finance costs and other gains and losses

(0.9)

 (0.7)

28.6%

Profit before tax and adjusted¹ items

47.0

 36.5

28.8%

Adjusted¹ items

(6.3)

 (8.3)

(24.1)%

Profit before tax

40.7

 28.2

44.3%

Tax

(8.0)

 (6.8)

17.6%

Profit after tax

32.7

 21.4

52.8%

Earnings per share:

 

 

 

Basic

11.1p

7.3p

52.1%

Diluted

10.9p

7.1p

53.5%

Adjusted² earnings per share:

 

 

 

Basic

13.0p

9.9p

31.3%

Diluted

12.5p

9.5p

31.6%

1. Adjusted items are amortisation of client relationships and brand - £5.6m (H1 2020: £5.4m), defined benefit pension scheme past service costs - £0.4m (H1 2020: £nil), acquisition costs - £nil (H1 2020: £2.3 m), other gains and losses £0.3m (H1 2020: £nil), incentivisation awards £0.6m (H1 2020: £0.6m) and onerous contracts - £(0.02)m (H1 2020: £(0.04)m).

2. See note 7.

3. See Annual Report and Accounts 2020 page 29 for explanation of adjusted profit before tax and why the adjusted measures have been chosen.

 

 

Funds

Total funds were up 10.5% to £52.6bn in the first half (H1 2020: £41.4bn, FY 2020: £47.6bn). The movement was driven by strong total net fund flows of £0.8bn (H1 2020: £0.6bn, H2 2020: £0.5bn) and elevated investment performance of £4.2bn due to market recovery. Total discretionary investment performance of 9.5% outperformed the MSCI PIMFA Private Investor Balanced Index of 8.7%.

Total funds by service category

£bn

31 March
2020

30 September
2020

31 March
2021

Change

Last
12 months

Last
6 months

Direct discretionary

23.2

26.7

29.3

26.3%

9.7%

Intermediaries

8.8

10.1

11.1

26.1%

9.9%

MPS/Voyager

3.7

4.4

5.3

43.2%

20.5%

Indirect discretionary

12.5

14.5

16.4

31.2%

13.1%

Total discretionary

35.7

41.2

45.7

28.0%

10.9%

Execution only

3.7

4.1

4.7

27.0%

14.6%

BPS

0.2

0.2

0.2

-

-

Advisory

1.8

2.1

2.0

11.1%

(4.8%)

Total funds

41.4

47.6

52.6

27.1%

10.5%

 

 

 

 

 

 

Indices

 

 

 

 

 

MSCI PIMFA Private Investor Balanced Index

1,423

1,568

1,704

19.7%

8.7%

FTSE 100

5,672

5,866

6,713

18.4%

14.4%

Funds flow by service category for H1 20211

£bn

30 September 2020

Inflows

Outflows

Internal transfers

Net
flows

Annualised growth
rate

Investment performance

31 March 2021

Change

Direct discretionary

26.7

0.7

(0.3)

(0.3)

0.1

0.7%

2.5

29.3

9.7%

Intermediaries

10.1

0.5

(0.3)

(0.1)

0.1

2.0%

0.9

11.1

9.9%

MPS/Voyager

4.4

0.4

0.0

0.0

0.4

18.2%

0.5

5.3

20.5%

Indirect discretionary

14.5

0.9

(0.3)

(0.1)

0.5

6.9%

1.4

16.4

13.1%

Total discretionary

41.2

1.6

(0.6)

(0.4)

0.6

2.9%

3.9

45.7

10.9%

Execution only

4.1

0.1

(0.3)

0.52

0.3

14.6%

0.3

4.7

14.6%

BPS

0.2

0.0

0.0

0.0

0.0

0.0%

0.0

0.2

0.0%

Advisory

2.1

0.0

0.0

(0.1)

(0.1)

(9.5%)

0.0

2.0

(4.8%)

Total funds

47.6

1.7

(0.9)

0.0

0.8

3.4%

4.2

52.6

10.5%

Funds flow by service category for Q2 20211

£bn

31 December 2020

Inflows

Outflows

Internal transfers

Net
flows

Annualised growth
rate

Investment performance

31 March 2021

Change

Direct discretionary

28.8

0.4

(0.2)

(0.1)

0.1

1.4%

0.4

29.3

1.7%

Intermediaries

10.9

0.3

(0.2)

0.0

0.1

3.7%

0.1

11.1

1.8%

MPS/Voyager

4.9

0.3

0.0

0.0

0.3

24.5%

0.1

5.3

8.2%

Indirect discretionary

15.8

0.6

(0.2)

0.0

0.4

10.1%

0.2

16.4

3.8%

Total discretionary

44.6

1.0

(0.4)

(0.1)

0.5

4.5%

0.6

45.7

2.5%

Execution only

4.6

0.1

(0.2)

0.12

0.0

0.0%

0.1

4.7

2.2%

BPS

0.2

0.0

0.0

0.0

0.0

0.0%

0.0

0.2

0.0%

Advisory

2.0

0.0

0.0

0.0

0.0

0.0%

0.0

2.0

0.0%

Total funds

51.4

1.1

(0.6)

0.0

0.5

3.9%

0.7

52.6

2.3%

1. The funds figures are rounded to one decimal place and therefore may not always cast.

2. Internal transfers for execution only, include discretionary fund pending exits

 

Total discretionary funds were £45.7bn at 31 March 2021 (H1 2020: £35.7bn, FY 2020: £41.2bn) with net fund flows of £0.6bn (H1 2020: £0.5bn), representing an annualised growth rate of 2.9%. We had a strong second quarter with total discretionary net flows of £0.5bn, representing an annualised growth rate of 4.5%. Our broad range of propositions and solutions, through our direct and indirect channels, supported our inflows performance of £1.6bn in the half, alongside our trusted brand and high retention rates. Direct client retention rates increased to 98% in H1 2021, up from 97% over the last 2 years. Investment performance was £3.9bn with the majority occurring in the first quarter in line with the market recovery.

Direct discretionary net flows were £0.1bn in the period (H1 2020: £0.0bn). Gross inflows were strong at £0.7bn (H1 2020: £0.7bn) and we saw a reduction in outflows from prior periods to £0.3bn (H1 2020: £0.5bn H2 2020: £0.4bn).

Indirect discretionary net flows remained stable at £0.5bn (H1 2020: £0.5bn) with 80% of net flows coming from MPS and the recently launched Voyager funds which has grown to around £140m since its launch in October 2020. MPS funds are now over £5bn.

Income

Income increased 13.7% to £199.9m compared to the same period last year (H1 2020: £175.8m).  Income was higher in the second quarter due to elevated commission levels and strong market performance.

 

Unaudited six months to
31 March
2021

Unaudited six months to
31 March
2020

Change

£'m

Fees

Commission

Total

Fees

Commission

Total

Fees

Commission

Total

Private clients

78.4

36.8

115.2

68.9

31.1

100.0

13.8%

18.3%

15.2%

Charities and corporates

9.8

1.4

11.2

 9.1

2.0

 11.1

7.7%

(30.0)%

0.9%

Direct discretionary

88.2

38.2

126.4

78.0

33.1

 111.1

13.1%

15.4%

13.8%

Intermediaries

36.0

0.5

36.5

 32.6

0.6

 33.2

10.4%

(16.7)%

9.9%

MPS

6.6

n/a

6.6

 5.2

n/a

 5.2

26.9%

n/a

26.9%

Indirect discretionary

42.6

0.5

43.1

37.8

0.6

 38.4

12.7%

(16.7)%

12.2%

Total discretionary

130.8

38.7

169.5

 115.8

33.7

 149.5

13.0%

14.8%

13.4%

Financial planning

n/a

n/a

19.1

 n/a

 n/a

 16.4

n/a

n/a

16.5%

Execution only

2.3

3.8

6.1

 2.2

3.5

 5.7

4.5%

8.6%

7.0%

BPS

0.8

n/a

0.8

 0.7

 n/a

 0.7

14.3%

n/a

14.3%

Advisory

2.2

0.5

2.7

 1.6

0.6

 2.2

37.5%

(16.7)%

22.7%

Other income

n/a

n/a

1.7

 n/a

 n/a

1.3

n/a

n/a

30.8%

Total income

136.1

43.0

199.9

 120.3

 37.8

175.8

13.1%

13.8%

13.7%

Total discretionary income increased by 13.4% to £169.5m (H1 2020: £149.5m), following strong growth in the second quarter across both direct and indirect businesses. Private client commission levels were up 18.3% on the same period last year, as a result of market recovery, asset reallocation and portfolio rebalancing.

Financial planning income grew 16.5% to £19.1m (H1 2020: £16.4m) driven by higher market levels and continued growth in demand for our advice-focused services including 1762 from Brewin Dolphin proposition.

