TIDMBRW
RNS Number : 3426T
Brewin Dolphin Holdings PLC
24 November 2021
This announcement contains inside information for the purposes
of the Market Abuse Regulation
24 November 2021
Brewin Dolphin Holdings PLC
Full Year Results
For the Year Ended 30 September 2021
Record discretionary fund inflows and delivering on our
strategic growth ambitions
Strong financial performance
-- Strong total discretionary net flows of GBP1.9bn (FY 2020:
GBP0.9bn), representing an annualised growth rate of 4.6%.
- Record discretionary gross inflows of GBP4.0bn (FY 2020:
GBP2.8bn), benefitting from strong brand advocacy, as well as a
broad range of propositions and investment solutions.
- Discretionary net flows of GBP0.5bn from direct clients and
GBP1.4bn from indirect clients, of which GBP1.0bn flowed into MPS
and Voyager.
-- Total funds increased by 19.5% over the last 12 months to
GBP56.9bn (FY 2020: GBP47.6bn). Total discretionary funds increased
20.9% to GBP49.8bn (FY 2020: GBP41.2bn) driven by positive net
flows and strong investment performance.
-- Total income for the period increased by 12.3% to GBP405.9m
(FY 2020: GBP361.4m) driven by strong market performance and record
discretionary gross inflows.
- Financial planning income grew 25.7% to GBP41.6m (FY 2020:
GBP33.1m), driven by both 1762 from Brewin Dolphin and the Wealth
Core propositions.
-- Adjusted(1) PBT up 16.2% to GBP90.9m (FY 2020: GBP78.2m),
with margin of 22.4% (FY 2020: 21.6%), driven by strong income
growth and cost savings of GBP2.6m associated with COVID-19
restrictions.
-- Strong cash balance of GBP188.0m (FY 2020: GBP180.5m) and
capital adequacy ratio of 230%.
-- Final dividend per share up 12.1% to 11.1p, taking total to
15.7p per share (2020 final: 9.9p per share, total 14.3p per
share).
30 Sept 30 Sept
2021 2020
GBP'm GBP'm Change
---------------------------------------- --------- -------- -------
Income 405.9 361.4 12.3%
Profit before tax and adjusted(1) items 90.9 78.2 16.2%
Statutory profit before tax 72.5 62.1 16.7%
Earnings per share
Basic earnings per share 18.8p 16.3p 15.3%
Diluted earnings per share 18.3p 15.9p 15.1%
Adjusted(1,2) earnings per share
Basic earnings per share 24.6p 21.1p 16.6%
Diluted earnings per share 23.8p 20.6p 15.5%
---------------------------------------- --------- -------- -------
1. Adjusted items are amortisation of client relationships and
brand, onerous contracts, acquisition costs, incentivisation
awards, defined benefit pension scheme past service costs and other
gains and losses. See the Financial Review for an explanation of
the adjusted measure.
2. See note 9 to the Financial Statements.
Delivering on our strategic priorities
-- Custody and settlement system is now live and will parallel
run with the existing system until summer 2022.
-- Improved our digital capabilities; new BPS onboarding
platform and piloting digital onboarding for intermediaries.
-- Expanded our distribution channels; successful launch and
continued momentum in Voyager funds, net flows of c.GBP300m.
-- ESG investment solutions launched for our intermediaries and
1762 from Brewin Dolphin clients.
Outlook and guidance for FY 2022
-- Well placed to serve the growing demand for financial advice
and capture market share through widening our distribution
channels, offering a broad range of propositions and investment
solutions to all demographics.
-- FY 2022 commission income expected to be similar to
annualised Q4 2021.
-- FY 2022 operating costs to grow mid to high single digit
percent, due to wage inflation, parallel running of systems which
will reverse in FY 2023, depreciation from recent technology
investments and continued investment in the business to support
future growth.
-- Technology investment:
- FY 2022, final year of elevated capex spend estimated at
c.GBP26m, of which GBP20m is on the final stage of integrating our
new custody and settlement system with our other two internal
systems whilst parallel running with the existing system.
- Post the completion of our large-scale technology project,
normalised capex spend will be c.GBP10m per annum.
- Modern technology and an operational excellence programme will
drive cost benefits of c.GBP1m in FY 2022 and c.GBP10m in FY
2023.
Robin Beer, Chief Executive, said:
"We have had an exceptional year achieving record discretionary
inflows and are delivering on our growth ambitions. None of this
would have been possible without our people, who have adapted so
effectively to remote working and continue to focus on putting our
clients at the centre of all their decision making. We have
remained relevant by continuing to innovate our propositions whilst
also developing our digital capabilities. We have started to drive
operational efficiencies through our client management system and
our new custody and settlement system is now live.
Looking ahead to FY 2022, our priority is to complete the final
phased rollout of functionality for our new custody and settlement
system, which will complete in summer 2022. On completion, with our
new technology capabilities coupled with the operational excellence
programme, we expect to capture significant synergies and benefits
across the business, supporting our vision to deliver double digit
earnings per share growth by 2025. We remain focused on becoming
the leading advice-focused digitally enabled wealth manager in the
UK and Ireland, which we believe will allow us to benefit from
sector growth and capture market share."
Declaration of Final Dividend
The Board is proposing a final dividend of 11.1p per share, to
be approved at the 2022 AGM and to be paid on 9 February 2022 to
shareholders on the register at the close of business on 7 January
2022 with an ex-dividend date of 6 January 2022.
For further information:
Brewin Dolphin Holdings PLC Camarco
Carla Bloom, Head of Investor Ben Woodford / Geoffrey Pelham-Lane
Relations Tel: +44 (0) 799 065 3341 / +44
Tel: +44 (0)20 7248 4400 (0) 773 312 4226
The results presentation will be held at 9.00am on 24 November
2021 and available to watch via a video webcast. The audio link can
be found on the corporate website
(www.brewin.co.uk/group/investor-relations). Investors and analysts
who would like to ask questions 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 GBP49.8 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.
Chief Executive Officer's Review
Exceptional year of delivery
While COVID-19 has had a huge impact on the economy and society,
our colleagues adapted effectively to the changing social
distancing guidelines and remote working. Our culture is one that
puts the best outcome for our clients at the core of everything we
do, and this has never been more important than the year we have
just experienced. Our success in supporting our clients is evident
in our client advocacy scores, which are the highest they have ever
been, with our net promoter score at 55% (up 4ppt on last year) and
overall client satisfaction at 8.8 out of 10. Our colleagues have
also had to support their teams with the pandemic affecting
everyone differently, but this has not wavered their desire to keep
driving forward and delivering on our strategic ambitions. We have
had record discretionary inflows in the year and we have continued
to innovate our propositions and build on our digital
capabilities.
In November 2020, I set out my 2025 ambition, which is to become
the leading advice-focused, digitally enabled wealth manager in the
UK and Ireland. For us to achieve this, I aligned our strategic
priorities to: remain 'Relevant', become more 'Efficient', which
combined will drive attractive levels of 'Growth'. All of these are
underpinned by a culture we are proud of.
Delivering our strategic priorities
1. Relevant
In the modern consumer world, being relevant is critical. We
want to create the most relevant wealth offering in the marketplace
and to deliver it through digital capabilities, combined with
personal contact.
To remain relevant in a landscape with increasing focus on
sustainability, we launched two new ESG investment solutions. Our
1762 responsible solution is a portfolio built around core
high-quality companies whose products and responsible behaviour
meet certain criteria. For intermediaries' clients, we have built
five model portfolios which exclude exposure to controversial
sectors and seek exposure to companies that have positive societal
and environmental impacts. We have seen positive signs of early
adoption, with just under 100 intermediaries reported to be using
our sustainable MPS solution. We expect to see this number and the
funds held increase as we expand this proposition to a greater
number of platforms over the coming year.
We launched our multi-asset Voyager fund range, in October 2020
and at the end of the financial year it had around GBP0.3bn of
funds.
We enhanced our online onboarding journey for our Brewin
Portfolio Service (BPS) clients earlier in the year. As a result,
we doubled our conversion rates to 40%, grew new accounts year on
year by 44%, and increased inflows by 66%. In July, we broadened
our BPS investment solution by offering an active or passive
managed portfolio. 61% of existing clients switched to the active
solution and around 70% of new clients are now taking the active
solution. At the end of the year, BPS had around 8,000 accounts
with around GBP0.3bn of funds.
2. Efficient
To drive efficiency through our business, we need to deliver our
services with speed and convenience to clients, we need to increase
our advisor capacity and improve our operating model.
We have been investing in enhancing our client user experience
through development of platforms and providing seamless digital
services. For intermediaries' clients, we have been rolling out
digital valuation capabilities and have more recently started
piloting digital onboarding. The success of these platforms will
enable us to focus on offering our core wealth clients digital
onboarding this coming year.
Over the last three years, we have been transforming our
technology systems, which will enable us to increase client-facing
staff capacity and drive operational efficiencies throughout our
business processes. We implemented our new client management system
last year, which was designed to speed up onboarding and processing
clients' details, enabling our client-facing staff to spend more
time with clients. This year we have been able to reduce client
onboarding time by 73%, with further improvements to come from
digitally onboarding our clients, following the implementation of
our new custody and settlement system.
Our new custody and settlement system is now live within our
environment, albeit later than originally expected. Learning from
other corporates who have implemented similar large scale projects,
we took the decision in May to de-risk the delivery of the system
and are now phasing the full functionality while parallel running
both the new and existing systems. We are now working through the
final complexities of integrating the automated interfaces with our
client management and trading systems. We expect the existing
custody and settlement system to be switched off in the summer of
2022.
Alongside embedding our new systems, we have launched an
operational excellence programme, which will enable us to start to
drive operational efficiencies throughout the business. We expect
cost efficiencies in FY 2022 to be c.GBP1m and c.GBP10m in FY
2023.
Having modern technology will allow us to increase our
automation capabilities with faster straight through processing.
Our operational excellence programme will help us improve our
processes and drive more data decision-making. And finally, we are
looking to right-source some of our testing and software
development to expert third parties. All these initiatives will
allow us to improve our operating model, enable us to scale at
pace, and drive further cost benefits.
3. Growth
Our strategic initiatives are delivering our growth by widening
our distribution channels through business-to-business, strategic
partnerships, and professional services. The combination of growth
in revenues and operating margin efficiencies, will enables us to
achieve our double-digit earnings per share growth target by
2025.
Over the last year, we have piloted our business-to-business
partnership strategy. Having a presence in our local communities
has enabled us to support local businesses in educating their
employees on financial wellbeing. We have relationships with 33
corporates, from small to large-scale businesses, and have been
able to reach further during the pandemic hosting over 100 webinars
with around 3,600 attendees.
Brewin Dolphin Ireland, which represents c.10% of the Group's
funds, has also contributed to the Group's growth. Brewin Dolphin
Ireland has continued to gain momentum through the year with total
fund growth of 17.4% to GBP5.4bn (FY 2020: GBP4.6bn), of which
discretionary funds were up 36% to GBP3.4bn (FY 2020: GBP2.5bn).
Discretionary net flows in the year were GBP0.4bn with an
annualised growth rate of 16.0%, Brexit-related transfers and a
one-off corporate transaction supported this growth. Income grew
30% to GBP30.3m (FY 2020: GBP23.3m); on a normalised basis it grew
c.25% year on year. The market opportunities in Ireland remain
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
resident EU-based clients; and it remains well positioned
considering recent market disruption.
4. Supported by a culture we are proud of
Maintaining our culture is an important part of our strategy as
a Group. Our values have again been demonstrated across the
organisation, sustaining our business and performance, and while
the last year has not been easy, our people have been at the heart
of our success.
During the year we evaluated our office space requirements given
the impact COVID-19 has had on our ways of working. We have moved
to a more agile working model, which led to the decision to remain
in our current London office, which has the capacity to fulfil our
current needs and future growth.
We are committed to creating a workplace and culture that is
welcoming and inclusive for everyone. We value the contribution of
all our people and recognise that diverse backgrounds, experiences
and ideas enable us to grow and remain resilient. We signed up to
the Race at Work Charter in 2020, and as a result, we launched
'EmbRACE', our employee-led race and ethnicity network in July
2021. Gender diversity has also remained a high priority this year.
We are signatories of the Women in Finance Charter, and since
joining we have stretched our target for female representation in
senior management twice. As of 1 September 2021, women represent
42% of our senior management team, and our new target is to achieve
45% by the end of 2023.
Our talent development programmes have continued, as have our
community responsibility activities, albeit in an adapted form as a
result of the pandemic. Our Future Wealth Manager programme for our
advisers has continued, focused on adapting and advancing skills
and behaviours that build strong client relationships. We have
launched a new Aspire Lead programme targeting key influencers and
emerging leaders across our business and we have also designed and
facilitated a number of virtual team 'offsites' to energise,
support and increase team effectiveness following organisational
redesign and new leadership.
Outlook
Markets this year have rebounded strongly due to the recovery in
economic activity, fiscal and monetary stimulation, COVID-19
vaccination progress and strong corporate earnings. After such a
strong year, we anticipate markets to be more volatile in 2022,
with governments reducing fiscal stimulus and consumer demand
normalising. We believe that we are well placed to capture the
strong structural drivers in the sector: with growing demand for
financial advice, the pandemic being a catalyst for the
acceleration, and a generational wealth transfer which is an
ongoing tailwind.
Our strategy of remaining relevant, through adapting our
investment solutions and propositions and our investment in digital
capabilities will ensure we are able to keep meeting the changing
client needs and a younger generation of clients. We expect
operating costs to grow mid to high single digit percent due to
cost inflation, depreciation from our technology investments,
investment in our business to support future growth, and parallel
running costs of our custody and settlement systems, which reverse
out in FY 2023. Having invested in our technology over the last few
years, we are now able to start driving significant efficiencies
through our internal operating processes, which will be a priority
in the coming year.
I look forward to building on the significant progress we have
made on our strategic growth ambitions and remain focused on
becoming the leading advice-focused, digitally enabled wealth
manager in the UK and Ireland.
Financial Review
Results and business performance
The Group's financial performance for the year to 30 September
2021 was exceptionally strong following the recovery in the markets
over the period and record discretionary gross inflows. For this
reason, statutory profit before tax ('statutory PBT') was 16.7%
higher than last year at GBP72.5m (2020: GBP62.1m). Statutory PBT
margin for the period was 17.9% (2020: 17.2%). Profit before tax
and adjusted items ('adjusted PBT') was up 16.2% to GBP90.9m (2020:
GBP78.2m). The adjusted PBT margin improved to 22.4% (2020: 21.6%)
as we have continued to benefit from COVID-19 related savings.
