Brewin Dolphin Holdings PLC
24 May 2007
Brewin Dolphin Holdings PLC
Interim Financial Report: For the Half Year Ending 31 March 2007
Highlights
• Discretionary funds £10.1 billion at 31 March 2007 (30 September 2006:
£8.8 billion, 31 March 2006: £8.5 billion) an annual increase of 19%.
• Total income £98 million (2006: £88 million) an increase of 12%.
• Profit before tax £20.8 million (2006: £17.3 million) a 20% increase.
• Earnings per share
- Basic earnings per share 7.2p (2006: 6.0p) an increase of 20%.
- Diluted earnings per share 6.8p (2006: 5.8p) an increase of 17%.
Jamie Matheson
Executive Chairman said:
'An important milestone was reached during the six months ended 31 March 2007
when discretionary funds under management crossed the £10 billion mark.
... once again we have been able to attract both teams and individuals to the
firm. Since the year end a total of 57 investment managers have joined, or will
shortly be joining, the Group and we have opened offices in Oxford, Hereford and
York and have announced that we will shortly be opening in Plymouth and Swansea.
'
23rd May 2007
Media Enquiries:
Brewin Dolphin
Jamie Matheson / John Hall
Charlotte Black
020 7248 4400
www.brewindolphin.co.uk
Citigate Dewe Rogerson
George Cazenove
020 7638 9571
Chairman's Statement
Once again it is my pleasure to report to Shareholders that the first half of
the current year has been a period of satisfactory progress for your Group.
Total income during the period under review rose by some 12% to £98 million.
Profits on ordinary activities before tax rose by some 20% to £20.8 million.
Diluted earnings per share were 6.8p, up 17% on the comparable period last year
while basic earnings per share show a rise of 20% to 7.2p per share.
The main thrust of the improved performance in the first half came from the
Group's Private Client Investment Management operations. An important milestone
was reached during the six months ended 31 March 2007 when discretionary funds
under management crossed the £10 billion mark. Total client funds amounted to
slightly over £24 billion (September 2006 - £22 billion) of which just over £21
billion (September 2006 - £19 billion) is managed. Discretionary income
advanced by some 33% to £51.3 million giving rise to a corresponding 49%
increase in profit before tax.
As has been the case for some time now market conditions have provided a
generally favourable background. During the six months under review the FTSE
100 Index rose by some 5.8% (4.9% in the twelve months since March 2006). Once
again this illustrates that a material element of the Group's progress arises
from strong organic growth, as well as the contribution made by new teams
joining your Group. Indeed the arrival of new people has been a significant
feature of the first half when once again we have been able to attract both
teams and individuals to the firm. Since the year end a total of 57 investment
managers have joined, or will shortly be joining, the Group and we have opened
offices in Oxford, Hereford and York and have announced that we will shortly be
opening in Plymouth and Swansea.
Profits and income generated from our Investment Banking Division (formerly
known as the Corporate Broking Division) have seen some slowdown in the first
half. This reflects, in part, the reduced level of activity on the AIM market.
However we expect the second half of the year to produce a more encouraging
outcome, particularly given the success of the division in pursuing larger and
fully listed mandates.
As ever we continue to invest significant resources in the infrastructure of the
business in order to maintain our pursuit of high levels of client service. In
particular the eXimius Investment Management system is now up and running and we
are currently embarking upon further strengthening of our business continuity,
both in terms of relocating our principal computer facility as well as upgrading
the hardware. We are also expending significant time and effort in order to be
fully prepared for the implementation of MIFID (Markets in Financial Instruments
Directive) later on this year.
At the AGM in February a dividend of 2.875p per share (2.5p per share in 2006)
was declared and subsequently paid on the 10th April. At the same time I
announced to Shareholders that the Board proposed to declare a second interim
dividend in September 2007, payable as before in October 2007. We proposed to
declare a final dividend in late November 2007 at the same time as our
preliminary results announcement, payable in April 2008.
Since my last opportunity to address Shareholders the Board has been very
pleased to be able to announce that it has been joined by Sir Stephen Lamport.
Sir Stephen has, since October 2002, been Group Director for Public Policy and
Government Affairs for The Royal Bank of Scotland. I am confident that the
Board and your Company will benefit significantly from Sir Stephen's
contribution.