Advisory income was up £0.5m to £2.7m, with majority of the growth coming from 6 months performance of Brewin Dolphin Capital & Investments (Ireland) Limited ('BDCIIL') compared to 5 months in the prior period.

Other income of £1.7m is up £0.4m in the period, and consists of interest, expert witness report writing income and rental income. This is driven primarily by the increase in expert witness report writing income generated by Mathieson Consulting and contributed £0.8m of other income (H1 2020: £0.5m).

Total discretionary margin decreased to 74.8bps (H1 2020: 77.9bps). Commission margin was lower at 17.1bps (H1 2020: 17.6bps) due to fund growth being higher than commission income growth. Direct discretionary fee margin decreased to 60.4bps (H1 2020: 62.1bps) largely driven by natural tiering in the pricing on client portfolios as the market recovered 19.7% from an unprecedented fall in H1 20 due to COVID-19. Intermediaries margin decreased to 66.0bps (H1 2020: 69.9bps) mainly due to the tiering effect as intermediaries client portfolios grow on our platforms.
 

Operating costs

 

 Six months to
31 March
2021
 'm

Six months to
31 March
2020
 'm

Staff costs

74.3

 70.2

Non-staff costs

40.0

40.3

Variable staff costs

37.7

 28.1

Total operating costs excluding adjusted¹ items

152.0

 138.6

1. Adjusted items are amortisation of client relationships and brand, defined benefit pension scheme past service costs, other gains and losses, incentivisation awards and onerous contracts.

Total operating costs before adjusted items were 9.7% higher at £152.0m (H1 2020: £138.6m), predominantly driven by increased variable staff costs.

Fixed costs increased by £3.8m to £114.3m (H1 2020: £110.5m). Staff costs grew 5.8% to £74.3m with £2.1m increase in planned hires to support our strategy and strong growth, and a £1.6m increase in our holiday accrual provision due to employees not being able to take holidays given the recent travel restrictions. Excluding the holiday accrual provision, staff costs grew 3.5%. Non-staff costs benefited from £4.1m of costs savings associated to lower travel, entertainment and marketing due to lockdown restrictions. These savings were offset by depreciation costs of £2.0m, of which £1.2m was related to our Client Engage platform which went live in the summer last year, increased BDCIIL costs of £1.3m relating to one additional month in the period and technology costs associated to the migration of systems.

Variable staff costs of £37.7m (H1 2020: £28.1m), most of which is related to the discretionary profit share, is higher driven by the increase in income and profit growth. Variable staff costs are provided for on an accrual basis and are based on the first half financial performance, the impact of higher numbers of eligible staff and the historical cost of share-based awards.

Adjusted items in the period were £6.3m (H1 2020: £8.3m) and is predominantly comprised of the amortisation of intangible client relationships of £5.6m, similar to last year. The defined benefit pension scheme past service costs of £0.4m (H1 2020: £nil) is more than offset by the non-recurring acquisition costs which were incurred last year of £2.3m.

Our operating cost guidance of mid-single digit growth remains on track. The holiday accrual associated to the first half of the year will reduce in the second half of the year. We expect non-staff costs to increase in the second half as we incur the FSCS levy and lockdown restrictions ease, which we anticipate will increase travel, entertainment and marketing costs.

Capital expenditure

We have continued to make progress on our strategic system and technology projects. Total capital expenditure in H1 2021 was £15.2m of which £12.3m was on our custody and settlement system. Our total capex spend to date on the custody and settlement system is £38.8m. Other capex in the period included £1.8m on enhancing our client user-experience, £0.8m on property improvements and the remaining £0.3m on IT hardware.

There is no change to our full year capex guidance of around £30m. Within our capex guidance we expect that the custody and settlement system will be higher at c.£24m than our original guidance of c.£19m for the year, as we require more resources to help with the final complexities of the project and de-risk its delivery. The custody and settlement system remains on track to complete in the Autumn. 

As we enter the final stages of the custody and settlement project, we foresee some ongoing support costs associated with the embedding of the systems and processes, which will fall into 2022. We are taking a prudent approach on the embedding of the system and will phase the deployment of functionality once Avaloq is live within Brewin's technology environment in the Autumn. We will update the market in November with these details as well as the cost savings we expect to capture from our new technology architecture.

Amortisation for both our Client Engage and custody and settlement system will increase operating costs by around £6-7m a year. We will recognise a full year of amortisation in FY 2021 of around £2m for our Client Engage platform. Once our custody and settlement system is implemented in the Autumn, we anticipate amortisation of around £5m per annum.

Net finance costs

Finance income of £0.2m was lower than H1 2020 of £0.6m due to lower interest rates. Finance costs were £1.1m (H1 2020: £1.3m) primarily related to our finance leases.

Tax

The Group's effective corporation tax rate at 19.6% (H1 2020: 23.9%) is higher than the UK statutory rate of 19%, as a result of the net effect of disallowable expenses and tax credits for share-based payments. Our effective tax rate is lower than prior year mainly due to the increase in tax credits for share based payments as the share price recovered.

Cash and capital

The Group's financial position remains very strong with total net assets of £328.6m and cash balances at period end of £145.8m (H1 2020: £144.1m). 

As at 31 March 2021 the Group had regulatory capital resources of £151.7m. The Group's main regulated entities are governed by both the FCA and CBI. Each regulator's rules determine the calculation of regulatory capital resources and regulatory capital requirements which then establishes the overall Group's capital adequacy. As required under FCA and CBI rules, we perform an Internal Capital Adequacy Assessment Process ('ICAAP') which includes performing a range of stress tests to determine the appropriate level of regulatory capital that the Group needs to hold. Our capital resources represent 210% of the FCA requirement. This is substantially above our risk appetite of 150%.

Dividend

The Group's dividend policy is to grow dividends in line with adjusted earnings, with a target pay out ratio of between 60% to 80% of annual adjusted diluted earnings per share. The Board has decided to increase the interim dividend by 5% to 4.6 pence per share (2020 interim: 4.4 pence per share) to reflect the performance of the business in the first half of 2021.

Looking ahead to the final dividend, the Board will continue to maintain the Group's dividend policy and will recognise the business performance in the second half of the year, when setting the final dividend.

The dividend will be payable on 11 June 2021 to shareholders on the register on the close of business on 21 May 2021 with an ex-dividend date of 20 May 2021.

Going concern

As stated in note 2 to the condensed consolidated set of interim financial statements, the Directors believe that the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, (see note 2(i) for detail) and stressed events that the Group is required to assess demonstrate that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt a going concern basis for the preparation of the condensed consolidated interim financial statements. In forming their view, the Directors have considered the Group's prospects for a period exceeding twelve months from the date the condensed consolidated interim financial statements are approved.

Principal risks and uncertainties

The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Group's performance during the remainder of its financial year remain unchanged from those identified on pages 47 and 48 of the Group's 2020 Annual Report and Accounts available on our website www.brewin.co.uk.

Board changes

There were a number of changes made to the Board during the period.  Simonetta Rigo resigned with effect from 13 November 2020 and Kath Cates stepped down at the AGM on 5 February 2021. Toby Strauss succeeded Simon Miller as Chairman with effect from 5 February 2021. Charlie Ferry, Managing Director of Wealth and Investment at Brewin Dolphin was appointed as an Executive Director on 17 March 2021 and Pars Purewal was appointed as a Non-Executive Director on 12 May 2021.

Robin Beer

Chief Executive

12 May 2021

 

 

 

Condensed Consolidated Income Statement

for the six months ended 31 March 2021

 

 

Note

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Revenue

3

199,003

174,968

359,164

Other operating income

3

931

806

2,283

Income

 

199,934

175,774

361,447

 

 

 

 

 

Staff costs

 

(111,981)

(98,290)

(199,485)

Amortisation of intangible assets - client relationships and brand

9

(5,636)

(5,388)

(11,072)

Defined benefit pension scheme past service costs

12

(360)

-

-

Acquisition costs

18

-

(2,334)

(3,600)

Onerous contracts

 

2

38

(250)

Incentivisation awards

 

(608)

(586)

(1,192)

Other operating costs

 

(40,032)

(40,284)

(82,056)

Operating expenses

 

(158,615)

(146,844)

(297,655)

 

 

 

 

 

Operating profit

 

41,319

28,930

63,792

Finance income

5

227

629

907

Other gains and losses

 

257

-

-

Finance costs

5

(1,133)

(1,314)

(2,627)

Profit before tax

 

40,670

28,245

62,072

Tax

6

(7,971)

(6,759)

(14,117)

Profit for the period

 

32,699

21,486

47,955

 

 

 

 

 

Attributable to:

 

 

 

 

Equity holders of the parent

 

32,699

21,486

47,955

 