Statutory diluted earnings per share ('EPS') increased by 15.1%
to 18.3p (2020: 15.9p). Adjusted diluted EPS increased by 15.5% to
23.8p (2020: 20.6p).
2021 2020
GBP'm GBP'm Change
================================================== ======= ======= ======
Income 405.9 361.4 12.3%
Fixed staff costs (148.0) (139.2) 6.3%
Variable staff costs (75.0) (60.2) 24.6%
Other operating costs excluding adjusted(1) items (90.2) (82.1) 9.9%
================================================== ======= ======= ======
Operating profit before adjusted(1) items 92.7 79.9 16.0%
Net finance costs and other gains and losses (1.8) (1.7) 5.9%
================================================== ======= ======= ======
Profit before tax and adjusted(1) items 90.9 78.2 16.2%
Adjusted(1) items (18.4) (16.1) 14.3%
================================================== ======= ======= ======
Statutory profit before tax 72.5 62.1 16.7%
Taxation (17.2) (14.1) 22.0%
================================================== ======= ======= ======
Statutory profit after tax 55.3 48.0 15.2%
================================================== ======= ======= ======
Earnings per share
Basic 18.8p 16.3p 15.3%
Diluted 18.3p 15.9p 15.1%
================================================== ======= ======= ======
Adjusted(1,2) earnings per share
Basic 24.6p 21.1p 16.6%
Diluted 23.8p 20.6p 15.5%
================================================== ======= ======= ======
1. Adjusted items are amortisation of client relationships and
brand, onerous contracts, acquisition costs, incentivisation
awards, defined benefit pension scheme past service costs and other
gains and losses.
2. See note 9 to the Financial Statements.
Explanation of profit before tax and adjusted items and
reconciliation to Financial Statements
Profit before tax and adjusted items ('adjusted PBT'), adjusted
diluted EPS and adjusted PBT margin ('adjusted measures') are used
to measure and report on the underlying financial performance of
the Group, aiding comparability between reporting periods. The
Board and management use adjusted financial measures and
non-financial measures for planning and reporting. The adjusted
financial measures are also useful for investors and analysts.
Additionally, some of the adjusted performance measures are used
as Key Performance Indicators, as well as for performance measures
for various incentive schemes, including the annual bonuses of
Executive Directors and long-term incentive plans.
Adjusted profit measures are calculated based on statutory PBT
adjusted to exclude various infrequent or unusual items of income
or expense. The Directors consider such items to be outside the
ordinary course of business. Income or expenditure adjusted for are
shown in the reconciliation below and meet the criteria.
Some adjusted for items of income or expense may, like onerous
contracts costs, recur from one period to the next. Although these
may recur over one or more periods, they are the result of events
or decisions which the Directors consider to be outside the
ordinary course of business, such as material restructuring
decisions to reduce the ongoing cost base of the Group, that do not
represent long-term expenses of the business. Likewise, costs
related to acquisitions are also infrequent by their nature and
therefore are excluded. Incentivisation awards costs in relation to
acquisitions that are payable for a predetermined period of time
are adjusted for on this basis.
The gains/losses from seed capital (see note 19 to the 2021
Annual Report and Accounts) and the defined benefit pension scheme
past service costs relating to the equalisation of Guaranteed
Minimum Pensions (see note 17 to the 2021 Annual Report and
Accounts) are excluded from the adjusted profit measures as the
Directors consider these to be outside of the ordinary course of
business.
Additionally, the amortisation of acquired client relationships
and brand is an expense which investors and analysts typically add
back when considering profit before tax or earnings per share
ratios.
Reconciliation of profit before tax and adjusted items to
statutory profit before tax
2021 2020
GBP'm GBP'm
=========================================================== ====== ======
Profit before tax and adjusted items 90.9 78.2
Adjusted items
----------------------------------------------------------- ------ ------
Acquisition costs (1.5) (3.6)
Other gains and losses 0.3 -
Defined benefit pension scheme past service costs (0.4) -
Onerous contracts (3.6) (0.2)
Incentivisation awards (2.0) (1.2)
Amortisation of intangible assets - client relationships
and brand (11.2) (11.1)
----------------------------------------------------------- ------ ------
Total adjusted items (18.4) (16.1)
=========================================================== ====== ======
Statutory profit before tax 72.5 62.1
=========================================================== ====== ======
Adjusted items for the year were higher at GBP18.4m (2020:
GBP16.1m). They included acquisition costs of GBP1.5m (2020:
GBP3.6m), this year's cost stemmed from aborted acquisition costs,
onerous contracts of GBP3.6m, with the majority relating to the
decision to not move our London office to 25 Cannon Street and to
assign or sublet the space instead once the lease commences, and
amortisation of client relationships of GBP11.2m (2020:
GBP11.1m).
Other adjusted items were in relation to incentivisation awards
of GBP2.0m (2020: GBP1.2m) and defined benefit pension scheme past
service costs of GBP0.4m.
Funds(1)
30 30
September Internal Net Growth Investment September
GBP'bn 2020 Inflows Outflows transfers flows rate performance 2021 Change
=============== ========= ======= ======== ===== ======= =========== ========= =======
Private clients 21.6 1.5 (0.6) (0.5) 0.4 1.9% 3.6 25.6 18.5%
---------------- --------- ------- -------- --------- ----- ------- ----------- --------- -------
Charities &
corporates 5.1 0.4 (0.3) - 0.1 2.0% 0.9 6.1 19.6%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Direct
discretionary 26.7 1.9 (0.9) (0.5) 0.5 1.9% 4.5 31.7 18.7%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Intermediaries 10.1 1.1 (0.6) (0.1) 0.4 4.0% 1.5 12.0 18.8%
MPS / Voyager 4.4 1.0 - - 1.0 22.7% 0.7 6.1 38.6%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Indirect
discretionary 14.5 2.1 (0.6) (0.1) 1.4 9.7% 2.2 18.1 24.8%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Total
discretionary 41.2 4.0 (1.5) (0.6) 1.9 4.6% 6.7 49.8 20.9%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Execution only 4.1 0.3 (0.6) 0.9 0.6 14.6% 0.3 5.0 22.0%
BPS 0.2 - - - - - - 0.3 50.0%
Advisory 2.1 - (0.1) (0.3) (0.4) (19.0)% 0.1 1.8 (14.3)%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
Total funds 47.6 4.3 (2.2) - 2.1 4.4% 7.1 56.9 19.5%
================ ========= ======= ======== ========= ===== ======= =========== ========= =======
30 September 2020 31 30 Change last Change last
March September 12 months 6 months
GBP'bn 2021 2021
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
Private clients 21.6 23.7 25.6 18.5% 8.0%
Charities & corporates 5.1 5.6 6.1 19.6% 8.9%
-------------------------------------------- ------------ ------------
Direct discretionary 26.7 29.3 31.7 18.7% 8.2%
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
Intermediaries 10.1 11.1 12.0 18.8% 8.1%
MPS / Voyager 4.4 5.3 6.1 38.6% 15.1%
-------------------------------------------- ------------ ------------
Indirect discretionary 14.5 16.4 18.1 24.8% 10.4%
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
Total discretionary 41.2 45.7 49.8 20.9% 9.0%
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
Execution only 4.1 4.7 5.0 22.0% 6.4%
BPS 0.2 0.2 0.3 50.0% 50.0%
Advisory 2.1 2.0 1.8 (14.3)% (10.0)%
Total funds 47.6 52.6 56.9 19.5% 8.2%
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
Indices
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
MSCI PIMFA Private Investor Balanced Index 1,568 1,704 1,781 13.6% 4.5%
FTSE 100 5,866 6,713 7,086 20.8% 5.6%
-------------------------------------------- ------------------ ------- ----------- ------------ ------------
1. The funds figures are rounded to one decimal place and
therefore may not always cast.
Total funds as at 30 September 2021 were GBP56.9bn (2020:
GBP47.6bn) an increase of 19.5% in the year, driven by strong net
flows of GBP2.1bn (2020: GBP1.1bn) and investment performance of
GBP7.1bn (2020: GBP(1.2)bn). Investment performance was 14.9%
compared to the increase in the MSCI PIMFA Private Investor
Balanced Index of 13.6%.
Total discretionary funds grew by 20.9% to GBP49.8bn (2020:
GBP41.2bn). Total net flows were GBP1.9bn (2020: GBP0.9bn)
representing an annualised growth rate of 4.6%, in line with our 5%
discretionary net flow target. This was driven by record gross
discretionary inflows of GBP4.0bn, benefitting from our broad range
of propositions. New clients were a large driver of this growth,
representing c.70% of UK inflows (excluding MPS and Voyager) and
our client retention rate remained high at 96%.
Direct discretionary net flows were GBP0.5bn (2020: GBP0.1bn)
driven by record gross inflows of GBP1.9bn (2020: GBP1.4bn) and
stable outflows of GBP0.9bn (2020: GBP0.9bn).
Indirect discretionary net flows were GBP1.4bn, an increase of
75.0% on last year (2020: GBP0.8bn). MPS and Voyager flows of
GBP1.0bn (2020: GBP0.5bn) were a significant driver to this growth.
Voyager funds, launched in October 2020, have grown to GBP0.3bn
.
Income
2021 2020 Change
===== ========== ===== ===== ========== ===== ===== ========== =====
GBP'm Fees Commission Total Fees Commission Total Fees Commission Total
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Private clients 158.3 65.7 224.0 141.5 65.3 206.8 11.9% 0.6% 8.3%
Charities &
corporates 23.6 3.7 27.3 18.4 3.6 22.0 28.3% 2.8% 24.1%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Direct discretionary 181.9 69.4 251.3 159.9 68.9 228.8 13.8% 0.7% 9.8%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Intermediaries 73.7 0.9 74.6 66.5 1.1 67.6 10.8% (18.2)% 10.4%
MPS / Voyager 14.0 n/a 14.0 11.2 n/a 11.2 25.0% n/a 25.0%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Indirect discretionary 87.7 0.9 88.6 77.7 1.1 78.8 12.9% (18.2)% 12.4%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Total discretionary 269.6 70.3 339.9 237.6 70.0 307.6 13.5% 0.4% 10.5%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Financial planning n/a n/a 41.6 n/a n/a 33.1 n/a n/a 25.7%
Execution only 4.9 7.1 12.0 4.6 6.7 11.3 6.5% 6.0% 6.2%
BPS 1.7 n/a 1.7 1.3 n/a 1.3 30.8% n/a 30.8%
Advisory 4.4 2.8 7.2 3.6 1.1 4.7 22.2% 154.5% 53.2%
Other income n/a n/a 3.5 n/a n/a 3.4 n/a n/a 2.9%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Income 280.6 80.2 405.9 247.1 77.8 361.4 13.6% 3.1% 12.3%
======================= ===== ========== ===== ===== ========== ===== ===== ========== =====
Income increased by 12.3% to GBP405.9m (2020: GBP361.4m). Fee
income increased by 13.6% to GBP280.6m driven by market recovery
and strong net flows. Commission income was up 3.1% to GBP80.2m,
largely driven by a one-off corporate transaction in advisory of
GBP1.7m in Ireland in the third quarter.
Discretionary income increased by 10.5% to GBP339.9m (2020:
GBP307.6m). This was driven by fee income of GBP269.6m increasing
13.5% from last year, attributable to the higher market level in
the year and strong positive net flows. Discretionary commission is
in line with the prior year, despite elevated trading activity in
the first half of the year. Indirect income increased by 12.4% to
GBP88.6m (2020: GBP78.8m), driven by continued demand for MPS and
the newly launched Voyager funds, as well as the market
recovery.
Financial planning income grew by 25.7% to GBP41.6m (2020:
GBP33.1m), driven by continued growth in demand for our
advice-focused services and the higher market level.
Other income increased to GBP3.5m (2020: GBP3.4m). Interest
income reduced by GBP0.5m to GBP0.8m (2020: GBP1.3m) due to lower
interest rates and restructuring of funds on fixed term rates.
Report writing income generated by Mathieson Consulting increased
by GBP0.6m to GBP1.7m (2020: GBP1.1m).
Income margin(1)
2021 2020
==== ========== ===== ==== ========== =====
(bps) Fees Commission Total Fees Commission Total
======================= ==== ========== ===== ==== ========== =====
Private clients 64.6 26.8 91.4 67.4 31.1 98.5
Charities & corporates 40.7 6.4 47.1 37.7 7.2 44.9
======================= ==== ========== ===== ==== ========== =====
Direct discretionary 60.2 23.0 83.2 61.8 26.6 88.4
======================= ==== ========== ===== ==== ========== =====
Intermediaries 63.7 0.8 64.5 67.9 1.1 69.0
MPS 25.5 - 25.5 26.5 - 26.5
======================= ==== ========== ===== ==== ========== =====
Total discretionary 57.0 14.9 71.9 59.7 17.6 77.3
======================= ==== ========== ===== ==== ========== =====
BPS 56.7 - 56.7 68.4 - 68.4
Execution only 10.2 14.8 25.0 11.4 16.4 27.8
Advisory 22.0 14.0 36.0 19.5 6.0 25.5
======================= ==== ========== ===== ==== ========== =====
Overall 51.6 14.8 66.4 53.7 17.0 70.7
======================= ==== ========== ===== ==== ========== =====
1. The income margins are calculated as total income over the
average funds at the end of each fee billing quarter for the year.
This is an alternative performance measure.
Overall blended margin across the discretionary business was
71.9bps (2020: 77.3bps). The year-on-year decrease is largely
driven by the intermediaries: as our IFA relationships grow, they
benefit from reduced tiered price levels. MPS margins are also
reduced year on year reflecting the effects of tiering across our
growing IFA book.
The direct margin was 83.2bps (2020: 88.4bps): fee margin was
down 1.6bps to 60.2bps (2020: 61.8bps), mostly due to the higher
value of client funds and the impact of rate card tiering, and
commission margin was down to 23.0bps (2020: 26.6bps) due to lower
commission-based activity in the second half of the year.
Advisory commission margin was 14.0bps (2020: 6.0bps); this
increase was driven by a one-off corporate transaction of GBP1.7m
in Ireland in the third quarter .
Operating costs (excluding adjusted(1) items) and capital
expenditure
2021 2020
GBP'm GBP'm
======================= ======= =======
Staff costs (148.0) (139.2)
Non-staff costs (90.2) (82.1)
======================= ======= =======
Fixed costs (238.2) (221.3)
Variable staff costs (75.0) (60.2)
======================= ======= =======
Total operating costs (313.2) (281.5)
======================= ======= =======
Capital expenditure(2) 30.3 35.6
======================= ======= =======
1. Adjusted items are amortisation of client relationships and
brand, defined benefit pension scheme past service costs,
acquisition costs, incentivisation awards, onerous contracts and
other gains and losses.