As I have also said before your Company continues to pursue its policy of
providing bespoke services to our clients with a strong emphasis on local
presence. This can only be achieved with the hard work and dedication of all
our people and I have great pleasure in acknowledging their contribution to the
Company's objectives. Similarly I have also said in the past that I believe it
foolhardy to become embroiled in detailed forecasts about the short term
outlook. However I think it is reasonable to say that the second half of the
year has got off to an encouraging start.
Jamie Matheson
Executive Chairman
23 May 2007
Independent Review Report
Independent Review Report to Brewin Dolphin Holdings PLC
Introduction
We have been instructed by the company to review the financial information for
the 26 week period ended 31 March 2007 which comprises the Consolidated Income
Statement, the Consolidated Statement of Recognised Income and Expense, the
Consolidated Balance Sheet, Consolidated Cash Flow Statement and the related
notes 1 to 9. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 26 week period
ended 31 March 2007.
Deloitte & Touche LLP
Chartered Accountants
London
23 May 2007
Consolidated Income Statement
26 week period ended 31 March 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
31 March 31 March 30 September
2007 2006 2006
Note £'000s £'000s £'000s
Continuing operations
Revenue 92,838 83,517 164,594
Other operating income 5,186 4,100 9,044
Total income 3 98,024 87,617 173,638
Staff costs (51,953) (45,141) (91,621)
Other operating costs (28,086) (27,557) (55,166)
(80,039) (72,698) (146,787)
Operating profit 17,985 14,919 26,851
Other gains and losses 58 - -
Finance income 2,786 2,355 5,235
Finance costs (53) (3) (36)
Profit before tax 3 20,776 17,271 32,050
Tax (6,452) (5,357) (10,045)
Profit attributable to equity shareholders of the parent from continuing
operations 14,324 11,914 22,005
Earnings per share
From continuing operations
Basic 4 7.2p 6.0p 11.1p
Diluted 4 6.8p 5.8p 10.6p
Consolidated Statement of Recognised Income and Expense
26 week period ended 31 March 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
31 March 31 March 30 September
2007 2006 2006
£'000s £'000s £'000s
Gain on revaluation of available-for-sale investments 299 1,161 1,509
Tax on revaluation of available-for-sale investments (90) (348) (453)
Actuarial gain /(loss) on defined benefit pension scheme 1,133 (530) (3,251)
Tax on actuarial (gain)/loss on defined benefit pension
scheme (340) 159 975
Deferred tax on share based payments 388 795 720
Net income recognised directly in equity 1,390 1,237 (500)
Transfers
Transfer to profit or loss on sale of available-for-sale (36) - -
investments
1,354 1,237 (500)
Profit for period 14,324 11,914 22,005
Total recognised income and expense for the period
attributable to equity shareholders of the parent 15,678 13,151 21,505
Consolidated Balance Sheet
As at 31 March 2007
Unaudited as at Unaudited as at Audited as at
31 March 31 March 30 September
2007 2006 2006
£'000s £'000s £'000s
Note
ASSETS
Non-current assets
Goodwill 73,037 44,440 66,846
Property, plant and equipment 19,231 10,450 16,920
Available-for-sale investments 11,009 10,115 10,463
Other receivables 1,896 1,938 1,988
Deferred tax asset 1,531 3,358 2,473
106,704 70,301 98,690
Current assets
Trading investments 1,337 811 2,470
Trade and other receivables 356,435 261,024 251,437
Cash and cash equivalents 54,274 54,203 61,576
412,046 316,038 315,483
Total assets 518,750 386,339 414,173
LIABILITIES
Current liabilities
Bank overdrafts 1,618 291 3,197
Trade and other payables 370,418 275,426 279,148
Current tax liabilities 5,549 5,318 3,256
Shares to be issued including premium 1,000 1,000 1,000
378,585 282,035 286,601
Net current assets 33,461 34,003 28,882
Non-current liabilities
Retirement benefit obligation 7 13,993 13,121 15,422
Deferred purchase consideration 3,529 - 3,444
Shares to be issued including premium 18,080 3,072 16,500
35,602 16,193 35,366
Total liabilities 414,187 298,228 321,967
Net assets 104,563 88,111 92,206
EQUITY
Called up share capital 8 2,015 1,989 1,995
Share premium account 8 84,885 81,812 82,755
Revaluation reserve 8 6,978 6,562 6,805
Merger reserve 8 4,562 4,562 4,562
Profit and loss account 8 6,123 (6,814) (3,911)
Equity attributable to equity holders of the 8 104,563 88,111 92,206
parent
Consolidated Cash Flow Statement
26 week period ended 31 March 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
31 March 31 March 30 September
2007 2006 2006
Note £'000s £'000s £'000s
Net cash flow from operating activities 6 7,389 12,285 34,442
Cash flows from investing activities
Purchase of goodwill (3,532) (758) (6,289)
Purchases of property, plant and equipment (5,007) (3,491) (11,523)
Proceeds from sale of available-for-sale investments 159 - -
Purchases of available-for-sale investments (400) - -
Dividend received from available-for-sale investments - - 249