 

32,699

21,486

47,955

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

7

11.1p

7.3p

16.3p

Diluted

7

10.9p

7.1p

15.9p

 

 

 

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2021

 

 

Note

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Profit for the period

 

32,699

21,486

47,955

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

 

 

 

 

Actuarial (loss)/gain on defined benefit pension scheme

12

(3,056)

5,023

1,377

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

6

581

(1,302)

(609)

Fair value loss on investments in equity instruments designated as at fair value through other comprehensive income

13

-

(2)

(5)

 

 

(2,475)

3,719

763

Items that may be reclassified subsequently to profit and loss:

 

 

 

 

Exchange differences on translation of foreign operations

 

(3,076)

13

1,245

 

 

(3,076)

13

1,245

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

 

(5,551)

3,732

2,008

Total comprehensive income for the period

 

27,148

25,218

49,963

 

 

 

 

 

Attributable to:

 

 

 

 

Equity holders of the parent

 

27,148

25,218

49,963

 

 

27,148

25,218

49,963

 

 

 

Condensed Consolidated Balance Sheet

as at 31 March 2021

 

 

Note

Unaudited
as at
31 March
2021
£'000

Unaudited
as at
31 March
2020
£'000

Audited
as at
30 September
2020
£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

9

 179,330

 162,035

 174,717

Property, plant and equipment

10

 9,211

 10,914

 9,723

Right of use assets

11

 33,976

 40,883

 38,042

Finance lease receivables

 

 1,904

 2,050

 1,966

Other receivables

 

 931

 908

 931

Defined benefit pension scheme

12

 17,374

 23,180

 20,324

Total non-current assets

 

 242,726

 239,970

 245,703

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

 

 286,095

 269,923

 241,939

Finance lease receivables

 

 146

 172

 167

Financial assets at fair value through other comprehensive income

13

 68

 77

 68

Financial assets at fair value through profit or loss

13

 2,836

 340

 379

Current tax asset

 

 -

 470

 3,909

Cash and cash equivalents

 

 145,847

 144,089

 180,533

Total current assets

 

 434,992

 415,071

 426,995

Total assets

 

 677,718

 655,041

 672,698

 

 

 

 

 

Liabilities

 

 

 

 

Trade and other payables

 

 274,101

 255,344

 256,036

Current tax liabilities

 

 1,011

 -

 -

Lease liabilities

15

 7,478

 7,567

 8,316

Provisions

14

 4,165

 4,330

 4,798

Total current liabilities

 

 286,755

 267,241

 269,150

Net current assets

 

 148,237

 147,830

 157,845

 

 

 

 

 

Non-current liabilities

 

 

 

 

Trade and other payables

 

 659

 955

 459

Shares to be issued

 

 3,773

 3,703

 3,738

Net deferred tax liability

6

 7,560

 6,287

 9,094

Lease liabilities

15

 40,809

 48,793

 45,265

Provisions

14

 9,596

 9,826

 9,956

Total non-current liabilities

 

 62,397

 69,564

 68,512

Total liabilities

 

 349,152

 336,805

 337,662

Net assets

 

 328,566

 318,236

 335,036

 

 

 

 

 

Equity

 

 

 

 

Share capital

16

 3,035

 3,032

 3,032

Share premium account

16

 58,388

 58,337

 58,340

Own shares

 

 (30,824)

 (25,943)

 (25,238)

Revaluation reserve

 

 (2)

 1

 (2)

Merger reserve

 

 70,553

 70,553

 70,553

Profit and loss account

 

 227,416

 212,256

 228,351

Equity attributable to equity holders of the parent

 

 328,566

 318,236

 335,036

 

 

 

 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2021

 

 

Attributable to the equity holders of the parent

 Share capital
£'000

 Share premium account
£'000

 Own
shares
£'000

 Hedging
reserve
£'000

 Revaluation reserve
£'000

 Merger reserve
£'000

 Profit and loss account1
£'000

 Total
£'000

At 30 September 2019 (audited)

3,032

 58,238

 (25,214)

 (24)

  3

 70,553

 231,115

 337,703

Effect of change in accounting policy for initial application of
IFRS 16 

 -

 -

 -

 -

 -

 -

 (5,813)

 (5,813)

At 1 October 2019 (unaudited)

3,032

 58,238

 (25,214)

 (24)

  3

 70,553

 225,302

 331,890

Profit for the period

 -

 -

 -

-

 -

 -

 21,486

 21,486

Other comprehensive income for the period

 

 

 

 

 

 

 

 

Deferred and current tax on other comprehensive income

 -

 -

 -

 -

 -

 -

 (1,302)

 (1,302)

Actuarial gain on defined benefit pension scheme

 -

 -

 -

 -

 -

 -

 5,023

 5,023

Fair value movement on investments in equity instruments designated as at fair value through other comprehensive income

 -

 -

 -

 -

 (2)

 -

 -

 (2)

Exchange differences on translation of foreign operations

 -

 -

 -

 -

 -

 -

 13

 13

Total comprehensive (expense)/income for the period

 -

 -

 -

 -

 (2)

 -

 25,220

 25,218

Dividends

 -

 -

 -

 -

 -

 -

 (35,401)

 (35,401)

Issue of share capital

 -

 99

 -

 -

 -

 -

 -

 99

Own shares acquired in the period

 -

 -

 (8,273)

 -

 -

 -

 -

 (8,273)

Own shares disposed of on exercise of options

 -

 -

 7,544

 -

 -

 -

 (7,544)

 -

Share-based payments

 -

 -

 -

 -

 -

 -

 4,755

 4,755

Hedge reversal

 -

 -

 -

 24

 -

 -

 -

 24

Tax on share-based payments

 -

 -

 -

 -

 -

 -

 (76)

 (76)

At 31 March 2020 (unaudited)

3,032

 58,337

 (25,943)

 -

  1

 70,553

 212,256

 318,236

Profit for the period

-

-

-

-

-

-

 26,469

 26,469

Other comprehensive income for the period

 

 

 

 

 

 

 

 

Deferred tax on other comprehensive income

-

-

-

-

-

-

 693

 693

Actuarial loss on defined benefit pension scheme

-

-

-

-

-

-

 (3,646)

 (3,646)

Fair value movement on investments in equity instruments designated as at fair value through other comprehensive income

-

-

-

-

 (3)

-

-

 (3)

Exchange differences on translation of foreign operations

-

-

-

-

-

-

 1,232

 1,232

Total comprehensive (expense)/income for the period

-

-

-

-

 (3)

-

 24,748

 24,745

Dividends

-

-

-

-

-

-

 (12,992)

 (12,992)

Issue of share capital

-

 3

-

-

-

-

-

 3

Own shares acquired in the period

-

-

 (115)

-

-

-

-

 (115)

Own shares disposed of on exercise of options

-

-

 820

-

-

-

 (820)

Share-based payments

-

-

-

-

-

-

 5,024

 5,024

Tax on share-based payments

-

-

-

-

-

-

 135

 135

At 30 September 2020 (audited)

 3,032

 58,340

 (25,238)

-

 (2)

 70,553

 228,351

 335,036

Profit for the period

-

-

-

-

-

-

 32,699

 32,699

Other comprehensive income for the period

 

 

 

 

 

 

 

 

Deferred tax on other comprehensive income

-

-

-

-

-

-

 581

 581

Actuarial loss on defined benefit pension scheme

-

-

-

-

-

-

 (3,056)

 (3,056)

Exchange differences on translation of foreign operations

-

-

-

-

-

-

 (3,076)

 (3,076)

Total comprehensive income for the period

-

-

-

-

-

-

 27,148

 27,148

Dividends

-

-

-

-

-

-

 (29,142)

 (29,142)

Issue of share capital

 3

 48

-

-

-

-

-

 51

Own shares acquired in the period

-

-

 (10,591)

-

-

-

-

 (10,591)

Own shares disposed of on exercise of options

-

-

 5,005

-

-

-

 (5,005)

-

Share-based payments

-

-

-

-

-

-

 5,905

 5,905

Tax on share-based payments

-

-

-

-

-

-

 159

 159

At 31 March 2021 (unaudited)

 3,035

 58,388

 (30,824)

 - 

 (2)

 70,553

 227,416

 328,566

1. A cumulative debit of £1,912k has been recognised in the profit and loss account reserve as at 31 March 2021 for exchange differences on translation of foreign operations (30 September 2020: £1,164k credit, 31 March 2020: £68k debit and 30 September 2019: £81k debit).