2. Excludes GBP1.5m of right of use asset additions (FY 2020:
GBP1.9m).
Total operating costs before adjusted items were up GBP31.7m,
11.3% higher at GBP313.2m (2020: GBP281.5m). The increase was
primarily driven by higher variable staff costs as a result of our
strong performance in the year and higher headcount.
Total fixed costs increased by GBP16.9m to GBP238.2m (2020:
GBP221.3m). Staff costs grew 6.3% to GBP148.0m as a result of
headcount increases to support the Group's business growth and
technology transformation projects, share price growth on employee
share options, and accounting for increased holiday accrual with
lower levels of holiday taken due to COVID-19.
Non-staff costs increased by 9.9% to GBP90.2m, attributable to
depreciation of the technology investment in 2020, continued
investment in our technology transformation projects which will
support operational improvements and more marketing spend in the
second half of the year, following a year of reduced client events
due to the pandemic. These increases were partially offset by
reduced spend of GBP2.6m in travel and entertainment, office
occupancy costs and supplies as a result of social distancing
restrictions.
Variable staff costs of GBP75.0m (2020: GBP60.2m), which
predominantly includes discretionary profit share, were up 24.6%,
driven by strong income and profit growth in the year. We have
maintained our staff compensation ratio of 55% in line with last
year and variable costs per capita were up 14% as we had 9%
headcount growth in the year .
Capital expenditure
Total capital expenditure for the year excluding IFRS 16 related
right of use additions was GBP30.3m, of which GBP24.8m was on our
custody and settlement system, in line with our market guidance.
Our total capital expenditure spend to date on the custody and
settlement system is GBP51.3m. Other capital expenditure in the
period included GBP4.5m on enhancing our client user experience,
GBP0.5m on property improvements and the remaining GBP0.5m on IT
hardware.
The custody and settlement system is now live within our
technology environment, albeit later than originally expected, and
we have commenced the final phased rollout of its functionality. In
taking a prudent approach with the embedding of the system, we are
phasing the deployment of its full functionality, which includes
the final complexities of integrating the automated interfaces with
our client management and trading systems. The parallel running of
both the old and new custody and settlement systems will end in the
summer of 2022. Once the new custody and settlement is fully
functional, we will have a cloud-based, modern technology
infrastructure in which we can start to realise some operational
and cost benefits. The operational benefits include straight
through processing and automation, simpler client journeys, reduced
operational risks, tighter business controls and the ability to
scale faster.
FY 2022 guidance
Looking ahead to next year's costs and capital expenditure, we
anticipate operating costs to grow mid to high single digit percent
due to: higher than normal wage inflation, costs related to
parallel running of systems which we expect to reverse in FY 2023,
depreciation from our recent technology investments, and continued
investment in the business to support our growth ambitions. We
anticipate our capital expenditure will be around GBP26m of which
GBP20m will be for the final stage of integrating our custody and
settlement system with our client management and trading systems.
We anticipate following FY 2022 that our capital requirements will
fall to normalised levels of investment of around GBP10m per annum.
Amortisation of our recent technology investments will be around
GBP3m in FY 2022, and around GBP8m in FY 2023, with our client
management system's amortisation falling away from FY 2024. Having
a modern technology infrastructure enables us to start to drive
operational efficiencies through the business. We expect cost
efficiencies in FY 2022 will be c.GBP1m and c.GBP10m in FY
2023.
Net finance costs
Finance income of GBP0.4m, lower than 2020 of GBP0.9m due to
lower interest rates. Finance costs were GBP2.2m (2020: GBP2.6m),
primarily related to our leases.
Defined benefit pension scheme (the 'Scheme')
The final salary pension scheme surplus has increased to
GBP20.8m (2020: GBP20.3m). An actuarial gain for the year of
GBP0.2m (2020: GBP1.4m) has been recognised. A past service cost of
GBP0.4m has been recognised in the Income Statement 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. This cost has been
excluded from adjusted measures, as it is a one-off item.
The Group completed and agreed the triennial valuation at
December 2020 for the Scheme during the year. The actuarial
valuation for funding purposes revealed a GBP8.1m surplus. It was
agreed that no additional contribution would be made to the scheme
until the funding is reassessed at the next triennial valuation.
Additionally, it was agreed that the administration costs of the
Scheme, including investment management fees and Scheme levy
payments previously paid by the Group, were to be paid directly by
the Scheme.
The increase in the surplus has been driven by contributions to
the Scheme, updated post-retirement mortality assumptions that
incorporate the latest mortality projection models and experience
mainly as a result of actual inflation and pension increases being
lower than assumed. These increases were partially offset by the
asset returns being lower than expected on the Scheme's assets over
the year, reflecting in part the increase in gilt yields and a
reduction in credit spreads.
Tax
The Group's effective corporation tax rate of 23.7% is higher
than the UK statutory corporation tax rate of 19%, and higher than
prior year (2020: 22.7%). This is mainly due to the impact of
adjusting the net deferred tax liability to allow for the increase
in the UK corporation tax rate from 19% to 25% from 1 April 2023;
this has increased the Group's tax charge for the year ended 30
September 2021.
Dividend
The Company's policy is to grow dividends in line with adjusted
earnings, with a target payout ratio of between 60% and 80% of
annual adjusted diluted earnings per share. The payout ratio range
has been adopted to provide sufficient flexibility for the Board to
reward shareholders whilst recognising that there may be a
requirement, at times, to retain capital within the Group for
investment to generate enhanced future shareholder returns.
The Board has taken a balanced view on rewarding shareholders in
what has a been a strong performance for the year. As a result the
Board is proposing a final dividend of 11.1p per share which brings
the total for 2021 to 15.7p per share, a 10% increase year on year
(2020 final: 9.9p per share; total dividend for the 2020 year 14.3p
per share). The payout is 66% of adjusted earnings per share and is
in line with our dividend policy.
Capital resources and regulatory capital
The Group's financial position remains very strong with net
assets of GBP347.3m as at 30 September 2021 (2020: GBP335.0m).
At 30 September 2021, the Group had regulatory capital resources
of GBP167.1m (2020: GBP161.1m), representing 230% of the FCA
requirement (2020: 220%). Improved business performance offset by
continued investment in intangibles is the main reason for the
increase, see note 10 to the Financial Statements. The Group's
primary regulator is the Financial Conduct Authority ('FCA'). The
FCA's rules determine the calculation of the Group's regulatory
capital resources and regulatory capital requirements. As required
under FCA rules, we perform an Internal Capital Adequacy Assessment
Process ('ICAAP'), at least annually, which includes performing a
range of stress tests to determine the appropriate level of
regulatory capital that the Group needs to hold.
By 1 January 2022 the Investment Firms Prudential Regime (IFPR)
will have replaced the existing EBA regulations in both UK and
Europe. The Group's regulated entity in Europe began reporting per
the new rules in June 2021 under EBA guidelines and continues to
retain sufficient regulatory capital resources. The UK regulated
entity has prepared for the transition under the FCA by ensuring
compliance and testing with new calculations which have established
current regulatory resources levels will be sustained. The Group is
satisfied that it will continue to maintain adequate capital
resources following implementation of the IFPR.
The Group's Pillar III disclosures are published annually on our
website and provide further details about regulatory capital
resources and requirements.
Cash flow
The Group had net cash inflow of GBP7.5m (2020: GBP48.7m
outflow) and total net cash balances of GBP188.0m as at 30
September 2021 (2020: GBP180.5m).
Adjusted EBITDA (see table below) was GBP118.9m (2020:
GBP99.5m). Capital expenditure of GBP34.6m (2020: GBP28.9m) was
principally in support of the ongoing technology transformation
programme. The contribution to the defined benefit pension scheme
of GBP0.3m (2020: GBP1.3m) was lower than last year, as the funding
agreement agreed at the December 2017 triennial valuation ended in
the year.
Cash outflow for own share 'matching' purchases in the year of
GBP10.5m to match the awards made in 2020 for the Deferred Profit
Share Plan (DPSP) awards (2020: GBP8.4m). Shares were also
purchased (GBP0.2m) for the Share Incentive Plan. During the year,
the Group seeded its Voyager fund range with GBP2.3m (see note 19
to the Financial Statements).
Working capital reflects our trade debtors and creditors and
prepayments and accruals, it is cyclical dependent on timing of
invoice payment runs on a monthly basis.
Dividends paid in the period decreased by 11.8% to GBP42.7m
(2020: GBP48.4m).
2021 2020
GBP'm GBP'm
=============================================================== ======= =======
Profit before tax and adjusted items 90.9 78.2
Finance income and costs 1.8 1.7
=============================================================== ======= =======
Operating profit before adjusted items (EBIT) 92.7 79.9
Share-based payments 12.6 9.8
Depreciation and amortisation - excluding client relationships
and brand 13.6 9.8
=============================================================== ======= =======
Adjusted EBITDA 118.9 99.5
Capital expenditure (34.6) (28.9)
Purchase of client relationships (0.2) -
Acquisition of subsidiary - (32.0)
Acquisition costs (1.5) (3.6)
Purchase of trading investments (2.3) -
Pension funding (0.3) (1.3)
Working capital 5.3 0.3
Disposal of PPE and software 0.5 -
Interest and taxation (11.9) (16.4)
Lease payments and interest on lease liabilities (10.3) (8.8)
Lease incentive and finance lease receivables - 0.6
Adjusted items (2.8) (1.4)
Shares purchased (10.7) (8.4)
Shares issued for cash 0.1 0.1
=============================================================== ======= =======
Cash flow pre-dividends 50.2 (0.3)
Dividends paid (42.7) (48.4)
=============================================================== ======= =======
Cash flow 7.5 (48.7)
Opening cash 180.5 229.2
=============================================================== ======= =======
Closing cash 188.0 180.5
=============================================================== ======= =======
Key Performance Indicators
Measuring the success of our strategy
Delivery of our strategy is measured through focused and select
KPIs that demonstrate continued progress to build and grow our
business.
Measuring our performance
Key Performance Indicators ('KPIs') are used to measure both the
progress and success of our strategy implementation. The KPIs are
set out below, with a measure of our performance to date and an
indication of potential challenges to success where applicable.
Changes to KPIs
During the year, we have reviewed our measurements to ensure
that they are appropriate for our strategy. We have realigned our
KPI's to our objectives of 'Relevance', 'Efficiency', 'Growth',
'Culture' and others which relate to our overall performance. As
outlined last year, total income now forms part our KPIs. This is
line with our increased focus on being an advice-led business, the
strength of which is more accurately measured by income rather than
funds. There will be no target provided but this will form part of
our remuneration decision making and will be disclosed and
monitored.
KPIs
Strategic KPI FY 2019 FY 2020 FY 2021 Target / Benchmark
outcome
---------- ----------------------------- --------- --------- --------- ------------------
Relevant Discretionary funds inflows 3.7% 2.2% 4.6% 5%
Total income GBP339.1m GBP361.4m GBP405.9m n/a
Net promoter score 51.2% 51.0% 55.0% 49.0%
Overall client satisfaction1 8.6 8.7 8.8 8.6
Efficient Adjusted 2 PBT margin 22.1% 21.6% 22.4% 25%
Discretionary funds per
client facing certified
person (CFCP) GBP81m GBP77m GBP89m GBP100m
Growth Adjusted2,3 diluted EPS 20.7p 20.6p 23.8p n/a
Culture Employee engagement 87% 90% 88% 78%
Capital adequacy risk
Overall appetite ratio 291% 220% 230% 150% (minimum)
Dividend payout ratio 80% 70% 66% 60%-80%
---------------------------------------- --------- --------- --------- ------------------
1. Scored out of 10.
2. Adjusted items are amortisation of client relationships and
brand, onerous contracts, acquisition costs, incentivisation
awards, defined benefit pension scheme past service costs and other
gains and losses.
3. See note 9 to the Financial Statements.
Principal Risks
Managing our risks
Effective risk management is key to the success of delivering
our strategic objectives. Our approach to risk management continues
to evolve as the risk landscape changes; it ensures timely
identification, assessment, and management of the principal risks
to our business.
We have a defined risk appetite which enables us to effectively
manage the potential upside and downside risks of our strategy.
Our principal risks relate to our resilience from an operational
and financial perspective, and our strategic focus including change
management required to build a platform for growth, and innovation
to deliver propositions that continue to meet the needs of our
clients.
The primary objectives of risk management at Brewin Dolphin are
to ensure that there is:
-- A strong risk culture so that employees are able to identify,
assess, manage and report against the risks the business is faced
with;
-- A swift and effective response to risk events and potential
issues in order to minimise impact;
-- A defined risk appetite within which risks are managed;
and
-- An appropriate balance between risk and the cost of
control.
Our approach is to maintain a strong control framework to
identify, monitor and manage the principal risks we face,
adequately quantify them and ensure we retain sufficient capital in
the business to support our strategy.
We assess our principal risks regularly to ensure that our risk
profile is within our risk appetite which is set by the Board.
Annual risk workshops attended by both the Risk Committee and
the Executive Committee are held.
Risk Management Framework
The Board has established a Risk Management Framework to ensure
there is effective risk governance. The Board promotes a strong
risk culture and expects every employee within the Group to adhere
to the high standards established by the Board.
The Board encourages a strong risk culture throughout the
business by promoting:
-- A distinct and consistent tone from the top;
-- Clear accountabilities for those managing risk;
-- Prompt sharing and reporting of risk information;
-- A commitment to ethical principles;
-- Appropriate levels of conduct and considered risk taking
behaviour;
-- Recognition of the importance of knowledge, skill and
experience in risk management;
-- Members of staff at all levels to escalate events and make
suggestions for improving processes and controls; and
-- An acceptance of the importance of continuous management of
risk, including clear accountability for and ownership of specific
risks.
The benefits of establishing a strong risk culture is evident,
with our employees self-identifying and escalating risk events and
potential issues to mitigate the probability of risks
crystallising.
We follow industry practice for risk management through the
"three lines of defence" model. The first line is the business that
owns and manages the risk, the second consists of the control
functions that monitor and facilitate the implementation of
effective risk management practices, and the third line is
independent assurance provided by internal audit.
The Board reviews the effectiveness of this Risk Management
Framework and undertakes an assessment of the principal and
emerging risks, receiving reports on internal control from the
Audit and Risk Committees and debating key risks for the Group
following more detailed work by the Risk Committee.
The key parties involved in the risk management process within
the Group and their respective responsibilities and an explanation
of how risk management is structured within the Group, are set out
below.