Net cash used in investing activities (8,780) (4,249) (17,563)
Cash flows from financing activities
Dividends paid to equity shareholders (5,488) (4,914) (9,884)
Proceeds on issue of shares 1,156 562 1,156
Net cash used in financing activities (4,332) (4,352) (8,728)
Net (decrease) / increase in cash and cash equivalents (5,723) 3,684 8,151
Cash and cash equivalents at the start of period 58,379 50,228 50,228
Cash and cash equivalents at the end of period 52,656 53,912 58,379
Firm's cash 37,369 35,417 47,832
Firm's overdraft (1,618) (291) (3,197)
Firm's net cash 35,751 35,126 44,635
Client settlement cash 16,905 18,786 13,744
Net cash and cash equivalents 52,656 53,912 58,379
Cash and cash equivalents shown in current assets 54,274 54,203 61,576
Bank overdrafts (1,618) (291) (3,197)
Net cash and cash equivalents 52,656 53,912 58,379
Notes to the Interim Financial Report
1. Basis of preparation
The interim financial information for the 26 week period to 31 March 2007 has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards, the disclosure requirements of the
Listing Rules and the accounting policies set out in the Group's latest Annual
Report and Accounts for the year ended 30 September 2006.
2. Section 240 statement
The financial information set out in this document in respect of the year ended
30 September 2006 does not constitute the Group's statutory accounts for the
year ended 30 September 2006 within the meaning of section 240 of the Companies
Act 1985. Those accounts were prepared under International Financial Reporting
Standards and have been reported on by the Company's auditors and delivered to
the Registrar of Companies. The auditors report was unqualified and did not
contain a statement under section 237 (2) or (3) of the Companies Act 1985. A
copy of this statement is available at the Company's registered office at 12
Smithfield Street, London EC1A 9BD and a copy will be posted to all
shareholders.
3. Segmental information
For management purposes, the Group is divided into two business streams: private
client investment management and investment banking (formerly corporate
broking). These form the basis for the primary segment information reported
below. All operations are carried out in the United Kingdom and the Channel
Islands.
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
31 March 31 March 30 September 2006
2007 2006
£'000s £'000s £'000s
Total income
Private client investment management
Discretionary portfolio management 51,382 38,652 84,878
Advisory portfolio management 35,263 35,185 66,613
86,645 73,837 151,491
Investment banking 11,379 13,780 22,147
98,024 87,617 173,638
Profit before tax
Private client investment management
Discretionary portfolio management 8,996 6,029 12,381
Advisory portfolio management 6,458 5,227 9,216
15,454 11,256 21,597
Investment banking 2,531 3,663 5,254
Operating profit 17,985 14,919 26,851
Net finance income and other gains and losses 2,791 2,352 5,199
20,776 17,271 32,050
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to 30
31 March 31 March September
2007 2006 2006
Number of shares '000 '000 '000
Basic
Weighted average number of shares in issue in the period 200,138 197,041 198,025
Diluted
Weighted average number of options outstanding for the
period 5,623 5,935 4,985
Estimated weighted average number of shares earned under
deferred consideration arrangements 4,719 3,628 4,106
Diluted weighted average number of options and shares for
the period 210,480 206,604 207,116
Earnings attributable to ordinary shareholders £'000s £'000s £'000s
Basic profit for the period and attributable earnings 14,324 11,914 22,005
Earnings per share
From continuing operations
Basic 7.2p 6.0p 11.1p
Diluted 6.8p 5.8p 10.6p
5. Dividends
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
31 March 31 March 30 September 2006
2007 2006
£'000s £'000s £'000s
Amounts recognised as distributions to equity holders in
the period:
First interim dividend paid 10 April 2007, 2.875p per share 5,793 4,970 4,970
(2006: 2.5p)
Second interim dividend paid 25 October 2006, 2.75p per - - 5,488
share
5,793 4,970 10,458
6. Note to the cash flow statement
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to 30
31 March 2007 31 March 2006 September 2006
£'000s £'000s £'000s
Group
Operating profit 17,985 14,919 26,851
Adjustments for:
Depreciation of property, plant and equipment 2,696 2,209 3,771
Retirement benefit obligation (296) (346) (766)
Share based payment cost 322 333 613
Interest income 2,786 2,355 4,987
Interest expense (53) (3) (36)
Operating cash flows before movements in working capital 23,440 19,467 35,420
Increase in receivables and trading investments (103,773) (28,891) (21,014)
Increase in payables 90,965 23,850 27,407
Cash generated by operating activities 10,632 14,426 41,813
Tax paid (3,243) (2,141) (7,371)
Net cash flow from operating activities 7,389 12,285 34,442
Cash and cash equivalents comprise cash at bank and bank overdrafts.