 

 

Condensed Consolidated Cash Flow Statement

for the six months ended 31 March 2021

 

 

Note

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Net cash inflow from operating activities

17

 24,857

 9,065

77,589

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of intangible assets - software

 

 (10,021)

 (12,101)

(26,523)

Purchases of property, plant and equipment

 

 (1,128)

 (1,984)

(2,379)

Acquisition of subsidiaries

 

  -

 (32,029)

 (32,029)

Purchase of financial instruments at fair value through profit and loss

 

 (2,200)

  -

  -

Proceeds on disposal of investments designated as at fair value through other comprehensive income

 

  -

  -

6

Net cash used in investing activities

 

 (13,349)

 (46,114)

(60,925)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Dividends paid to equity shareholders

8

 (29,142)

 (35,401)

(48,393)

Purchase of own shares

 

 (10,591)

 (8,273)

(8,388)

Repayment of lease liabilities

 

 (5,428)

  (4,487)

 (8,765)

Proceeds on issue of shares

 

 49

  99

102

Net cash used in financing activities

 

 (45,112)

 (48,062)

(65,444)

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 (33,604)

 (85,111)

(48,780)

 

 

 

 

 

Cash and cash equivalents at the start of period

 

 180,533

 229,199

229,199

Effect of foreign exchange rates

 

 (1,082)

  1

114

Cash and cash equivalents at the end of period

 

 145,847

 144,089

180,533

 

 

 

Notes to the Condensed Consolidated Set of Financial Statements

 

1. General information

Brewin Dolphin Holdings PLC (the 'Company') is a public limited company incorporated in the United Kingdom. The shares of the Company are listed on the London Stock Exchange. The address of its registered office is 12 Smithfield Street, London, EC1A 9BD. This Interim Financial Report of Brewin Dolphin Holdings PLC and its subsidiaries (collectively, 'the Group') was approved for issue by its directors on 12 May 2021.

A copy of this Interim Financial Report including the Condensed Consolidated Financial Statements for the period ended 31 March 2021 is available at the Company's registered office and on the Company's investor relations website (www.brewin.co.uk).

The comparative information for the period ended 30 September 2020 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

The condensed consolidated set of financial statements included in this Interim Financial Report has been prepared in accordance with both International Accounting Standards in conformity with the requirements of Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ('IFRS'). The Interim Financial Report has been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority.

The condensed consolidated set of financial statements included in this Interim Financial Report for the six months ended 31 March 2021 should be read in conjunction with the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2020.

The 2020 annual financial statements of Brewin Dolphin Holdings PLC were prepared in accordance with IFRS.

The foreign operations have been translated into the functional currency at a spot rate of €/£1.1739 for the Balance Sheet at 31 March 2021 (31 March 2020 €/£1.1301 and 30 September 2020: €/£1.1025) and the average exchange rate of €/£1.1332 for the Income Statement items for the period ending 31 March 2021 (31 March 2020 €/£1.166 and 30 September 2020: €/£1.141).

(i)  Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. Thus, they continue to adopt the going concern basis of accounting in preparing the condensed consolidated financial statements.

To form the view that the condensed consolidated financial statements should continue to be prepared on a going concern basis, the Directors have assessed the outlook of the Group by considering:

i. the Group's Medium-Term Plan ('MTP'), the MTP is a comprehensive multi-year business plan forecasting costs and revenues across all operations and branches; and

ii.  the performance of a range of stress tests including reverse stress tests that are used as part of the Internal Capital Adequacy Assessment Process ('ICAAP') to assess the Group's ability to withstand a market-wide stress.

 

The stress tests enable the modelling of the impact of a variety of external and internal events on the MTP; identify the potential impact of stress events on the Group's income, costs, cash flow and capital; and enable the Directors to assess management's ability to implement effective management actions that may be taken to mitigate the impact of the stress events. The reverse stress tests have considered severe scenarios and actions and allow the Directors to assess scenarios and circumstances that would render the Group's business model unviable. The tests demonstrated that the Group has adequate resources, including cash, to continue in operational existence for the foreseeable future.

(ii)  Impairment considerations

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

The Group has performed a detailed assessment of whether there were any indicators that any of its assets may be impaired at the reporting period end. External sources of information, as well as internal information such as financial performance, were considered in assessing whether there were indicators of impairment including performance of the assets compared to the MTP for the Bath CGU which was the most sensitive to the value in use ('VIU') assumptions, in the impairment exercise disclosed in the Group's 2020 Annual Report and Accounts. The MTP was used to derive cashflows for the VIU calculation for the CGUs.

The COVID-19 pandemic is no longer considered an indicator of impairment by management. The pandemic has been a feature of the economic environment for over a year and has had a limited impact on the Group's financial results and position.

The assessment did not identify any indicators of impairment for the assets held by the Group - see note 9 for further details.

(iii)  Significant accounting policies and use of estimates and judgements

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 30 September 2020.

The preparation of interim condensed consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the Group's accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2020. However, for the six months to 31 March 2021, the following critical accounting judgements and key sources of estimation uncertainty disclosed in the financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2020 are no longer applicable:

a.  Critical accounting judgement

-Leases - determining the lease term

b.  Key source of estimation uncertainty

- Acquisitions

- Leases - determination of the appropriate rate to discount the lease payments

3. Income

The following table presents revenue disaggregated by service and timing of revenue recognition:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Discretionary investment management fee income

130,769

115,790

237,617

Discretionary investment management commission income

38,688

33,689

70,033

Financial planning income

19,131

16,413

33,079

Execution only fee income

2,300

2,226

4,611

Execution only commission income1

3,798

3,479

6,684

Advisory investment management fee income

2,284

1,610

3,633

Advisory investment management commission income1

511

576

1,066

BPS2 investment management fee income

756

664

1,335

Expert witness report service1

766

521

1,106

Revenue

199,003

174,968

359,164

Other operating income

931

806

2,283

Income

199,934

175,774

361,447

1. Services transferred at a point in time.

2. Brewin Portfolio Service.

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Services transferred at a point in time

5,075

4,576

8,856

Services transferred over time

193,928

170,392

350,308

Revenue

199,003

174,968

359,164

Contract balances

The Group does not have contract assets. There are no incremental costs of obtaining a contract, and no contracts whereby revenue is conditional on the fulfilment of a contingent event.

Contract liabilities

Contract liabilities relate to the advance consideration received from customers for services still to be delivered. The Group derecognises contract liabilities (and recognises revenue) when it transfers services and satisfies its performance obligations.

Unsatisfied performance obligations

The Group does not have material unsatisfied (or partially unsatisfied) performance obligations at the reporting date, as the majority of the Group's performance obligations are satisfied equally over time.

 

 

4. Segmental information

The Group provides a wide range of wealth management services in the United Kingdom ('UK'), Channel Islands ('CI') and the Republic of Ireland ('ROI'). The Group's Executive Committee has been determined to be the chief operating decision maker for the purposes of making decisions regarding the allocation of resources and assessing the performance of the identified segments.

For management reporting purposes the Group currently has a single operating segment: the Wealth Management business. This forms the reportable segment of the Group for the period and consequently, the Group's Consolidated Income Statement and Consolidated Balance Sheet are monitored by the Group's Executive Committee. The accounting policies of the operating segment are the same as those of the Group. All segmental income relates to external clients.

For the six month period ended 31 March 2021

Segmental income statement

 

UK & CI
business
£'000

ROI
business
£'000

Group
£'000

Revenue

 186,220

 13,714

 199,934

Staff costs

 (105,540)

 (6,441)

 (111,981)

Other operating costs

 (35,276)

 (4,756)

 (40,032)

 

 45,404

 2,517

 47,921

Amortisation of intangible assets - client relationships and brand

 (3,995)

 (1,641)

 (5,636)

Defined benefit pension scheme past service costs

 (360)

-

 (360)

Onerous contracts

 2

-

 2

Incentivisation awards

 (63)

 (545)

 (608)

Operating profit

 40,988

 331

 41,319

Finance income and costs and other gains and losses

 (607)

 (42)

 (649)

Profit before tax

 40,381

 289

 40,670

Tax

 (7,766)

 (205)

 (7,971)

Profit/(loss) after tax

 32,615

 84

 32,699

 

Segmental balance sheet

 

UK & CI
business
£'000

ROI
business
£'000

Group
£'000

Net assets

 280,859

 47,707

 328,566

Total assets

 620,970

 56,748

 677,718

Total liabilities

 340,111

 9,041

 349,152

 

 

 

For the period ended 31 March 2020

Segmental income statement

 

UK & CI
business
£'000

ROI
Business2
£'000

Group
£'000

Revenue

 164,618

 11,156

 175,774

Staff costs

 (93,327)

 (4,963)

 (98,290)

Other operating costs

 (36,952)

 (3,332)

 (40,284)

 

 34,339

 2,861

 37,200

Amortisation of intangible assets - client relationships and brand1

 (3,182)

 (2,206)

 (5,388)

Acquisition costs1

-

 (2,334)

 (2,334)

Onerous contracts

 38

 38

Incentivisation awards

 (171)

 (415)

 (586)

Operating profit/(loss)

 31,024

 (2,094)

 28,930

Finance income and costs and other gains and losses

 (652)

 (33)

 (685)

Profit/(loss) before tax

 30,372

 (2,127)

 28,245

Tax

 (6,795)

 36

 (6,759)

Profit/(loss) after tax

 23,577

 (2,091)

 21,486

 

Segmental balance sheet

 

UK & CI
business
£'000

ROI
business
£'000

Group
£'000

Net assets

 266,832

 51,404

 318,236

Total assets

 586,734

 68,307

 655,041

Total liabilities

 319,902

 16,903

 336,805

1. Amortisation of intangible assets - client relationships and brand and acquisition costs have been represented with £877k and £861k transferred from the UK and CI business respectively, to the ROI business.