Risk Management Framework
Top down risk management
Board
* Responsible for ensuring there is an adequate and
appropriate risk management framework and culture in
place.
* Sets risk appetite and is responsible for ensuring
alignment with the Group's business strategy.
* Approves the ICAAP.
Risk Committee
* Oversees the Risk Management Framework.
* Assists the Board in its responsibilities for the
integrity of internal control and risk management
systems.
* Recommends the ICAAP to the Board for approval.
Audit Committee
* Assists the Board in gaining assurance as to the
integrity of the Financial Statements and the
effectiveness of the system of internal controls.
* Monitors the effectiveness and objectivity of
internal and external auditors.
Risk Management Committee
* Executive level committee oversight and monitoring of
the adequacy and effectiveness of the Risk Management
Framework.
* Monitors current and emerging risks and themes.
* Oversees the Group's Policy Framework.
Bottom up risk management
Risk identification and assessment
* Risk and Control Self Assessments to identify the key
risks for each department, for business change
activities, and for new products and services.
* A horizon scanning forum is in place to identify and
assess emerging risks, and establish ownership for
mitigation and management of those risks.
* Assessment of inherent (pre-control) and residual
risk (post-control).
Risk mitigation and management
* Management of events that have a potential or actual
financial, regulatory, operational or client impact.
* Agreeing action plans to mitigate risk issues.
Risk monitoring and reporting
* The business community is primarily responsible for
monitoring risks.
* Risk trends are monitored and analysed.
* Key risk indicators are reviewed monthly.
Risk assurance
* Internal auditors evaluate the adequacy of process
and systems, and test the operating effectiveness of
key controls.
* Control monitoring teams are in place, undertaking
both regular control sampling and thematic reviews.
Responding to risks
-- We held an in depth risk workshop with our Risk Committee and
Executive Committee members to discuss the key risks that can
impact our business strategy, including external speakers providing
their perspective on ESG and Climate Change risks to wealth
management firms.
-- Financial market uncertainty remains a focus and we regularly
stress test our funds, profits, cash and regulatory capital to
understand and plan for both market wide and firm specific
scenarios that could result in the need to amend our business
strategy.
-- Change management governance and oversight has continued to
be a significant focus during the period as we are in the final
stages of implementing a new custody and settlement system.
-- We have completed the deployment of all modules to support
our core risk management processes into our Governance, Risk and
Compliance tool, including Operating Events, Client Complaints,
Risk and Control Self Assessments, Key Risk Indicators, Risk Issues
and Actions. The tool provides enhanced analytical and workflow
capabilities, increasing the efficiency in how we identify trends
and manage risk.
-- The pipeline of regulatory change remains a focus, including
our preparations for the Investment Firms Prudential Regime, due to
be implemented in January 2022.
The Directors confirm that we have carried out a robust
assessment of the emerging and principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity.
Principal risks and uncertainties
The tables below detail the principal risks and uncertainties we
have identified, it is not an exhaustive list of all of the risks
the Group faces. We have a process to regularly report key risk
indicators and identify changes in the profile of these principal
risks. We also consider emerging risks as part of this process.
Key to our strategic objectives
R = Relevant E = Efficient G = Growth C = Culture O = Overall
Business risks
These are the risks that we do not set the right strategy, a
material business decision fails, or external market factors impact
the businesses viability. This could include an inability to
introduce or enter into new business lines effectively, to expand
organically or through merger/acquisition, or to enhance the
effectiveness of our operational infrastructure. In addition to the
principal risk specified, we monitor the external environment and
model the potential impact of different potential geopolitical
scenarios as part of our stress testing programme.
Principal Nature and
risk and potential Primary Examples
risk impact strategic of risk metrics Movement
owner(s) of the risk objectives Mitigating factors monitored in the year
============ ============== ========== ========================================================== ============================ ==============
1 The risk of R G --
Propositions propositions * Dedicated resources to develop, test and launch new * Number of new clients, Client needs
Risk owners: being service offerings. client pipeline, net flows, continue
Managing uncompetitive funds under management to evolve,
Director and not . and we have
of Advice meeting * New service offerings are piloted before broader increased
and the needs of rollout. choice for
Innovation, our clients, our clients
and Managing resulting in by launching
Director a failure to * We have continued to innovate over the last year, new
of Wealth attract new with the launch of new ESG solutions '1762 propositions.
and clients or Responsible Progress' through 1762 from Brewin
Investment existing Dolphin and 'Sustainable MPS' for the intermediaries
clients market. In addition we have launched Brewin Dolphin
leaving, e.g. Voyager funds.
risk of not
meeting
increasing
demand for
sustainability
focused
investment
solutions.
============ ============== ========== ========================================================== ============================ ==============
2 (a) The risk G -
Acquisitions of * Acquisitions form part of the Change Management * Income, client and sta Although
Risk owner: acquisitions Programme governance. ff retention, client the risks
Chief not achieving complaints. associated
Executive strategic with past
Officer objectives * Post completion metrics are monitored. acquisitions
or resulting have decreased
in unexpected as integration
adverse * An acquisition forum is in place to review potential activity
financial opportunities. has been
impacts, and completed,
(b) the risk there is
of missed increasing
strategic acquisition
acquisition activity
opportunities. in the
industry,
and more
potential
strategic
opportunities.
============ ============== ========== ========================================================== ============================ ==============
Financial risks
These are the risks facing our business in terms of inadequate
or failed management of finances and the risk introduced by
external factors that could have a detrimental impact to our cash
flow, capital and liquidity.
Principal Nature and Examples
risk and potential Primary of risk Movement
risk impact strategic metrics in the
owner(s) of the risk objectives Mitigating factors monitored year
============ ============== ========== ========================================================== ======================================================== ===============
3 Default by O <<
Counterparty our banking * A Financial Risk Management Framework is in place * Proportion of money held per banking counterparty. We maintain
Risk owner: counterparties which includes managing the Group's exposure to diversity
Chief could put our counterparty credit risk; setting and monitoring across our
Financial own or our counterparty limits. * Banking counterparty ratings. banking
Officer client cash counterparties,
deposits and have
or assets * Diversity across our banking counterparties. * Changes in the risk profile of banking robust
at risk of counterparties. oversight
loss. and monitoring
* Due diligence is undertaken for all banking in place.
counterparties. * Credit Default Swap spreads.
* A Financial Risk Committee provides oversight of the
Financial Risk Management Framework.
============ ============== ========== ========================================================== ======================================================== ===============
Operational risks
This is the risk of loss resulting from inadequate or failed
internal processes, people and systems, or from external
events.
Nature and Examples
Principal potential Primary of risk Movement
risk and impact strategic metrics in the
risk owner(s) of the risk objectives Mitigating factors monitored year
============= ============ ========== =========================================================== ========================================================== ============
4 This is the O <<
Regulatory risk that we * Compliance and Legal functions monitor and oversee * We have dashboards in place to monitor each Regulatory
& Legal are not fulfilment of our regulatory and legislative regulatory risk which includes assessment of the and Legal
Compliance compliant requirements and interactions with our key control environment, regulatory interaction, issues Compliance
(Risk owner: with all regulators. and breaches. has been
Chief Risk existing an area
Officer) applicable of continued
regulation * We execute against a robust compliance monitoring focus during
and plan, and have strong governance in place to identify the year.
legislation, issues and ensure any required actions are completed.
which could
lead to
regulatory
enforcement
action.
============= ============ ========== =========================================================== ========================================================== ============
5 The risk E -
Change that * A Business Change Board with Executive Committee * Project status taking into account risks, issues, Resourcing
Management business and representatives oversee and challenge the change budget, resources, internal and vendor deliverables. requirements
(Risk owners: regulatory management programme. during the
Chief Risk changes are year have
Officer not challenged
and Chief delivered. * Change management is centralised within a Change and change
Operating This could Transformation team. delivery.
Officer) restrict the However,
firm's strong
ability progress
to achieve has been
its achieved
strategic during the
objectives final stages
of revenue of
growth and implementing
operational our new
efficiency. custody
and
settlement
system.
============= ============ ========== =========================================================== ========================================================== ============
6 This is the C --
Conduct risk of not * Tone from the top sets a culture which puts * Client advice reviews. Market
(Risk owner: delivering delivering fair outcomes for clients at the core of volatility
Group Head fair the Group's activities/ethos. has trended
of Investment outcomes * Quality of advice. downwards,
Governance) for clients. leading
* A conduct risk framework sets our approach to conduct to reduced
risk governance and the ongoing assessment, * Asset allocation. trading
monitoring against key metrics and reporting of levels and
conduct risk. fewer
* Portfolio turnover. changes
to client
* A conduct risk dashboard is in place, enabling requirements
detailed monitoring and oversight of conduct risk at * Client complaints. compared
an individual employee level. to the prior
year. We
have been
* A risk based client on-boarding process which ensures focused
that we understand our clients' needs and attitudes on client
to risk. advice
reviews,
and
* A quality assurance process to identify and address continuing
any instances where the best outcomes for clients are to enhance
not achieved. our
governance
oversight.
* Robust investment governance supported by an
Investment Governance Committee and a dedicated
research department.
============= ============ ========== =========================================================== ========================================================== ============
7 This is the E <<
Resilience risk that * A dedicated Operational Resilience team reports * Technology resilience and potential vulnerabilities. Although
(Risk owners: the directly to the Chief Operating Officer. the external
Chief Risk Group does threat of
Officer not have the * Key person dependencies. operational
and Chief ability to * Crisis management response teams are in place. disruption
Operating respond to, remains
Officer) recover and * Service disruptions. at similar
learn from * Our Digital Security and Vendor Management teams levels to
operational ensure the resilience capabilities of our third last year,
disruption parties. we continue
to core to
business increasingly
activities. invest time
and
resources
in
mitigating
this risk.
============= ============ ========== =========================================================== ========================================================== ============
8 The risk of O <<
Fraud unauthorised * All expense payments are requested, approved and * Fraud attempts. External
(Risk owner: gain or administered using a spend management platform within risk has
Chief Risk transfer built controls. been
Officer) of company * Internal process monitoring results. heightened
or client since
assets, * Robust controls are in place for the requested change fraudsters
and the risk of payee bank account details. * Security threats. have been
of taking
unauthorised advantage
access to or * Threat scanning for potential cyber risks. * Phishing testing results. of COVID-19
corruption disruption,
of particularly
information. * Simulated phishing programme in place to ensure related
familiarisation with phishing attacks. to cyber.
============= ============ ========== =========================================================== ========================================================== ============
Environmental, Social and Governance Risks
In addition to our Principal Risks, during the period we have
started to consider the different emerging ESG risks to Brewin
Dolphin and have the governance in place to oversee the risks
related to our responsible business initiatives, stewardship
activities and investment offerings.
Nature and potential
Risk impact of the risk Governance of ESG
=================== ============================== ===========================================================
The risk The risk that there is
of misalignment a misalignment between
of ESG activities our ESG commitments and
our outward values, in
comparison to our actions,
resulting in a lack of
credibility and damaging
our reputation.
=================== ============================== ===========================================================
The risk The risk that our responsible
of unsuccessful investment offerings
responsible are not perceived as
investment credible, damaging our
offerings ability to attract current
and future demand for
responsible investment
offerings.
=================== ==============================
The risk The risk that our responsible
of being investment offerings
unable to do not meet clients'
accommodate ESG preferences, or that
clients' clients' ESG preferences
ESG preferences are unable to be accommodated
within bespoke portfolios
leading to loss of existing
clients / being unable
to attract new clients.
=================== ==============================
The risk The risk that the investment
of ESG investment criteria for ESG investment
criteria solutions is ambiguous
not being to clients, and as a
fully understood result holdings are out
by clients of line with client
expectations,
resulting in client
dissatisfaction.
=================== ==============================
Conflicts The risk that our ESG
of interest stewardship activities
in stewardship are in conflict with
activities clients' own interests
and are not appropriately
managed.
=================== ==============================
The risk The risk that our ESG
that our values are undermined
ESG values by our vendors and
are not counterparties
shared by having conflicting values,
our vendors damaging our reputation.
and counterparties
=================== ==============================
Climate The risk that our funds
change physical under management are
and transitional impacted by i) physical
risks to risks resulting in a
our funds loss in value or ii)
under management transitional risks resulting
in a loss in value, impacting
investment performance
and fee income.
=================== ==============================
Climate The risk that a climate * The Sustainability Committee defines the
change physical change sudden physical sustainability goals for the Group and provides a
risks to event impacts on Brewin sustainability framework that ensures oversight of
Brewin Dolphin Dolphin's staff or operations. business activities related to the Group's
sustainable investment offering, the Group's
stewardship activities, and the Group's internal
responsible business initiatives.
* The ESG Investment Forum considers clients' needs
relating to ESG investing and contributes to thinking
around the development of the Group's ESG investment
strategies ensuring alignment to our core values.
* The Wealth Governance Committee responsibilities
include approval of key investment process controls,
oversight and challenge of investment strategy and
performance, and consideration of new products and
services.
* Areas of activity with a societal focus, e.g.
employment practices, tax and supplier management are
managed within the existing Risk Management
Framework.
=================== ============================== ===========================================================
Going concern
The Group's business activities, performance and position,
together with the factors likely to affect its future development
are set out in the Chairman's Statement, the Strategic Report and
the report of the Risk Committee.
The Group's objectives, policies and processes for managing its
capital, its financial risk management objectives, details of its
financial instruments and its exposure to credit risk and liquidity
risk are described in note 16 to the Financial Statements.
The Directors believe that the Group is well placed to manage
its business risks successfully. The Directors assess the outlook
of the Group by considering its Medium-Term Plan ('MTP') as
described in the viability statement below, as well as the results
of a range of stress tests. The MTP takes into account the economic
impact of the COVID pandemic. The stress tests, including a reverse
stress, 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 (see note 2.2.2 to the
2021 Annual Report and Accounts for detail).
These tests demonstrated that the Group has adequate resources,
including cash to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue to adopt
the going concern basis for the preparation of the Financial
Statements.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and Parent company's ability to continue as a going concern
for twelve months from the date the 2021 Annual Report and Accounts
is signed.
Viability statement
The Directors have assessed the outlook of the Group over a
longer period than the 12 months required by the going concern
statement in accordance with the UK Corporate Governance Code.
The assessment is based on the Group's Medium Term Plan ('MTP'),
the Internal Capital Adequacy Assessment Process ('ICAAP') and the
evaluation of the Group's principal risks and uncertainties,
including those risks that could threaten its business model,
future performance or solvency.