7. Retirement benefit obligation
The main financial assumptions used in calculating the Group's retirement
benefit obligation are as follows:
31 March 31 March 30 September 2006
2007 2006
Discount rate 5.3% 5.0% 5.1%
Inflation 3.1% 2.9% 2.9%
Salary increases 3.1% 2.9% 2.9%
Expected return on equities 7.6% 7.7% 7.6%
Expected return on bonds 4.6% 4.7% 4.6%
Expected return on other assets 4.75% 4.5% 4.8%
A full actuarial valuation was carried out as at 31 December 2005 and the
results of this valuation have been updated to 31 March 2007 by a qualified
independent actuary and reflected in the accounts.
8. Reconciliation of changes in equity
Called up Share Revaluation Merger Profit Total
share premium reserve reserve and loss
capital account account
£'000s £'000s £'000s £'000s £'000s £'000s
Group
30 September 2005 1,965 79,287 5,749 4,562 (14,515) 77,048
Profit for the period - - - - 22,005 22,005
Dividends - - - - (10,458) (10,458)
Issue of shares 30 3,468 - - - 3,498
Revaluation - - 1,509 - - 1,509
Deferred tax on items taken directly to equity - - (453) - 1,695 1,242
Share based payments - - - - 613 613
Actuarial loss on defined benefit pension - - - - (3,251) (3,251)
scheme
30 September 2006 1,995 82,755 6,805 4,562 (3,911) 92,206
Profit for the period - - - - 14,324 14,324
Dividends - - - - (5,793) (5,793)
Issue of shares 20 2,130 - - - 2,150
Revaluation - - 299 - - 299
Deferred tax on items taken directly to equity - - (90) - 48 (42)
Released on sale of available-for-sale - - (36) - - (36)
investments
Share based payments - - - - 322 322
Actuarial gain on defined benefit pension - - - - 1,133 1,133
scheme
31 March 2007 2,015 84,885 6,978 4,562 6,123 104,563
9. Provisions
Discussions with the Group's insurers in respect of claims for amounts already
incurred and expensed in relation to legal actions have largely been concluded
and recoveries made, realising the debtor included at 30 September 2006. A
provision has been made in respect of estimated outstanding matters and included
within trade and other payables. This amount is not disclosed separately, as the
directors consider that the disclosure of any further information would
seriously prejudice the ongoing position of the Group. The net effect of the
above matters on the current period's income statement is not material.
Client Funds
At 31 March At 31 March At 30 September
2007 2006 2006
£ Billion £ Billion £ Billion
In Group's nominee or sponsored member 9.9 8.0 8.6
Stock not held in Group's nominee 0.2 0.5 0.2
Discretionary funds under management 10.1 8.5 8.8
In Group's nominee or sponsored member 8.2 7.6 7.2
Other funds where valuations are carried out but where the 2.9 3.3 2.9
stock is not under the Group's control
Advisory funds under management 11.1 10.9 10.1
Managed funds 21.2 19.4 18.9
In Group's nominee or sponsored member 2.6 2.3 2.4
Stock not held in Group's nominee 0.4 0.4 0.3
Execution only stock 3.0 2.7 2.7
Total funds 24.2 22.1 21.6
Stock
In Group's nominee or sponsored member 20.7 17.9 18.2
Stock not held in Group's nominee 3.5 4.2 3.4
24.2 22.1 21.6
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