2. The Group acquired BDCIIL on 31 October 2019 - see note 18 for further details.

 

 

 

For the year ended 30 September 2020

Segmental income statement

 

UK & CI
business
£'000

ROI
Business1
£'000

Group
£'000

Revenue

 338,098

 23,349

 361,447

Staff costs

 (189,189)

 (10,296)

 (199,485)

Other operating costs

 (74,134)

 (7,922)

 (82,056)

 

 74,775

 5,131

 79,906

Amortisation of intangible assets - client relationships and brand

 (8,084)

 (2,988)

 (11,072)

Acquisition costs

 (3,600)

 (3,600)

Onerous contracts

 (250)

 (250)

Incentivisation awards

 (258)

 (934)

 (1,192)

Operating profit/(loss)

 66,183

 (2,391)

 63,792

Finance income and costs and other gains and losses

 (1,582)

 (138)

 (1,720)

Profit/(loss) before tax

 64,601

 (2,529)

 62,072

Tax

 (14,453)

 336

 (14,117)

Profit/(loss) after tax

 50,148

 (2,193)

 47,955

1. The Group acquired BDCIIL on 31 October 2019 - see note 18 for further details.

 

Segmental balance sheet

 

UK & CI
business
£'000

ROI
business
£'000

Group
£'000

Net assets

 284,386

 50,650

 335,036

Total assets

 612,866

 59,832

 672,698

Total liabilities

 328,480

 9,182

 337,662

 

 

 

5. Finance income and finance costs

 

Unaudited
six months to
31 March
2021
 '000

Unaudited
six months to
31 March
2020
 '000

Audited
year to
30 September
2020
 '000

Finance income

 

 

 

Interest income on defined benefit pension scheme

 153

 159

 324

Interest on lease receivables

 47

  43

 92

Interest on bank deposits

 27

 427

 491

 

 227

 629

 907

 

 

 

 

Finance costs

 

 

 

Unwind of discounts on provisions (see note 14)

 73

 110

 210

Unwind of discounts on shares to be issued

 35

  35

 70

Interest expense on lease liabilities

 1,018

 1,148

 2,327

Interest on bank overdrafts

 7

  21

 20

 

 1,133

 1,314

 2,627

 

6. Taxation

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

 

 

Unaudited
six months to
31 March
2021
 '000

Unaudited
six months to
31 March
2020
 '000

Audited
year to
30 September
2020
 '000

Current tax

 

 

 

United Kingdom:

 

 

 

Charge for the period

 8,337

 5,424

 10,623

Adjustments in respect of prior periods

 46

  -

 (1,174)

Overseas:

 

 

 

Charge for the period

87

 108

 67

Adjustments in respect of prior periods

  191

  -

 (70)

Total current tax

 8,661

 5,532

 9,446

 

 

 

 

 

 

 

 

Deferred tax

 

 

 

United Kingdom:

 

 

 

Charge for the period

 (633)

 1,344

 4,048

Adjustments in respect of prior periods

  -

  -

 889

Overseas:

 

 

 

Charge for the period

 (57)

 (117)

 (266)

Adjustments in respect of prior periods

  -

  -

-

Total deferred tax

 (690)

 1,227

 4,671

Tax charged to the Income Statement

7,971

 6,759

14,117

 

On 11 March 2021, Finance (No.2) Bill 2019-21 ('Finance Bill') was published and incorporates legislation on certain new measures announced at Budget 2021. It includes the measure announced to increase the corporation tax rate from 19% to 25% from 1 April 2023. Since the Finance Bill is not substantively enacted at 31 March 2021, this measure is not reflected in the tax charge or net deferred tax for the interim period.

 

 

 

Net deferred tax liability

 

 

 Capital allowances
 '000

 Revaluation
 '000

 Other short-term timing differences
 '000

 Defined pension benefit scheme
 '000

 Share-based payments
 '000

Incentivisation awards
 '000

 Intangible asset amortisation
 '000

 Total
 '000

At 30 September 2019 (audited)

 964

 (1)

 828

 (2,953)

 3,703

 31

 (5,271)

 (2,699)

Effect of change in accounting policy for initial application of IFRS 16

 -

 -

 1,323

 -

 -

  -

 -

 1,323

At 1 October 2019 (unaudited)

 964

 (1)

 2,151

 (2,953)

 3,703

 31

 (5,271)

 (1,376)

Acquired on acquisition of subsidiary

 -

 -

 1,930

 -

 -

  -

  -

  1,930

Additions

 -

 -

 -

 -

 -

  -

(4,008)

(4,008)

Exchange rate movement

 -

 -

 51

 -

 -

  -

 (106)

 (55)

Credit/(charge) in the period to the Income Statement

 776

 -

 39

 (149)

 (614)

 42

 (1,321)

 (1,227)

Charge in the period to the Statement of Comprehensive Income

 -

 -

 -

 (1,302)

 -

  -

 -

 (1,302)

Charge in the period to the Statement of Changes in Equity

 -

 -

 -

 -

 (249)

  -

 -

 (249)

At 31 March 2020 (unaudited)

 1,740

 (1)

 4,171

 (4,404)

 2,840

 73

 (10,706)

 (6,287)

Acquired on acquisition of subsidiary

-

-

-

-

-

-

-

-

Exchange rate movement

-

-

 50

-

-

-

 (103)

 (53)

(Charge)/credit in the year to the Income Statement

 (883)

 (102)

 (150)

 403

 13

 (2,725)

 (3,444)

Charge in the period to the Statement of Comprehensive Income

-

-

-

 693

-

-

-

 693

Charge in the period to the Statement of Changes in Equity

-

-

-

-

 (3)

-

-

 (3)

At 30 September 2020 (audited)

 857

 (1)

 4,119

 (3,861)

 3,240

 86

 (13,534)

 (9,094)

Exchange rate movement

-

-

 (116)

-

-

-

 231

 115

(Charge)/credit in the period to the Income Statement

 (92)

-

 (291)

 (20)

 980

 (86)

 199

 690

Credit in the period to the Statement of Comprehensive Income

-

-

-

 581

-

-

-

 581

Credit in the period to the Statement of Changes in Equity

-

-

-

 148

-

-

 148

At 31 March 2021 (unaudited)

 765

 (1)

 3,712

 (3,300)

 4,368

 -

 (13,104)

 (7,560)

 

 

 

 

7. Earnings per share

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

 

Unaudited
six months to
31 March
2021
'000

Unaudited
six months to
31 March
2020
'000

Audited
year to
30 September
2020
'000

Number of shares

 

 

 

Basic

 

 

 

Weighted average number of shares in issue in the period

 294,058

 294,895

 295,012

Diluted

 

 

 

Effect of weighted average number of options outstanding for the period

 6,796

 6,199

 6,110

Diluted weighted average number of options and shares for the period

 300,854

 301,094

 301,122

Adjusted1 diluted

 

 

 

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

 5,607

 4,950

 3,664

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

 306,461

 306,044

 304,786

 

 

£'000

 '000

 '000

Earnings attributable to ordinary shareholders

 

 

 

Profit for the purpose of basic and diluted earnings per share

 32,699

 21,486

 47,955

Onerous contracts costs

 (2)

 (38)

 250

Amortisation of intangible assets - client relationships and brand

 5,636

 5,388

 11,072

Defined benefit pension scheme past service costs

 360

-

-

Acquisition costs

 2,334

 3,600

Incentivisation awards

 608

 586

 1,192

Other gains and losses

 (257)

-

-

less tax effect of above

 (736)

 (595)

 (1,918)

Adjusted profit for the purpose of basic earnings per share

 38,308

 29,190

 62,151

 

 

 

 

Earnings per share

 

 

 

Basic

11.1p

7.3p

16.3p

Diluted

10.9p

7.1p

15.9p

 

 

 

 

Adjusted2 earnings per share

 

 

 

Basic

13.0p

9.9p

21.1p

Adjusted1 diluted

12.5p

9.5p

20.4p

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

 

 

2. Excluding onerous contracts costs, amortisation of client relationships and brand, acquisition costs, other gains and losses, incentivisation awards and defined benefit pension scheme past service costs.