The Group maintains a five-year MTP as part of its corporate
planning process, which is a financial articulation of the Group's
strategy. The financial forecasting model is predicated on a
detailed year-one budget and higher level forecasts for years two
to five. As part of preparing the MTP, the Board takes into
consideration the impact of external factors and this year in
particular the impact of the COVID-19 pandemic and the resulting
economic uncertainty, in the projections.
As a matter of good practice and as part of the ICAAP required
by the Financial Conduct Authority ('FCA'), the Group performs a
range of stress tests including reverse stress tests. These assess
the Group's ability to withstand a market-wide stress, a
Group-specific (idiosyncratic) stress and a combined stress taking
into account both market-wide and Group-specific events. The stress
tests are derived through discussions with senior management, are
deemed to be severe but plausible, after considering the principal
risks and uncertainties faced by the Group. The scenarios involved
are refreshed on an at least annual basis or sooner if a trigger
event occurs to ensure they remain current. Next year will see the
introduction of the ICARA under the new Investment Firms Prudential
Regime where new comparable stresses will be considered.
The stress tests enable the Group to model the impact of a
variety of external and internal events on the MTP; to identify the
potential impact of stress events on the Group's income, costs,
cash flow and capital; and the Board to assess the effectiveness of
any management actions that may be taken to mitigate the impact of
the stress events.
The reverse stress test allows the Board to assess scenarios and
circumstances that would render its business model unviable. This
enables the identification of potential business vulnerabilities
and the development of potentially mitigating actions. In order for
the Group to fail, this year's test consists of individual stresses
combined with additional overlays, occurring simultaneously, of a
banking counterparty default and a reputational event which leads
to significant outflows.
One of the individual stresses for the Group is a market-wide
scenario based around the impact of the prolonged inflation
experienced in the 1970's which saw global equities fall
approximately 40%. Subsequent management actions include, inter
alia, a significant decrease of dividend payments over the period
and variable remuneration reduced to the minimum possible.
Following these actions, the resultant outcome ensures the Group
still maintains sufficient net assets and regulatory resources to
operate as a going concern.
Following the assessment of the above, the Board concluded that
the Viability Statement should cover a period of five years. While
the Directors have no reason to believe that the Group will not be
viable over a longer period, this period has been chosen to be
consistent with the MTP used as part of the Group's corporate
planning process.
In addition to the assessment of working capital, cashflow and
capital position, the Board has considered the overall prospects of
the Group including the industry and geographies within which it
operates, looking at our market position, market share and growth
rates and satisfied itself that they demonstrate the Group is well
placed to grow sustainably into the future. These are discussed
more in detail in the CEO statement and Financial Review.
Taking account of the Group's current position and principal
risks and the Board's assessment of the Group's prospects, the
Directors have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
over a period of at least five years.
Consolidated Income Statement
For the year ended 30 September 2021
Group
(Consolidated)
=====================
2021 2020
Note GBP'000 GBP'000
========================================================= ==== ========== =========
Revenue 4 404,075 359,164
Other operating income 4 1,841 2,283
========================================================= ==== ========== =========
Income 405,916 361,447
========================================================= ==== ========== =========
Staff costs (222,967) (199,485)
Amortisation of intangible assets - client relationships
and brand 10 (11,232) (11,072)
Onerous contracts 13 (3,644) (250)
Acquisition costs (1,500) (3,600)
Incentivisation awards (2,015) (1,192)
Defined benefit pension scheme past service costs (360) -
Other operating costs (90,219) (82,056)
========================================================= ==== ========== =========
Operating expenses (331,937) (297,655)
========================================================= ==== ========== =========
Operating profit 73,979 63,792
Finance income 6 454 907
Other gains and losses 340 -
Finance costs 6 (2,245) (2,627)
========================================================= ==== ========== =========
Profit before tax 72,528 62,072
Tax 7 (17,210) (14,117)
========================================================= ==== ========== =========
Profit for the year 55,318 47,955
========================================================= ==== ========== =========
Attributable to:
Equity holders of the parent 55,318 47,955
========================================================= ==== ========== =========
55,318 47,955
========================================================= ==== ========== =========
Earnings per share
Basic 9 18.8p 16.3p
Diluted 9 18.3p 15.9p
========================================================= ==== ========== =========
Consolidated Statement of Comprehensive Income
Year ended 30 September 2021
Group
(Consolidated)
==================
2021 2020
Note GBP'000 GBP'000
========================================================= ==== ======== ========
Profit for the year 55,318 47,955
Items that will not be reclassified subsequently
to profit and loss:
Actuarial gain on defined benefit pension scheme 238 1,377
Deferred tax charge on defined benefit pension
scheme surplus 14 (1,295) (609)
Realised gain on disposal of equity instruments
designated as at fair value through other comprehensive
income 27 -
Tax on disposal of equity instruments designated
as at fair value through other comprehensive
income (5) -
Fair value loss on investments in equity instruments
designated as at fair value through other comprehensive
income - (5)
Deferred tax on fair value on investments in
equity instruments designated as at fair value
through other comprehensive income 14 1 -
========================================================= ==== ======== ========
(1,034) 763
========================================================= ==== ======== ========
Items that may be reclassified subsequently to
profit and loss:
Exchange differences on translation of foreign
operations (2,643) 1,245
========================================================= ==== ======== ========
(2,643) 1,245
========================================================= ==== ======== ========
Other comprehensive (expense)/income for the
year net of tax (3,677) 2,008
========================================================= ==== ======== ========
Total comprehensive income for the year 51,641 49,963
========================================================= ==== ======== ========
Attributable to:
Equity holders of the parent 51,641 49,963
========================================================= ==== ======== ========
51,641 49,963
========================================================= ==== ======== ========
Balance Sheets
As at 30 September 2021
Group
(Consolidated) Company
==================== ====================
2021 2020 2021 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
======================================= ==== ========= ========= ========= =========
Assets
Non-current assets
Intangible assets 10 187,660 174,717 - -
Property, plant and equipment 8,059 9,723 - -
Right of use assets 11 32,324 38,042 - -
Finance lease receivables 1,791 1,966 - -
Investment in subsidiaries - - 241,833 238,659
Defined benefit pension scheme 20,822 20,324 - -
Other receivables - 931 - -
======================================= ==== ========= ========= ========= =========
Total non-current assets 250,656 245,703 241,833 238,659
======================================= ==== ========= ========= ========= =========
Current assets
Trade and other receivables 241,633 241,939 41,849 35,042
Finance lease receivables 174 167 - -
Financial assets at fair value through
other comprehensive income 37 68 - -
Financial assets at fair value through
profit or loss 2,974 379 - -
Current tax 2,741 3,909 - -
Cash and cash equivalents 188,021 180,533 216 1,256
======================================= ==== ========= ========= ========= =========
Total current assets 435,580 426,995 42,065 36,298
======================================= ==== ========= ========= ========= =========
Total assets 686,236 672,698 283,898 274,957
======================================= ==== ========= ========= ========= =========
Liabilities
Trade and other payables 258,763 256,036 13,626 12,419
Lease liabilities 12 7,766 8,316 - -
Provisions 13 5,823 4,798 - -
======================================= ==== ========= ========= ========= =========
Total current liabilities 272,352 269,150 13,626 12,419
======================================= ==== ========= ========= ========= =========
Net current assets 163,228 157,845 28,439 23,879
======================================= ==== ========= ========= ========= =========
Non-current liabilities
Trade and other payables 509 459 - -
Lease liabilities 12 38,250 45,265 - -
Provisions 13 11,322 9,956 - -
Shares to be issued 3,807 3,738 3,807 3,738
Net deferred tax liability 14 12,737 9,094 - -
======================================= ==== ========= ========= ========= =========
Total non-current liabilities 66,625 68,512 3,807 3,738
======================================= ==== ========= ========= ========= =========
Total liabilities 338,977 337,662 17,433 16,157
======================================= ==== ========= ========= ========= =========
Net assets 347,259 335,036 266,465 258,800
======================================= ==== ========= ========= ========= =========
Equity
Share capital 15 3,035 3,032 3,035 3,032
Share premium account 15 58,393 58,340 58,393 58,340
Own shares (29,723) (25,238) (29,723) (25,238)
Hedging reserve - - (24) (24)
Revaluation reserve (1) (2) - -
Merger reserve 70,553 70,553 70,838 70,838
Profit and loss account 245,002 228,351 163,946 151,852
======================================= ==== ========= ========= ========= =========
Equity attributable to equity holders 347,259 335,036 266,465 258,800
======================================= ==== ========= ========= ========= =========
The Company's total profit for the year was GBP48,365k (2020:
GBP44,225k).
Approved by the Board of Directors and authorised for issue on
23 November 2021.
Signed on its behalf by
Robin Beer Siobhan Boylan
Chief Executive Officer Chief Financial Officer
Brewin Dolphin Holdings PLC - Company Number: 02685806
Statements of Changes in Equity
Year ended 30 September 2021
Attributable to the equity holders of
Group (Consolidated) the parent
====================================================================================
Profit
Share and
Share premium Own Hedging Revaluation Merger loss
capital account shares reserve reserve reserve account1 Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
At 30 September 2019 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 3,032 58,238 (25,214) (24) 3 70,553 225,302 331,890
Profit for the year - - - - - - 47,955 47,955
Other comprehensive
(expense)/income
for the year - - - - (5) - 2,013 2,008
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
Total comprehensive
(expense)/income
for the year - - - - (5) - 49,968 49,963
Dividends 8 - - - - - - (48,393) (48,393)
Issue of share capital - 102 - - - - - 102
Own shares acquired in
the
year - - (8,388) - - - - (8,388)
Own shares disposed of on
exercise of options - - 8,364 - - - (8,364) -
Share-based payments - - - - - - 9,779 9,779
Hedge reversal - - - 24 - - - 24
Tax on share-based
payments - - - - - - 59 59
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
At 30 September 2020 3,032 58,340 (25,238) - (2) 70,553 228,351 335,036
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
Profit for the year - - - - - - 55,318 55,318
Other comprehensive
income/(expense)
for the year - - - - 1 - (3,678) (3,677)
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
Total comprehensive
income
for the year - - - - 1 - 51,640 51,641
Dividends 8 - - - - - - (42,652) (42,652)
Issue of share capital 15 3 53 - - - - (2) 54
Own shares acquired in
the
year - - (10,689) - - - - (10,689)
Own shares disposed of on
exercise of options - - 6,204 - - - (6,204) -
Share-based payments - - - - - - 12,587 12,587
Tax on share-based
payments - - - - - - 1,282 1,282
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
At 30 September 2021 3,035 58,393 (29,723) - (1) 70,553 245,002 347,259
========================= ===== ======== ======== ========= ======== =========== ======== ========= =========
1. A cumulative debit of GBP1,479k has been recognised in the
profit and loss account reserve as at 30 September 2021 for
exchange differences on translation of foreign operations (2020:
GBP1,164k credit, 2019: GBP81k debit).
Attributable to the equity holders
Company of the Company
===== ====================================================================
Profit
Share and
Share premium Own Hedging Merger loss
capital account shares reserve reserve account Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================================== ===== ======== ======== ======== ======== ======== ======== ========
At 30 September 2019 3,032 58,238 (25,214) (24) 70,838 154,605 261,475
Profit for the year - - - - - 44,225 44,225
Dividends 8 - - - - - (48,393) (48,393)
Issue of share capital - 102 - - - - 102
Own shares acquired in the year - - (8,388) - - - (8,388)
Own shares disposed of on exercise
of options - - 8,364 - - (8,364) -
Share-based payments - - - - - 9,779 9,779
=================================== ===== ======== ======== ======== ======== ======== ======== ========
At 30 September 2020 3,032 58,340 (25,238) (24) 70,838 151,852 258,800
=================================== ===== ======== ======== ======== ======== ======== ======== ========
Profit for the year - - - - - 48,365 48,365
Dividends 8 - - - - - (42,652) (42,652)
Issue of share capital 15 3 53 - - - (2) 54
Own shares acquired in the year - - (10,689) - - - (10,689)
Own shares disposed of on exercise
of options - - 6,204 - - (6,204) -
Share-based payments - - - - - 12,587 12,587
=================================== ===== ======== ======== ======== ======== ======== ======== ========
At 30 September 2021 3,035 58,393 (29,723) (24) 70,838 163,946 266,465
=================================== ===== ======== ======== ======== ======== ======== ======== ========
Cash Flow Statements
Year ended 30 September 2021
Group
(Consolidated) Company
==================== ====================
2021 2020 2021 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
=========================================== ==== ========= ========= ========= =========
Profit before tax 72,528 62,072 48,365 44,225
Adjustments for:
Share-based payment expense 12,587 9,779 - -
Amortisation of intangible assets
- client relationships and brand 10 11,232 11,072 - -
Amortisation of intangible assets
- software 10 3,994 417 - -
Loss on disposal of intangible assets
- software 10 115 - - -
Depreciation of property, plant and
equipment 3,249 3,114 - -
Loss on disposal of property, plant
and equipment 421 - - -
Depreciation of right of use assets 11 6,371 6,250 - -
Defined benefit pension scheme past
service costs 360 - - -
Defined benefit pension scheme cash
contributions (313) (1,250) - -
Other gains and losses (340) - - 1,174
Effect of changes in foreign exchange
rates 1,198 303 - -
Lease incentive - 442 - -
Finance income (399) (416) - -
Finance costs 2,242 2,607 - -
=========================================== ==== ========= ========= ========= =========
Operating cash flows before movements
in working capital 113,245 94,390 48,365 45,399
Increase/(decrease) in payables and
provisions 6,148 27,237 - (154)
Decrease/(increase) in receivables
and trading investments 1,496 (27,144) (6,807) 3,925
=========================================== ==== ========= ========= ========= =========
Cash generated by operating activities 120,889 94,483 41,558 49,170
Tax paid (11,903) (16,894) - -
=========================================== ==== ========= ========= ========= =========
Net cash inflow from operating activities 108,986 77,589 41,558 49,170
=========================================== ==== ========= ========= ========= =========
Cash flows from investing activities
Purchase of intangible assets - software (32,679) (26,523) - -
Purchase of property, plant and equipment (1,960) (2,379) - -
Purchase of intangible assets - client
relationships 10 (176) - - -
Capital contribution to subsidiary - - - (45,449)
Purchase of financial instruments
at fair value through profit and loss (2,255) - - -
Disposal of financial instruments
at fair value through other comprehensive
income 58 6 - -
Acquisition of subsidiaries - (32,029) - -
=========================================== ==== ========= ========= ========= =========
Net cash used in investing activities (37,012) (60,925) - (45,449)
=========================================== ==== ========= ========= ========= =========
Cash flows from financing activities
Dividends paid to equity shareholders 8 (42,652) (48,393) (42,652) (48,393)
Repayment of lease liabilities 12 (10,266) (8,765) - -
Proceeds on issue of shares 15 54 102 54 102
Purchase of own shares (10,689) (8,388) - -
Foreign exchange - - - (1,174)
=========================================== ==== ========= ========= ========= =========
Net cash used in financing activities (63,553) (65,444) (42,598) (49,465)
=========================================== ==== ========= ========= ========= =========
Net increase/(decrease) in cash and
cash equivalents 8,421 (48,780) (1,040) (45,744)
=========================================== ==== ========= ========= ========= =========
Cash and cash equivalents at 1 October 180,533 229,199 1,256 47,000
Effect of foreign exchange rates (933) 114 - -
=========================================== ==== ========= ========= ========= =========
Cash and cash equivalents at 30 September 188,021 180,533 216 1,256
=========================================== ==== ========= ========= ========= =========
Notes to the Financial Statements
1. General information
The financial information contained in this preliminary
announcement does not constitute the Group's and the Company's
Statutory Financial Statements for the period ended 30 September
2021 within the meaning of section 435 of the Companies Act
2006.