 

 

8. Dividends

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Amounts recognised as distributions to equity shareholders in the period:

 

 

 

2020/19 Final dividend paid 10 February 2021, 9.9p per share (2020: 12.0p per share)

 29,142

 35,401

35,401

Interim dividend paid 12 June 2020, 4.4p per share

  -

12,992

 

 29,142

 35,401

48,393

An interim dividend of 4.6p per share was declared by the Board on 12 May 2021 and has not been included as a liability as at 31 March 2021. This interim dividend will be paid on 11 June 2021 to shareholders on the register at the close of business on 21 May 2021 with an ex-dividend date of 20 May 2021.

 

9. Intangible assets

 

 Goodwill
 '000

 Client relationships
 '000

 Brand
 '000

 Software
 '000

 Total
 '000

Cost

 

 

 

 

 

 At 30 September 2019 (audited)

 52,733

 156,656

 1,388

 30,483

 241,260

 Additions 

 2,064

 32,067

-

 15,226

 49,357

 Exchange differences

 54

 846

-

 900

 At 31 March 2020 (unaudited)

 54,851

 189,569

 1,388

 45,709

 291,517

 Additions 

-

-

-

 17,931

 17,931

 Exchange differences

 52

 824

-

-

 876

 At 30 September 2020 (audited)

 54,903

 190,393

 1,388

 63,640

 310,324

 Additions 

-

-

-

 14,120

 14,120

 Exchange differences

 (131)

 (2,052)

-

-

 (2,183)

 At 31 March 2021 (unaudited)

 54,772

 188,341

 1,388

 77,760

 322,261

 

 

 

 

 

 

Accumulated amortisation and impairment

 

 

 

 

 

 At 30 September 2019 (audited)

-

 106,166

 69

 17,779

 124,014

 Amortisation charge for the period

-

 5,319

 69

 38

 5,426

 Exchange differences

-

 42

-

-

 42

 At 31 March 2020 (unaudited)

-

 111,527

 138

 17,817

 129,482

 Amortisation charge for the period

-

 5,614

 70

 379

 6,063

 Exchange differences

-

 62

-

-

 62

 At 30 September 2020 (audited)

-

 117,203

 208

 18,196

 135,607

 Amortisation charge for the period

-

 5,567

 69

 1,933

 7,569

 Exchange differences

-

 (245)

-

-

 (245)

 At 31 March 2021 (unaudited)

-

 122,525

 277

 20,129

 142,931

 

 

 

 

 

 

Net book value

 

 

 

 

 

 At 31 March 2021 (unaudited)

 54,772

 65,816

 1,111

 57,631

 179,330

 At 30 September 2020 (audited)

 54,903

 73,190

 1,180

 45,444

 174,717

 At 31 March 2020 (unaudited)

 54,851

 78,042

 1,250

 27,892

 162,035

 

 

Goodwill and client relationships impairment testing

The tables below show the goodwill allocated to groups of cash-generating units ('CGUs') and the significant client relationship assets:

Groups of
CGUs
No.

Goodwill
 '000

Midland Branch 1

1

5,149

Midland Branch 2

1

5,284

Northern Branch 1

1

6,432

South East Branch 1

1

12,800

BD Ireland

1

2,039

17

23,068

22

54,772

 

 

Intangible
assets - client
relationships 
£'000

Brewin Dolphin Wealth Management Limited1

8,607

Brewin Dolphin Capital and Investments (Ireland) Limited2

27,197

BD Ireland

35,804

South East investment management team3

11,338

Bath branch4

15,714

Other investment management teams5

2,960

Carrying amount at 31 March 2021 (unaudited)

65,816

1. Amortisation period remaining 5 years 4 months.

2. Amortisation period remaining 8 years 7 months.

3. Amortisation period remaining 3 years 1 months.

4. Amortisation period remaining 8 years 4 months.

5. None of the constituent parts of the goodwill or client relationships relating to the other investment management teams is individually significant in comparison to the total value of goodwill or client relationships respectively.

In accordance with IFRS, the Group performs impairment testing for goodwill on an annual basis or more frequently when there are impairment indicators. Client relationships and brand intangible assets are reviewed for indicators of impairment at each reporting date.

The Group has reviewed goodwill, client relationships and brand intangible assets as at 31 March 2021. The review determined that there were no indicators of impairment present, see note 2 (ii) for further detail.

 

 

 

10. Property, plant and equipment

 

Leasehold
improvements
£'000

Office
equipment
£'000

Computer
equipment
£'000

Total
£'000

Cost

 

 

 

 

At 30 September 2019 (audited)

 19,247

 12,227

 36,005

 67,479

Effect of change in accounting policy for initial application of IFRS 16

 (992)

 -

 -

 (992)

At 1 October 2019 (unaudited)

 18,255

 12,227

 36,005

 66,487

Additions

 931

 439

 614

 1,984

Disposals

 (78)

 -

 -

 (78)

At 31 March 2020 (unaudited)

 19,108

 12,666

 36,619

 68,393

  Additions

 264

 44

 87

 395

  Exchange differences

 11

 13

 24

  Disposals

 (373)

 (115)

 (392)

 (880)

At 30 September 2020 (audited)

 19,010

 12,608

 36,314

 67,932

  Additions

 776

 6

 346

 1,128

  Exchange differences

 (26)

 (40)

 (66)

  Disposals

-

-

-

-

At 31 March 2021 (unaudited)

 19,760

 12,574

 36,660

 68,994

 

 

 

 

 

Accumulated depreciation and impairment

 

 

 

 

At 30 September 2019 (audited)

 12,542

 11,625

 32,653

 56,820

 Effect of change in accounting policy for initial application of IFRS 16

 (775)

-

-

 (775)

At 1 October 2019 (unaudited)

 11,767

 11,625

 32,653

 56,045

  Charge for the period

 585

 122

 805

 1,512

  Eliminated on disposal

 (78)

-

-

 (78)

At 31 March 2020 (unaudited)

 12,274

 11,747

 33,458

 57,479

  Charge for the period

 615

 171

 816

 1,602

  Exchange differences

 2

 6

 8

  Eliminated on disposal

 (373)

 (115)

 (392)

 (880)

At 30 September 2020 (audited)

 12,518

 11,809

 33,882

 58,209

  Charge for the period

 621

 151

 833

 1,605

  Exchange differences

 (8)

 (23)

-

 (31)

  Eliminated on disposal

-

-

-

-

At 31 March 2021 (unaudited)

 13,131

 11,937

 34,715

 59,783

 

 

 

 

 

Net book value

 

 

 

 

At 31 March 2021 (unaudited)

 6,629

 637

 1,945

 9,211

At 30 September 2020 (audited)

 6,492

 799

 2,432

 9,723

At 31 March 2020 (unaudited)

 6,834

 919

 3,161

 10,914

 

 

 

11. Right of use assets

 

 Unaudited
as at
31 March
2021
£'000

Cost

 

At 30 September 2019 (audited)

 n/a

Effect of change in accounting policy for initial application of IFRS 16

 43,305

At 1 October 2019 (unaudited)

 43,305

Additions

 1,600

Transfer to finance lease receivable

 (945)

At 31 March 2020 (unaudited)

 43,960

Additions

 332

At 30 September 2020 (audited)

 44,292

Lease modifications and rent reviews

 (932)

Exchange differences

 (37)

At 31 March 2021 (unaudited)

 43,323

 

Accumulated depreciation and impairment losses

 

At 30 September 2019 (audited)

 n/a

Effect of change in accounting policy for initial application of IFRS 16

-

At 1 October 2019 (unaudited)

-

Charge for the period

 3,077

At 31 March 2020 (unaudited)

 3,077

Charge for the period

 3,173

At 30 September 2020 (audited)

 6,250

Charge for the period

 3,144

Disposals

 (38)

Exchange differences

 (9)

At 31 March 2021 (unaudited)

 9,347

 

Net book value

 

At 31 March 2021 (unaudited)

  33,976

At 30 September 2020 (audited)

 38,042

At 31 March 2020 (unaudited)

 40,883

 

12. Defined benefit pension scheme

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

 

Unaudited
six months to
31 March
2021

Unaudited
six months to
31 March
2020

Audited
year to
30 September
2020

Discount rate

1.90%

2.30%

1.50%

RPI Inflation assumption

3.30%

2.70%

2.90%

CPI Inflation assumption

2.50%

2.00%

2.20%

Rate of increase in salaries

3.30%

2.70%

2.90%

LPI Pension increases

3.20%

2.70%

2.85%

 

 

 

 

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

 

 

 

Retiring today

 

 

 

Males

86.9 years

86.9 years

86.9 years

Females

89.3 years

89.2 years

89.2 years

Retiring in 20 years' time

 

 

 

Males

88.3 years

88.2 years

88.2 years

Females

90.7 years

90.7 years

90.7 years

The value of the defined benefit pension liability as at 31 March 2021 was estimated in accordance with International Accounting Standard 19 by a qualified independent actuary. The latest full actuarial funding valuation was carried out as at 31 December 2017 and the 31 December 2020 actuarial funding valuation is underway.

For further details see note 18 to the 2020 Group Annual Report and Accounts as this includes the main risks to which the Group is exposed in relation to the pension scheme. The assets in the Scheme were:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Equities and property (quoted)

15,492

13,509

22,073

Fixed interest bonds (quoted)

46,766

37,828

48,293

Index linked bonds (quoted)

47,808

47,073

40,040

Liability hedging (quoted)

1,925

5,804

4,559

Commodities (quoted)

-

-

986

Currency hedging (quoted)

102

(407)

78

Alternatives (quoted)

2,567

7,312

7,116

Cash and cash equivalents

3,934

4,753

2,934

Fair value of scheme assets

118,594

115,872

126,079

Over the six-month period to 31 March 2021, the Trustees of the Scheme have further de-risked its investment strategy. The investment strategy reflects the Scheme's liability profile and the Trustees' and Group's attitude to risk. The Scheme's investment strategy has moved from being to invest in 30% in higher return seeking assets - "assets on risk" (e.g. equities, high yielding bonds etc.), 50% in gilts and other matching assets and 20% in a cashflow generating corporate bond to 20%, 60% and 20% respectively.

Over the six months to 31 March 2021, gilt yields experienced a significant increase which led to a significant decrease in the value of the liabilities and a corresponding decrease to the asset values. Over the period December 2020 and March 2021, the assets and liabilities on the low-risk basis have fallen by c. £9m due to changes in the gilt yields which has been offset a little by the assets on risk.

Net asset recognised on the Balance Sheet:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Present value of funded obligations

(101,220)

(92,692)

(105,755)

Fair value of scheme assets

118,594

115,872

126,079

Surplus in funded scheme and net asset on the Balance Sheet

17,374

23,180

20,324

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Benefit obligation at beginning of period

105,755

107,862

107,862

Past service cost1

360

-

-

Interest cost

783

958

1,913

Net remeasurement gains - demographic

-

(350)

(4,247)

Net remeasurement (gains)/losses - financial

(2,454)

(13,449)

3,993

Net remeasurement gains - experience

(1,392)

(495)

(567)

Benefits paid

(1,832)

(1,834)

(3,199)

Benefit obligation at end of period

101,220

92,692

105,755

1. The past service cost relates to the equalisation of the Guaranteed Minimum Pensions ("GMP"). This cost has been incurred following the judgment in November 2020 in relation to the Lloyds Bank GMP equalisation case confirming that pension scheme trustees are responsible for equalising GMP benefits that have already been transferred out of Defined Benefit schemes.

Reconciliation of opening and closing balances of the fair value of plan assets:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Fair value of plan assets at beginning of the period

126,079

125,235

125,235

Interest income on scheme assets

936

1,117

2,237

Return on assets, excluding interest income

(6,902)

(9,271)

556

Contributions by employers

313

625

1,250

Benefits paid

(1,832)

(1,834)

(3,199)

Fair value of scheme assets at end of the period

118,594

115,872

126,079

 

The amounts recognised in the Income Statement are:

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Past service cost

(360)

-

-

Net interest income on the net defined benefit asset

153

159

324

Total (expense)/income

(207)

159

324

 

 

Remeasurements of the net defined benefit asset included in Other Comprehensive Income ('OCI'):

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Net remeasurement - demographic

-

350

4,247

Net remeasurement - financial

2,454

13,449

(3,993)

Net remeasurement - experience

1,392

495

567

Return on assets, excluding interest income

(6,902)

(9,271)

556

Total remeasurement of the net defined benefit asset included in OCI

(3,056)

5,023

1,377

 

Sensitivity

It should be noted that the methodology and assumptions prescribed for the purposes of IAS 19 mean that the disclosures will be inherently volatile, varying greatly according to investment market conditions at each accounting date.

A sensitivity analysis of the principal assumptions used to measure the Scheme liabilities and assets are set out below. The duration of the pension scheme liabilities is in the region of 18 years.

 

Scheme liabilities

Assumption

Change in assumption

Impact on scheme liabilities

Discount rate

Decrease by 0.25%

Increase by £4.6m

Rate of inflation (RPI, CPI, inflation linked pension increases and salary increases)

Increase by 0.25%

Increase by £3.2m

Assumed life expectancy

Members live 1 year longer

Increase by £5.0m

 

Scheme assets

Change in value of assets on risk

Impact on scheme assets

Decrease by 10%

Decrease by £2.3m

Decrease by 20%

Decrease by £4.6m

 

 

 

 

13. Financial instruments

Financial assets at fair value through other comprehensive income ('FVTOCI')

Level 3

 

Unaudited
as at
31 March
2021
£'000

Unaudited
as at
31 March
2020
£'000

Audited
as at
30 September
2020
£'000

At start of period

 68

 79

 79

Loss from changes in fair value recognised in equity

-

 (2)

 (5)

Disposals

-

 (6)

At end of period

 68

 77

 68

 

 

 

 

Equity

 68

 77

 68

Total financial assets at FVTOCI

 68

 77

 68

Financial assets at fair value through profit and loss ('FVTPL')

Level 1

 

Unaudited
as at
31 March
2021
£'000

Unaudited
as at
31 March
2020
£'000

Audited
as at
30 September
2020
£'000

Listed investments

2,836

340

379

Total financial assets at FVTPL

2,836

340

379

The fair value of financial assets at FVTPL is determined directly by reference to published prices in an active market where available. They are held in an unregulated subsidiary, Brewin Dolphin MP, whose sole objective is to provide seed capital to the model portfolios managed under an investment mandate by Brewin Dolphin Limited. During October 2020, £2.2 million was added to the seed capital, to launch the Group's Voyager fund range.

Fair value measurement recognised on the Balance Sheet

The table below provides an analysis of the fair value measurement of financial instruments which are grouped into Levels 1 to 3 of the fair value hierarchy based on the degree to which the fair value is observable:

Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities;

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

Level 3 inputs which include formal valuation techniques for the asset or liability that are not based on observable market data (unobservable inputs).

 

 

 

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

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

 

Unaudited
fair value
as at
31 March 2021
£'000

Unaudited
fair value
as at
31 March 2020
£'000

Audited
fair value
as at
30 September 2020
£'000

Valuation
technique(s)
and key input(s)

Significant
unobservable
input(s)

Relationship of unobservable inputs
to fair value

Level 1

 

 

 

 

 

 

Financial assets at FVTPL

2,836

340

379

Quoted bid prices in an active market

n/a

n/a

Level 3

 

 

 

 

 

 

Financial assets at FVTOCI - Equity

37

46

37

The valuation is based on published monthly NAVs.

n/a

n/a

Financial assets at FVTOCI - Equity

31

31

31

The valuation is based on the net assets as presented in the most recent audited financial statements of the company.
A marketability discount is applied as this investment is highly illiquid.

Marketability discount ranging between
30-50%.

As the marketability discount increases the valuation decreases.

Sensitivity analysis

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

Financial asset

Assumption

Change in assumption

Impact on valuation

Current assets - financial assets at FVTOCI - Equity

Marketability discount

Increase by 5%

Decrease by £4,300

 

 

 

 

14. Provisions

 

Audited
 as at
30 September 2020
£'000

Additions
£'000

Utilisation of provision
£'000

Unwinding of discount
£'000

Unused amounts reversed
£'000

Unaudited
as at
31 March 2021
£'000

Unaudited
as at
31 March 2020
£'000

Sundry claims and associated costs

397

54

(127)

-

(57)

267

338

Onerous contracts

1,382

29

(101)

1

-

1,311

1,134

Social security and levies on share awards

2,805

1,063

(685)

-

(14)

3,169

2,150

Incentivisation awards

1,420

542

-

5

-

1,967

1,461

Deferred and/or contingent consideration

6,587

-

(1,750)

44

(13)

4,868

6,940

Leasehold dilapidations

2,163

20

-

23

(27)

2,179

2,133

 

14,754

1,708

(2,663)

73

(111)

13,761

14,156

 

 

Current
liability
£'000

Non-current liability
£'000

Total
£'000

Sundry claims and associated costs

267

-

267

Onerous contracts

353

958

1,311

Social security and levies on share awards

1,578

1,591

3,169

Incentivisation awards

728

1,239

1,967

Deferred and/or contingent consideration

1,095

3,773

4,868

Leasehold dilapidations

144

2,035

2,179

Unaudited as at 31 March 2021

4,165

9,596

13,761

The Group recognises provisions for the following:

Sundry claims and associated costs

The timing of the settlements is unknown, but it is expected that they will be resolved within 12 months.