The financial information set out in this preliminary
announcement has been extracted from the Group's and the Company's
2021 Annual Report and Accounts, which have been approved by the
Board of Directors on 23 November 2021 and agreed with Ernst &
Young LLP, the Company's Auditor. The Auditor's Report was
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
Whilst the financial information has been prepared in accordance
with the recognition and measurement criteria of International
Financial Reporting Standards ('IFRS') the preliminary announcement
does not contain sufficient information to comply with IFRS.
The material accounting policies used are consistent with the
accounting policies set out in note 3 to the 2020 Annual Report and
Accounts which have been delivered to the Registrar of
Companies.
The critical accounting judgements and key sources of estimation
uncertainty are set out in note 3 below.
The 2021 Annual Report and Accounts will be posted to
shareholders during January 2022. Copies will be available from the
registered office of the Company, 12 Smithfield Street, London,
EC1A 9BD. It will also be available on the Company's website
www.brewin.co.uk.
2. Application of new and revised International Financial
Reporting Standards ('IFRSs') and changes in material accounting
policies
2.1. New standards, amendments and interpretations adopted
In the current year, there have been no new standards,
amendments or interpretations adopted that have had a material
impact on the disclosures or amounts reported in these financial
statements.
2.2. Changes in material accounting policies
There have been no changes to material accounting policies in
the year.
2.3. New standards, amendments and interpretations issued but
not effective
The table below sets out changes to accounting standards which
will be effective for periods beginning on or after:
New or revised standards
IFRS 17 Insurance Contracts. 1 Jan
2023
Amendments
IAS 1 - classification Presentation of financial statements on 1 Jan
of liabilities. classification of liabilities as current 2023
or non-current.
Further amendments - IAS 8 - Definition of Accounting Estimates; 1 Jan
IAS 8, IAS 12, IAS 12 - Disclosure of Accounting Policies; 2023
IAS 1 and IFRS Practice and IAS 1 and IFRS Practice Statement
Statement 2. 2 - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction.
Further amendments - IFRS 3 - Reference to the Conceptual Framework; 1 Jan
IFRS 3, IAS 16 IAS 16 - Proceeds before Intended Use; 2022
and IAS 37. and IAS 37 - Onerous Contracts - Costs
of Fulfilling a Contract.
Annual Improvements IFRS 1 - Subsidiary as a first-time adopter; 1 Jan
2018 -2020; IFRS 9 - Fees in the '10 per cent' test 2022
IFRS1, IFRS 9 and IAS for derecognition of financial liabilities;
41. and IAS - Taxation in fair value measurements.
Amendments to IFRS 9, Interest Rate Benchmark Reform - phase 1 Jan
IAS 39 and 2. 2021
IFRS 7, IFRS 4 and
IFRS 16.
Further amendment - Covid-19-Related Rent Concessions beyond 1 Apr
IFRS 16. 30 June 2021. 2021
======================== =============================================== =====
The Directors are reviewing the impact of these new standards,
amendments and interpretations and do not intend to adopt the
standards early. It is not currently expected that these will have
a material impact on the financial statements of the Group.
3. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 1, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of the assets
and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects
only that year, or in the year of the revision and future years if
the revision affects both current and future years.
3.1. Critical judgements in applying the Group's accounting
policies
There have been no critical judgements required in applying the
Group's accounting policies in this period, apart from those
involving estimations which are detailed separately below.
3.2. Key sources of estimation uncertainty
The key sources of estimation uncertainty disclosed below do not
present a significant risk of material adjustment in next years'
financial statements, however they are the most significant areas
of estimation in the financial statements.
3.2.1. Amortisation of client relationships
The useful economic life over which client relationships are
amortised is based on assumptions around the expected duration of
the client relationships which is determined with reference to past
experience of account closures, in particular the average life of
those relationships, and future expectations. During the year,
client relationships were amortised over periods ranging from 5 to
15 years.
The amortisation for the year was GBP11,093k (2020: GBP10,933k).
A reduction in the average amortisation period by one year would
increase the amortisation expense for the year by GBP2,496k (2020:
GBP1,862k).
3.2.2. Defined benefit pension scheme
The calculation of the present value of the defined benefit
pension scheme is determined by using actuarial valuations.
Management makes key assumptions in determining the inputs into the
actuarial valuations, which may differ from actual experience in
the future. These assumptions are governed by IAS 19 Employee
Benefits, and include the determination of the discount rate, life
expectancies, inflation rates and future salary increases. Due to
the complexities in the valuation, the defined benefit pension
scheme obligation is highly sensitive to changes in these
assumptions. The detailed assumptions, including a sensitivity
analysis, are set out in note 17 to the 2021 Annual Report and
Accounts.
The defined benefit pension scheme has a surplus of GBP20,822k
(2020: GBP20,324k). See note 17 to the 2021 Annual Report and
Accounts 'Defined benefit pension scheme asset recognition basis'
for further detail.
3.2.3. Long Term Incentive Plan ('LTIP')
Awards are granted under the LTIP. The scheme includes
performance-based vesting conditions, which impact the amount of
benefit paid, such as
-- Average annual net inflows in discretionary funds; and
-- Growth in adjusted diluted EPS over the performance
period.
Assumptions are made on the likelihood of meeting certain
average and stretch targets over the remaining service periods in
determining the expense in the year. The directors consider that
the LTIP is qualitatively material. The charge for the year was
GBP1,244k (2020: GBP747k).
If all of the performance conditions were assumed to be met, the
charge for the year would increase by GBP2,967k (2020: GBP3,105k);
an increase of 10% in the vesting assumptions would increase the
charge for the year by GBP480k (2020: GBP443k).
Further information on the scheme is disclosed in note 30 to the
2021 Annual Report and Accounts.
4. Income
The following table presents revenue disaggregated by service
and timing of revenue recognition:
Group
==================
2021 2020
GBP'000 GBP'000
====================================================== ======== ========
Discretionary investment management fee income 269,620 237,617
Discretionary investment management commission income 70,225 70,033
Financial planning income 41,623 33,079
Execution only fee income 4,860 4,611
Execution only commission income(1) 7,151 6,684
Advisory investment management fee income 4,430 3,633
Advisory investment management commission income(1) 2,782 1,066
BPS(2) investment management fee income 1,660 1,335
Expert witness report service(1) 1,724 1,106
====================================================== ======== ========
Revenue 404,075 359,164
Other operating income 1,841 2,283
====================================================== ======== ========
Income 405,916 361,447
====================================================== ======== ========
2021 2020
GBP'000 GBP'000
======================================== ======== ========
Services transferred at a point in time 11,657 8,856
Services transferred over time 392,418 350,308
======================================== ======== ========
Revenue 404,075 359,164
======================================== ======== ========
1. Services transferred at a point in time.
2. Brewin Portfolio Service.
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 (see note 21 to the 2021 Annual Report and
Accounts).
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.
5. Segmental information
Group
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 year 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.
Geographical information
For the year ended 30 September 2021
Segmental income statement
Group
=================================
UK & CI ROI
business business Total
GBP'000 GBP'000 GBP'000
========================================================= ========== ========= ==========
Revenue 375,602 30,314 405,916
Staff costs (209,870) (13,097) (222,967)
Other operating costs (80,680) (9,539) (90,219)
========================================================= ========== ========= ==========
85,052 7,678 92,730
Amortisation of intangible assets - client relationships
and brand (7,993) (3,239) (11,232)
Defined benefit pension scheme past service costs (360) - (360)
Acquisition costs (1,500) - (1,500)
Onerous contracts (3,644) - (3,644)
Incentivisation awards (125) (1,890) (2,015)
========================================================= ========== ========= ==========
Operating profit 71,430 2,549 73,979
Net finance costs and other gains and losses (1,338) (113) (1,451)
========================================================= ========== ========= ==========
Profit before tax 70,092 2,436 72,528
Tax (16,341) (869) (17,210)
========================================================= ========== ========= ==========
Profit after tax 53,751 1,567 55,318
========================================================= ========== ========= ==========
Segmental balance sheet
Group
==============================
UK & CI ROI
business business Total
GBP'000 GBP'000 GBP'000
================== ========= ========= ========
Net assets 301,053 46,206 347,259
Total assets 627,922 58,314 686,236
Total liabilities 326,869 12,108 338,977
================== ========= ========= ========
For the year ended 30 September 2020
Segmental income statement
Group
====================================
UK & CI ROI
business business(1) Total
GBP'000 GBP'000 GBP'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
Net finance 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 Brewin Dolphin Capital & Investments
(Ireland) Limited on 31 October 2019 - see note 33 to the 2021
Annual Report and Accounts for further details.
Segmental balance sheet
Group
==============================
UK & CI ROI
business business Total
GBP'000 GBP'000 GBP'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
================== ========= ========= ========
6. Finance income and costs
Group
==================
2021 2020
Note GBP'000 GBP'000
================================================== ==== ======== ========
Finance income
Interest income on defined benefit pension scheme 307 324
Interest on lease receivables 92 92
Interest on bank deposits 55 491
================================================== ==== ======== ========
454 907
================================================== ==== ======== ========
Finance costs
Interest expense on lease liabilities 12 2,036 2,327
Unwind of discounts on provisions 13 137 210
Unwind of discounts on shares to be issued 69 70
Interest on bank overdrafts 3 20
================================================== ==== ======== ========
2,245 2,627
================================================== ==== ======== ========
7. Income tax expense
Group
==================
2021 2020
Note GBP'000 GBP'000
======================================== ===== ======== ========
Current tax
United Kingdom:
Charge for the year 11,905 10,623
Adjustments in respect of prior years 828 (1,174)
Overseas:
Charge for the year 445 67
Adjustments in respect of prior years 347 (70)
======================================== ===== ======== ========
Total current tax 13,525 9,446
======================================== ===== ======== ========
Deferred tax
United Kingdom:
Charge for the year 4,106 4,048
Adjustments in respect of prior years (515) 889
Overseas:
Charge for the year 38 (266)
Adjustments in respect of prior years 56 -
======================================== ===== ======== ========
Total deferred tax 14 3,685 4,671
======================================== ===== ======== ========
Tax charged to the Income Statement 17,210 14,117
======================================== ===== ======== ========
Finance (No.2) Bill 2019-21 maintained the UK statutory
corporation tax rate at 19% until 31 March 2023. From 1 April 2023
the rate will increase to 25%.
Taxation for other jurisdictions is calculated at the relevant
prevailing rates in the respective jurisdictions.
The charge for the year can be reconciled to the profit per the
Income Statement as follows:
Group
==================
2021 2020
GBP'000 GBP'000
========================================================== ======== ========
Profit before tax 72,528 62,072
Tax at the UK corporation tax rate of 19% (2020:19%) 13,780 11,794
Tax effect of:
Expenses that are not deductible in determining taxable
profit 2,142 1,275
Permanent differences in respect of capital expenditure (693) 163
Share-based payments (1,453) 1,098
Under/(over) provision for tax in prior years 716 (408)
Lower tax rates of subsidiaries (37) 142
Impact of deferred tax rate change 2,755 53
========================================================== ======== ========
Tax expense for the year 17,210 14,117
========================================================== ======== ========
Effective tax rate for the year 23.7% 22.7%
========================================================== ======== ========
Expenses that are not deductible in determining taxable profit
include amortisation of client relationships and brand, acquisition
costs, hospitality costs and professional fees that are capital in
nature.
Lower rates in subsidiaries reflects the overall impact of
overseas taxes on the total tax charge of the Group. Although the
Group's subsidiaries are taxed at a lower rate than the UK
corporation tax rate of 19%, the impact of permanent disallowable
items and prior year adjustments suffered in overseas subsidiaries
has been to increase the tax suffered by the overseas subsidiaries
to a rate higher than the UK statutory corporation tax rate.
There are no material uncertainties within the calculation of
corporation tax. The tax provisions are based on tax legislations
in the relevant jurisdictions and have not required any judgements
or material estimates.
8. Dividends
Group and Company
===================
2021 2020
GBP'000 GBP'000
=========================================================== ========= ========
Amounts recognised as distributions to equity shareholders
in the year:
2020/19 Final dividend paid 10 February 2021, 9.9p per
share (2020: 12.0p per share) 29,142 35,401
2021/20 Interim dividend paid 11 June 2021, 4.6p per
share (2020: 4.4p per share) 13,510 12,992
=========================================================== ========= ========
42,652 48,393
=========================================================== ========= ========
Proposed final dividend for the year ended 30 September
2021 of 11.1p (2020: 9.9p) per share based on shares
in issue at 18 November 2021 (2020: 19 November 2020) 32,625 29,242
=========================================================== ========= ========
The proposed final dividend for the year ended 30 September 2021
of 11.1p per share is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in
these financial statements.
Under an arrangement dated 1 April 2011, Computershare Trustees
(Jersey) Limited (the 'Trustee'), holds 9,594,749 Ordinary Shares
representing 3.2% of the Company's called up share capital in
relation to employee share plans, has agreed to waive all dividends
due to the Trustee.
9. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Group
=================
2021 2020
'000 '000
========================================================= ======== =======
Number of shares
Basic
Weighted average number of shares in issue in the year 293,785 295,012
Diluted
Effect of weighted average number of options outstanding
for the year 8,769 6,110
Effect of estimated weighted average number of shares
earned under deferred consideration arrangements 343 -
========================================================= ======== =======
Diluted weighted average number of options and shares
for the year 302,897 301,122
========================================================= ======== =======
GBP'000 GBP'000
========================================================= ======= =======
Earnings attributable to ordinary shareholders
Profit for the purpose of basic earnings per share 55,318 47,955
Finance costs of deferred consideration(1) 69 -
less tax effect of above (13) -
========================================================= ======= =======
Profit for the purpose of diluted earnings per share 55,374 47,955
Amortisation of intangible assets - client relationships
and brand 11,232 11,072
Onerous contracts 3,644 250
Acquisition costs 1,500 3,600
Incentivisation awards 2,015 1,192
Defined benefit pension scheme past service costs 360 -
Other gains and losses (340) -
less tax effect of above (1,583) (1,918)
========================================================= ======= =======
Adjusted profit for the purpose of diluted earnings
per share 72,202 62,151
Finance costs of deferred consideration(1) (69) -
less tax effect of above 13 -
========================================================= ======= =======
Adjusted profit for the purpose of basic earnings per
share 72,146 62,151
========================================================= ======= =======
Earnings per share
Basic 18.8p 16.3p
========================================================= ======= =======
Diluted 18.3p 15.9p
========================================================= ======= =======
Adjusted earnings per share
Basic 24.6p 21.1p
========================================================= ======= =======
Diluted 23.8p 20.6p
========================================================= ======= =======
1. Finance costs of deferred consideration are added back where
the issue of shares is more dilutive than the interest cost
saved.
10. Intangible assets
Group
=======================================================
Client Software
Goodwill relationships Brand costs(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================================== ======== ============== ======== ========= ========
Cost
At 30 September 2019 52,733 156,656 1,388 30,483 241,260
Additions 2,064 32,067 - 33,157 67,288
Exchange differences 106 1,670 - - 1,776
=================================== ======== ============== ======== ========= ========
At 30 September 2020 54,903 190,393 1,388 63,640 310,324
Additions - 337 - 29,625 29,962
Exchange differences (113) (1,769) - - (1,882)
Disposals - - - (8,620) (8,620)
=================================== ======== ============== ======== ========= ========
At 30 September 2021 54,790 188,961 1,388 84,645 329,784
=================================== ======== ============== ======== ========= ========
Accumulated amortisation and impairment
losses
At 30 September 2019 - 106,166 69 17,779 124,014
Amortisation charge for the year - 10,933 139 417 11,489
Exchange differences - 104 - - 104
=================================== ======== ============== ======== ========= ========
At 30 September 2020 - 117,203 208 18,196 135,607
Amortisation charge for the year - 11,093 139 3,994 15,226
Exchange differences - (204) - - (204)
Disposals - - - (8,505) (8,505)
=================================== ======== ============== ======== ========= ========
At 30 September 2021 - 128,092 347 13,685 142,124
=================================== ======== ============== ======== ========= ========
Net book value
At 30 September 2021 54,790 60,869 1,041 70,960 187,660
=================================== ======== ============== ======== ========= ========
At 30 September 2020 54,903 73,190 1,180 45,444 174,717
=================================== ======== ============== ======== ========= ========
At 30 September 2019 52,733 50,490 1,319 12,704 117,246
=================================== ======== ============== ======== ========= ========
1. GBP57,981k is under construction.
Client relationship additions are made up as follows:
Group
==================
2021 2020
GBP'000 GBP'000
========================================================= ======== ========
Cash paid for client relationships acquired in current
year 176 32,029
Deferred consideration for client relationships acquired
in current year 174 -
Fair value adjustment - 38
Adjustment for client relationships acquired in previous
years (13) -
========================================================= ======== ========
Total additions 337 32,067
========================================================= ======== ========
On 30 July 2021, Brewin Dolphin Limited, the Group's principal
operating subsidiary purchased client relationships from an IFA
based in Exeter, for an initial payment of GBP176k and an estimated
deferred consideration of GBP176k subject to performance
conditions. The fair value of the deferred consideration recognised
is GBP174k.
Goodwill impairment testing
The Group has revised its methodology for identifying
cash-generating units ('CGUs') for the purpose of goodwill
impairment testing. In prior reporting periods goodwill impairment
tests were performed for groups of CGUs based at the branch level.
Following a re-assessment of this approach, goodwill impairment
testing is now performed for groups of CGUs defined at the
geographical operating segment level for the Wealth Management
business, as reported in note 5, Segmental information. This means
the Group has 2 CGUs which are the UK & CI business and ROI
business, reflecting how business performance and operations are
considered, controlled and assessed by management.
In accordance with IFRS, the Group performs impairment testing
for goodwill on an annual basis, at 30 September, 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 tables below show the goodwill allocated to groups of CGUs
and the significant client relationship assets.
Goodwill allocation to CGUs:
Group
=======
GBP'000
===================================== =======
UK & CI business 52,732
ROI business 2,058
===================================== =======
Carrying amount at 30 September 2021 54,790
===================================== =======
Group
=================
Groups
of CGUs GBP'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 2,170
Other Branches 17 23,068
===================================== ======== =======
Carrying amount at 30 September 2020 22 54,903
===================================== ======== =======
Significant client relationship intangible assets:
Group
==================
2021 2020
GBP'000 GBP'000
============================================================ ======== ========
Brewin Dolphin Wealth Management Limited(1) 7,800 9,414
Brewin Dolphin Capital and Investments (Ireland) Limited(2) 25,841 30,645
============================================================ ======== ========
BD Ireland 33,641 40,059
South East investment management team(3) 9,511 13,154
Bath branch(4) 14,766 16,645
Other investment management teams(5) 2,951 3,332
============================================================ ======== ========
Carrying amount at 30 September 60,869 73,190
============================================================ ======== ========
1. Amortisation period remaining 4 years 10 months as at 30
September 2021.
2. Amortisation period remaining 8 years 1 months as at 30
September 2021.
3. Amortisation period remaining 2 years 7 months as at 30
September 2021.
4. Amortisation period remaining 7 years 10 months as at 30
September 2021.
5. None of the constituent parts of the client relationships
relating to the other investment management teams is individually
significant in comparison to the total value of goodwill or client
relationships respectively.
Goodwill impairment testing is performed for groups of CGUs at
the geographical operating segment level for the Wealth Management
business, as reported in note 5, Segmental information. Client
relationships and brand impairment testing is performed for each
relevant CGU where there are indicators of impairment. At 30
September 2021 there were no indicators of impairment for client
relationships and brand intangible assets.
The recoverable amount for each of the CGUs is the fair value
less costs of disposal. The fair value is determined by applying
percentages to the funds for each CGU. The percentages applied are
a Level 2 input based on recent observable market transactions.
Discretionary funds are valued at 3% and advisory funds are valued
at 1%.
Following the impairment testing of goodwill, it was determined
that none of the goodwill held by the Group was impaired. All of
the CGUs within the Group have headroom, where the fair value less
costs to dispose ('FVLCTD') is in excess of the carrying value.
Sensitivity analysis of the key assumptions
All of the CGUs within the Group have significant headroom (i.e.
where the recoverable amount of the CGU is in excess of the
carrying value), such that they are insensitive to all reasonable
possible changes to the value of funds used for the purpose of
goodwill impairment testing.
11. Leases
Group
With the exception of short-term leases and leases of low-value
underlying assets, contracts that contain a lease are reflected on
the Consolidated Balance Sheet as either a Right of Use ('ROU')
asset or a finance lease receivable with a corresponding lease
liability.
The majority of the Group's ROU assets are in respect of leases
for the offices it occupies ('property leases'). The property
leases generally have a term ranging from 5 to 15 years. There were
three new property leases in the year. The property leases require
the Group to keep the properties in a good state of repair and to
return the offices in their original condition at the end of the
lease. The average remaining lease term is 4.3 years for the
property leases. The Group entered into a new lease for printers
during the year.
The Group signed an agreement to lease 25 Cannon St, London in
2019. The lease for 25 Cannon St is yet to commence and
subsequently a ROU asset and corresponding lease liability have not
been recognised.
Right of use assets
Group
=======
Note GBP'000
================================================================ ===== =======
Cost
At 30 September 2019 n/a
Effect of change in accounting policy for initial application
of IFRS 16 43,305
======================================================================= =======
At 1 October 2019 43,305
Additions 1,932
Transfer to finance lease receivable (945)
======================================================================= =======
At 30 September 2020 44,292
Lease modifications and rent reviews (176)
Disposals (733)
Additions 1,549
Exchange differences (32)
======================================================================= =======
At 30 September 2021 44,900
======================================================================= =======
Accumulated depreciation and impairment losses
At 30 September 2019 n/a
Effect of change in accounting policy for initial application
of IFRS 16 -
================================================================ ===== =======
At 1 October 2019 -
Charge for the year 6,250
======================================================================= =======
At 30 September 2020 6,250
Charge for the year 6,371
Disposals (38)
Exchange differences (7)
======================================================================= =======
At 30 September 2021 12,576
======================================================================= =======
Net book value
At 30 September 2021 32,324
======================================================================= =======
At 30 September 2020 38,042
======================================================================= =======
Amounts recognised in the Income Statement
Group
==================
2021 2020
Note GBP'000 GBP'000
============================================= ==== ======== ========
Depreciation expense on ROU assets 6,371 6,250
Interest expense on lease liabilities 6 2,036 2,327
Expenses relating to short-term leases 428 653
Expenses relating to low-value assets 14 25
Income from subleasing ROU assets recognised
as operating leases 692 572
============================================= ==== ======== ========
12. Lease liabilities
Group
==================
2021 2020
GBP'000 GBP'000
================== ======== ========
Current 7,766 8,316
Non-current 38,250 45,265
================== ======== ========
Lease liabilities 46,016 53,581
================== ======== ========
Maturity analysis of lease payments
Group
==================
2021 2020
GBP'000 GBP'000
===================== ======== ========
Less than 1 year 9,378 10,216
1 to 2 years 8,357 9,261
2 to 3 years 7,998 8,095
3 to 4 years 7,702 7,788
4 to 5 years 5,052 7,617
Greater than 5 years 15,139 20,300
===================== ======== ========
Total lease payments 53,626 63,277
Finance charges (7,610) (9,696)
===================== ======== ========
Lease liabilities 46,016 53,581
===================== ======== ========
Reconciliation of lease liability:
Group
===================
2021 2020
Note GBP'000 GBP'000
================================================== ==== ========= ========
At 1 October 53,581 57,784
Non-cash:
Additions 1,527 2,235
Disposal of ROU assets, lease modifications and
rent reviews (862) -
Unwind of discount 6 2,036 2,327
Cash:
Repayments (10,266) (8,765)
================================================== ==== ========= ========
At 30 September 2021 46,016 53,581
================================================== ==== ========= ========
13. Provisions
Group
===================================================================================
Unused
At 30 September Utilisation Unwinding amounts At 30 September
2020 Additions of provision of discount reversed 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= =============== ========= ============= ============ ========= ===============
Sundry claims and associated
costs 397 216 (239) - (57) 317
Onerous contracts 1,382 999 (197) 2 - 2,186
Social security and levies
on share awards 2,805 3,099 (757) - (73) 5,074
Incentivisation awards 1,420 1,951 - 9 - 3,380
Deferred and/or contingent
consideration 6,587 174 (2,847) 80 (13) 3,981
Leasehold dilapidations 2,163 99 (74) 46 (27) 2,207
============================= =============== ========= ============= ============ ========= ===============
14,754 6,538 (4,114) 137 (170) 17,145
============================= =============== ========= ============= ============ ========= ===============
Group
====================================
Current Non-current
liability liability Total
GBP'000 GBP'000 GBP'000
=========================================== =========== ============ =========
Sundry claims and associated costs 317 - 317
Onerous contracts 1,305 881 2,186
Social security and levies on share awards 2,066 3,008 5,074
Incentivisation awards 2,019 1,361 3,380
Deferred and/or contingent consideration - 3,981 3,981
Leasehold dilapidations 116 2,091 2,207
=========================================== =========== ============ =========
At 30 September 2021 5,823 11,322 17,145
=========================================== =========== ============ =========
At 30 September 2020 4,798 9,956 14,754
=========================================== =========== ============ =========
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, service charges and professional fees. 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 11.5 years remaining.
Additions of GBP999k have been made to the provision in the
year. The additions include expected future costs of GBP960k
relating to 25 Cannon St, London and GBP39k for other leases
identified as onerous in prior periods.
The Group signed an agreement to lease 25 Cannon St, London in
2019. During the current year, management decided not to proceed
with moving the current London office to 25 Cannon St. The lease
for 25 Cannon St is yet to commence and subsequently a ROU asset
and corresponding lease liability have not been recognised.
The Group has recognised onerous contract costs of GBP3,644k
(2020: GBP250k) in the Income Statement, the majority of this
expense, GBP3,605k, is attributable to 25 Cannon St. The costs
associated with obtaining the 25 Cannon St lease (other receivables
- GBP921k) and the leasehold improvements (GBP421k) capitalised on
the Balance Sheet of 30 September 2020 have been expensed in the
current year and further costs incurred in the current year
(GBP1,303k) plus the provision of GBP960k have been expensed.
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 which will
occur over the next 8 years which is the latest point at which
exercise can occur for the award with the latest exercise
period
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, the
incentivisation awards are payable in tranches with the final
tranche to paid in December 2023.
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 with the majority
of the provision to be paid in December 2022 and the last payment
to be made in August 2024.
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 11.5 years.
14. Net deferred tax liability
In addition to the amount debited to the Income Statement,
deferred tax relating to the actuarial gain in the defined benefit
pension scheme amounting to GBP1,295k has been debited to other
comprehensive income (2020: GBP609k debited). Deferred tax on
share-based payments of GBP1,236k has been credited to profit and
loss reserves (2020: GBP252k debited).