Onerous contracts

The provision is in respect of surplus office space costs such as rates and service charges. Rent is accounted for under IFRS 16.

The valuation of an onerous contract is based on the best estimate of the likely costs discounted to present value. Where the provision is in relation to leasehold obligations on premises and it is more likely than not that the premises will be sublet, an allowance for recoverable costs such as service charges from the subtenant has been included in the valuation. The longest lease term has 12 years remaining.

Social security and levies on share awards

The provision is in respect of Employer's National Insurance and Apprenticeship Levy on share awards outstanding at the end of the year. The provision is based on the Group's share price, the amount of time passed and likelihood of the share awards vesting and represents the best estimate of the expected future cost.

Incentivisation awards

The provision is in respect of incentivisation awards that are payable to employees in relation to the retention and acquisition of funds and is based on the best estimate of the likely future obligation discounted for the time value of money.

Deferred and/or contingent consideration

The provision is for deferred and/or contingent consideration relating to the acquisition of both subsidiaries and asset purchases. It is based on the best estimate of the likely future obligation discounted for the time value of money.

Leasehold dilapidations

The provision is in respect of the expected dilapidated costs that will arise at the end of the lease. The leases covered by the provision have a maximum remaining term of 12 years.

 

 

 

15. Lease liabilities

 

 

Unaudited
as at
31 March
2021
£'000

Unaudited
as at
31 March
2020
£'000

Audited
as at
30 September
2020
£'000

Current

 7,478

 7,567

 8,316

Non-current

 40,809

 48,793

 45,265

Lease liabilities

 48,287

 56,360

 53,581

 

 

Unaudited
as at
31 March
2021
£'000

 6 months to 30 September 2021

 4,608

12 months to 30 September 2022

 9,053

12 months to 30 September 2023

 7,991

12 months to 30 September 2024

 7,698

12 months to 30 September 2025

 7,530

From 1 October 2025 onwards

 19,794

Total lease payments

 56,674

Finance charges

 (8,387)

Lease liabilities

 48,287

 

16. Called up share capital

The following movements in share capital occurred during the period:

 

Date

No. of shares

Exercise price/

Issue price
(pence)

Share
capital
£'000

Share premium account
£'000

Total
£'000

At 1 October 2020

 

 303,234,190

 

 3,032

 58,340

 61,372

Issue of shares to satisfy LTIP awards

10/12/2020

 233,644

1.0p

 2

 2

Issue of options

Various

 33,254

 131.3p - 148.0p

 1

 48

 49

At 31 March 2021 (unaudited)

 

 303,501,088

 

 3,035

 58,388

 61,423

 

17. Note to the cash flow statement

 

Unaudited
six months to
31 March
2021
£'000

Unaudited
six months to
31 March
2020
£'000

Audited
year to
30 September
2020
£'000

Profit before tax

40,670

 28,245

62,072

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

1,605

1,512

3,114

Depreciation of right of use assets

3,144

3,077

6,250

Amortisation of intangible assets - client relationships and brand

5,636

5,388

11,072

Amortisation of intangible assets - software

1,933

38

417

Defined benefit pension scheme past service costs

360

-

-

Defined benefit pension scheme cash contributions

(313)

(625)

(1,250)

Share-based payment expense

5,905

4,755

9,779

Effect of changes in foreign exchange rates

1,181

190

303

Lease incentive

-

442

442

Other gains and losses

(257)

-

-

Finance income

(200)

(202)

(416)

Finance costs

1,126

1,293

2,607

Operating cash flows before movements in working capital

60,790

44,113

94,390

Increase in payables and provisions

11,582

32,018

27,237

Decrease in receivables and trading investments

(44,026)

(55,204)

(27,144)

Cash generated by operating activities

28,346

20,927

94,483

Tax paid

(3,489)

(11,862)

(16,894)

Net cash inflow from operating activities

24,857

9,065

77,589

 

18. Business combinations

6 months to 31 March 2021

There were no business combinations in the period.

Prior period

Year to 30 September 2020

Investec Capital & Investments (Ireland) Limited

On 31 October 2019, Brewin Dolphin Wealth Management Limited ('BDWM'), a subsidiary, based in the Republic of Ireland, completed the acquisition of Investec Capital & Investments (Ireland) Limited ('ICIIL') the wealth management business of Investec Group in the Republic of Ireland. The acquired entity has been renamed Brewin Dolphin Capital and Investments (Ireland) Limited ('BDCIIL'). BDCIIL was acquired to meet the delivery of the Group's strategic objectives by expanding the Group's presence and scale in Ireland.

The acquisition was accounted for using the acquisition method. Details of the purchase consideration, the fair value of the net assets and intangible assets acquired, and the net cash outflow arising on acquisition are as follows:

Purchase consideration:

 

£'000

Cash paid

32,029

Net assets acquired for cash

11,335

Total purchase consideration

43,364

 

 

The fair value of the assets and liabilities recognised as a result of the acquisition are provisional and may be subject to change during the measurement period:

 

Amounts recognised:

 

£'000

Non-current assets

 

Intangible asset - client relationships1

32,067

Current assets

 

Trade and other receivables

8,316

Cash and cash equivalents

14,102

Current liabilities

 

Trade and other payables

(7,773)

Cash and cash equivalents

(1,380)

Non-current liabilities

(4,008)

Identifiable net assets acquired

41,324

 

 

Goodwill

2,040

1. The fair value of BDCIIL's client relationship intangible assets on consolidation has been measured using a multi-period excess earnings method. The model uses estimates of client longevity and the level of both funds and activity driving income to derive a forecast series of cash flows, which are discounted to a present value to determine the fair value of the client relationships acquired.

 

The goodwill balance comprised: -

the excess of the fair value of the assets acquired (excluding the deferred tax liability) over the consideration paid which was negative; and

the value of the deferred tax liability arising on recognition of the client relationship intangible asset on acquisition.

Net cash outflow arising on acquisition:

 

£'000

Consideration paid in cash

43,364

Less: Net assets acquired for cash

(11,335)

Total net cash outflow1

32,029

1. Shown in the line item "Acquisition of subsidiaries" within the Consolidated Cash Flow Statement.

(i)  Acquisition-related costs

Acquisition-related costs of £3,600,000 were recognised as an expense in the Income Statement for the year to 30 September 2020 (6 months to 31 March 2020: £2,334,000).

(ii)  Revenue and net profit

The acquired business contributed revenues of £13,491,000 and profit after tax of £2,201,000 to the Group for the period from 31 October 2019 to 30 September 2020 excluding the impact of the amortisation for the client relationships recognised on acquisition. If the acquisition had occurred on 1 October 2019, consolidated revenue and consolidated profit after tax for the year would have been £1,226,500 and £200,100 higher respectively, excluding the impact of the amortisation for the client relationships recognised on acquisition.

 

 

 

19. Related party transactions

There have been no related party transactions that have taken place during the period that have materially affected the financial position or the performance of the Group. There were also no changes to related party transactions from those disclosed in the 2020 Annual Report and Accounts available via our website www.brewin.co.uk that could have a material effect on the financial position or the performance of the Group. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed. There were no other transactions with related parties which were not part of the Group during the period, with the exception of remuneration paid to key management personnel.

Cautionary statement

The Interim Management Report (the 'IMR') for the period ended 31 March 2021 has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

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

 

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

a.  the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b.  the interim management report includes a fair view of the information required by Disclosure and Transparency Rules ('DTR') 4.2.7 R (indication of important events during the period ended 31 March 2021 and their impact on the condensed consolidated set of financial statements; and description of principal risks and uncertainties for the remaining six months of the year); and

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

By order of the Board

Robin Beer                                                                           Siobhan Boylan

Chief Executive Officer                                                         Chief Financial Officer

12 May 2021                                                                         12 May 2021

 

 

 

Independent Review Report to Brewin Dolphin Holdings PLC

 

Introduction

We have been engaged by Brewin Dolphin Holdings PLC ('the Company') and its subsidiaries (collectively the 'Group') to review the condensed consolidated set of financial statements in the interim financial report for the six months ended 31 March 2021 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and notes to the condensed set of financial statements 1 - 19 We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities 

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

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The consolidated set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

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

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 31 March 2021 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Ernst & Young LLP

London
12 May 2021

Notes:

1. The maintenance and integrity of the Brewin Dolphin Holdings PLC web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the web site. 

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

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