The following are the major deferred tax assets/(liabilities)
recognised by the Group and movements thereon during the current
and prior reporting year:
Group
==========================================================================================================
Other Defined
short-term pension Intangible
Capital timing benefit Share-based Incentivisation asset
allowances Revaluation differences scheme payments awards amortisation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ =========== ============ ============ ======== ============ ================ ============= ========
At 30 September
2019 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 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 - - 101 - - - (209) (108)
(Charge)/credit
in the
year to the
Income
Statement (107) - (63) (299) (211) 55 (4,046) (4,671)
Charge in the
year to
the Statement
of
Comprehensive
Income - - - (609) - - - (609)
Charge in the
year to
the Statement
of Changes
in Equity - - - - (252) - - (252)
================ =========== ============ ============ ======== ============ ================ ============= ========
At 30 September
2020 857 (1) 4,119 (3,861) 3,240 86 (13,534) (9,094)
Exchange rate
movement - - (101) - - - 201 100
(Charge)/credit
in the
year to the
Income
Statement (4) - (646) (49) 2,781 285 (6,052) (3,685)
Credit/(charge)
in the
year to the
Statement
of
Comprehensive
Income - 1 - (1,295) - - - (1,294)
Charge in the
year to
the Statement
of Changes
in Equity - - - - 1,236 - - 1,236
================ =========== ============ ============ ======== ============ ================ ============= ========
At 30 September
2021 853 - 3,372 (5,205) 7,257 371 (19,385) (12,737)
================ =========== ============ ============ ======== ============ ================ ============= ========
Deferred income taxes are calculated using substantially enacted
rates of UK corporate tax expected to be in force at the time
assets are realised. Following the Finance Bill 2021 announcing an
increase in the rate of corporation tax in the UK from 19% to 25%
from 1 April 2023, deferred tax liabilities have been remeasured
during the year, the blended deferred tax rate is 19.9%.
15. Share capital and share premium
Group and Company
==============================================
2021 2020 2021 2020
No. No. GBP'000 GBP'000
================================= ============ ============ ======== ========
Authorised:
Ordinary shares of 1p each 500,000,000 500,000,000 5,000 5,000
================================= ============ ============ ======== ========
Allotted, issued and fully paid:
Ordinary shares of 1p each 303,504,838 303,234,190 3,035 3,032
================================= ============ ============ ======== ========
During the year the following shares were issued:
Group and Company
=========================== =========== ============ ==================================================
Exercise/issue Share Share premium
No. of price capital account Total
Date shares (pence) GBP'000 GBP'000 GBP'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 37,004 131.3p -148.0p 1 53 54
=========================== =========== ============ =============== ======== ============= ========
At 30 September 2021 303,504,838 3,035 58,393 61,428
======================================== ============ =============== ======== ============= ========
16. Risk management
Overview
This note presents information about the Group's:
-- exposure to each of the key risks (market risk, credit risk
and liquidity risk) arising from the use of financial
instruments;
-- policies and procedures for measuring and managing risk;
and
-- management of capital.
Risk management
The Board of Directors has overall responsibility for
establishing and overseeing the Group's Risk Management Framework
and risk appetite.
The Board has established a clear relationship between the
Group's strategic objectives and its willingness to take risk
through a Risk Appetite Statement. The Risk Appetite Statement is
an expression of limits (qualitative and/or quantitative) giving
clear guidance on the nature and quantum of risk that the Board
wishes the Group to bear (its 'risk appetite') in order to achieve
its strategic objectives whilst remaining within all regulatory
constraints and its own defined levels of capital and liquidity.
The Board reviews the statement and related qualitative and
quantitative measures on at least an annual basis to ensure the
document continues to reflect the Board's appetite for risk within
the context of the environment in which the Group operates.
The Group's Risk Committee provides oversight of the adequacy of
the Group's Risk Management Framework based on the risks to which
the Group is exposed. It monitors how management complies with the
Group's risk management policies and procedures. It is assisted in
the discharge of this duty by the Group's Risk & Compliance
Department which has responsibility for monitoring the overall risk
environment of the Group. The Risk Committee also regularly
monitors exposure against the Group's Risk Appetite.
The Group's Audit Committee is responsible for overseeing the
financial statements and working closely with the Risk Committee,
for both review and oversight of internal controls. The Audit
Committee is assisted in the discharge of its obligations by
Internal Audit who provide the Audit Committee with regular reports
based on a structured programme of reviews agreed annually with the
Committee, this includes reviews of risk management processes and
recommendations to improve the control environment.
The Group's risk management policies are intended to ensure that
risks are identified, evaluated and subject to ongoing monitoring
and mitigation (where appropriate). The risk management policies
also serve to set the appropriate control framework. The aim is to
promote a robust risk culture with employees across the Group
understanding their role and obligations under the framework.
Capital structure and capital management
The capital structure of the Group and Company consists of
issued share capital, reserves and retained earnings as disclosed
in the Consolidated and Company Statement of Changes in Equity.
Capital generated from the business is both reinvested in the
business to generate future growth and returned to shareholders,
principally in the form of dividends. Capital adequacy is given a
high level of focus to ensure not only that regulatory capital
requirements are met, but that the Group is sufficiently
capitalised against the risks to which it is currently exposed, as
well as to withstand a range of potential stress events.
There were no changes in the Group's approach to capital
management during the year.
Regulatory capital requirements
The Group conducts an Internal Capital Adequacy Assessment
Process ('ICAAP'), as required by the Financial Conduct Authority
('FCA') to assess the appropriate amount of regulatory capital to
be held by the Group. There are two active regulated entities in
the Group: Brewin Dolphin Limited ('BDL') regulated by the FCA and
Brewin Dolphin Wealth Management Limited ('BDWM') regulated by the
Central Bank of Ireland. The Jersey branch of BDL is regulated by
the Jersey Financial Services Commission. There is one further
regulated entity in the Group which is dormant, Brewin Dolphin
Capital & Investments (Ireland) Limited, a wholly owned
subsidiary of BDWM.
The Pillar II capital assessment of the ICAAP is the Board of
Directors' opinion of the level of capital the Group should hold
against the risks to which the Group is exposed. The ICAAP is kept
updated throughout the year to take account of changes to the
profile of the risks facing the Group and for any material changes
to strategy or business plans. The ICAAP is discussed and approved
at a Brewin Dolphin Holdings PLC Board meeting at least
annually.
Regulatory capital adequacy is monitored by management. The
Group uses the standardised approach to credit risk to calculate
Pillar I requirements. The Group complied with the FCA's regulatory
capital requirements throughout the year.
The regulatory capital resources of the Group were as
follows:
2021 2020
GBP'000 GBP'000
============================================================== ========= =========
Share capital 3,035 3,032
Share premium account 58,393 58,340
Own shares (29,723) (25,238)
Revaluation reserve (1) (2)
Merger reserve 70,553 70,553
Profit and loss account 245,002 228,351
============================================================== ========= =========
347,259 335,036
Shares to be issued 3,807 3,738
============================================================== ========= =========
Regulatory capital resources before deductions 351,066 338,774
Deduction - Intangible assets (net of deferred tax liability) (168,275) (161,183)
Deduction - Defined benefit pension scheme asset (net
of deferred tax liability) (15,617) (16,463)
Deduction - Free deliveries (122) (10)
============================================================== ========= =========
Total regulatory capital resources after deductions
at 30 September 167,052 161,118
============================================================== ========= =========
Information disclosure under Pillar 3 of the Capital
Requirements Directive is published annually on the Group's website
(www.brewin.co.uk).
Material accounting policy information
Details of the material accounting policy information, including
the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of
each financial asset and financial liability, are disclosed in note
2.20 to the 2021 Annual Report and Accounts.
Categories of financial instruments
Carrying value
======================================
Group Company
================== ==================
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
========================================== ======== ======== ======== ========
Financial assets
Financial assets at FVTOCI 37 68 - -
Financial assets at FVTPL 2,974 379 - -
Non-current finance lease receivables 1,791 1,966 - -
Current finance lease receivables 174 167 - -
Non-current receivables - 931 - -
Current loans and receivables 234,972 239,096 41,849 35,042
Cash and cash equivalents 188,021 180,533 216 1,256
========================================== ======== ======== ======== ========
At 30 September 427,969 423,140 42,065 36,298
========================================== ======== ======== ======== ========
Financial liabilities
Shares to be issued including premium 3,807 3,738 3,807 3,738
Financial liabilities at FVTPL - deferred
and contingent consideration 3,981 6,587 - -
Other financial liabilities at amortised
cost 285,733 291,093 7,334 7,334
========================================== ======== ======== ======== ========
At 30 September 293,521 301,418 11,141 11,072
========================================== ======== ======== ======== ========
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments. The objective of the Group's market risk management is
to both control and manage exposure within the Group's risk
appetite whilst accepting the inherent risk of market
fluctuations.
The Group undertakes trades on an agency basis on behalf of its
clients. The Group holds financial instruments as principal but
does not trade as principal. All trades are matched in the market
(see note 18 to the 2021 Annual Report and Accounts.).
The Group transacts foreign currency deals in order to fulfil
our client obligations and any non-sterling costs to our business.
Foreign currency exposure is matched intra-day and at the end of
each day.
The total net foreign exchange exposure resulting from income
yet to be converted to sterling at the year end was a debtor of
GBP273k (2020: GBP870k).
The Group is exposed to translation risk in respect of the
foreign currency value of the net assets of Brewin Dolphin Wealth
Management Limited ('BDWM') and its subsidiary Brewin Dolphin
Capital & Investments (Ireland) Limited, both based in the
Republic of Ireland, together 'Brewin Dolphin Ireland'. At the year
end Brewin Dolphin Ireland had net assets of GBP46.2m (2020:
GBP50.6m) denominated in its local currency (Euros).
There has been no change to the Group's exposure to market risks
or the manner in which it manages and measures the risk during the
year.
Equity price risk
The Group is exposed to equity price risk arising from both
FVTOCI and FVTPL investments (see note 19 to the 2021 Annual Report
and Accounts.).
Equity price sensitivity analysis
The sensitivity analyses below have been determined based on the
exposure to equity price risk at the reporting date.
If equity prices had been 5% higher/lower:
-- Pre-tax profit for the year ended 30 September 2021 would
have been GBP146k higher/lower (2020: GBP1.9k higher/lower) due to
changes in the fair value of financial assets at fair value through
profit or loss; and
-- Other equity reserves as at 30 September 2021 would
increase/decrease by GBP1.9k (2020: increase/decrease by GBP4.3k)
pre-tax for the Group as a result of the changes in fair value of
financial assets through other comprehensive income.
The Group's sensitivity to equity prices has not changed
significantly from the prior year.
Interest rate risk
The Group is exposed to interest rate risk in respect of the
Group's cash and in respect of client deposits. The Group holds
client and firm deposits on demand and in 30 to 95 day notice
accounts. Client deposits are fully segregated from the Group's
deposits and held in separate accounts. During the year a 0.1%
increase in base rate would have increased pre-tax profit by
GBP104k (2020: GBP109k), this is based on the average cash balance
throughout the year multiplied by 0.1%.
Credit risk
Credit risk refers to the risk that a client or other
counterparty will default on its contractual obligations resulting
in financial loss to the Group. The Group's exposure to credit risk
arises principally from the settlement of client and market
transactions ('settlement risk') and cash deposited at banks.
The Company has credit risk resulting from intercompany balances
held with its subsidiaries; these are reviewed for impairment at
each reporting date.
Settlement risk
Exposures to settlement risk are spread across a large number of
counterparties and clients. A delivery versus payment settlement
method is also used for the majority of transactions, ensuring that
securities and cash are exchanged within a short period of time.
Consequently, no residual maturity analysis is presented. The Group
also holds collateral in the form of cash, as well as equity and
bonds which are quoted on recognised exchanges. This collateral is
held, principally, in Group nominee accounts.
Concentration of credit risk
The Group has no significant concentration of credit risk with
the exception of cash. The Group utilises a panel of five
internally approved major banking groups and the majority of cash
is currently spread across all five on the panel, excluding Brewin
Dolphin Wealth Management Limited and its subsidiaries.
Maximum exposure
The maximum exposure to credit risk at the end of the reporting
year is equal to the Balance Sheet figure.
Credit exposure
Credit exposure in relation to settlement risk is monitored
daily. The Group's exposure to large trades is limited with an
average trade size in the current year of GBP17,182 (2020:
GBP16,971).
Impaired assets
The total gross amount of individually impaired assets in
relation to trade receivables at the year end was GBP180k (2020:
GBP392k). Collateral valued at fair value by the Group in relation
to these impaired assets was GBP42k (2020: GBP59k). This collateral
is stock held in the clients' account which per our client terms
and conditions can be sold to meet any unpaid liabilities falling
due. The net difference has been provided as an allowance for
credit impaired assets (see note 18 to the 2021 Annual Report and
Accounts.). Note 18 to the 2021 Annual Report and Accounts. details
amounts past due but not impaired.
Non-impaired assets
Financial assets that are neither past due nor impaired in
respect of trade receivables relate mainly to bonds and equity
trades quoted on a recognised exchange, which are matched in the
market, and are either traded on a Delivery Versus Payment basis or
against a client's portfolio in respect of which any one trade
would normally be a small percentage of the client's collateral
held by the Group's nominees. At the year end no financial assets
that would otherwise be past due or impaired had been renegotiated
(2020: none).
Loans to employees are repayable over a maximum of three years
(see note 18 to the 2021 Annual Report and Accounts).
The credit risk on liquid funds, cash and cash equivalents is
limited as deposits are diversified across a panel of major banks.
This ensures that the Group is not excessively exposed to an
individual counterparty. The Group's policy requires cash deposits
to be placed with banks with a minimum long-term credit rating of
A- (S&P) / A3 (Moody's) / A- (Fitch), excluding Brewin Dolphin
Wealth Management Limited and its subsidiaries (which comprise the
'Below A-' column below). Requirements and limits are reviewed on a
regular basis. The Group's allocation of cash and cash equivalents
to S&P rating grades has been outlined in the below table:
Below
AA AA- A+ A A- A-
========================== ==== ==== ===== ===== ==== =====
Cash and cash equivalents 1.1% 1.4% 37.7% 49.3% 0.0% 10.5%
========================== ==== ==== ===== ===== ==== =====
The Group maintains a set of Credit Risk policies which are
regularly reviewed by the Board. A due diligence review is also
performed on all counterparties on an annual basis, at a minimum.
The investment of cash is managed by the Group's Treasury team.
There has been no material change to the Group's exposure to
credit risk during the year.
Liquidity risk
Liquidity risk refers to the risk that the Group will be unable
to meet its financial obligations as they fall due. The Group
maintains adequate cash resources to meet its financial obligations
at all times. When investing cash belonging to the Group or its
clients, the focus is on security of principal and the maintenance
of liquidity. Client money is held in segregated client bank
accounts with strict limits on deposit tenors, in accordance within
regulatory guidelines designed to minimise liquidity risk.
The Group has a Liquidity Policy which is reviewed by the Board
regularly. The Group's intention at all times is to operate with an
amount of liquid resources which provides significant headroom
above that required to meet its obligations. Group cash resources
are monitored on a daily basis through position reports and
liquidity requirements are analysed over a variety of forecast
horizons. Liquidity stress tests are conducted at least annually to
ensure ongoing liquidity adequacy, and a Contingency Funding Plan
is also maintained to provide backup liquidity in the unlikely
event of a severe liquidity stress event.
At 30 September 2021, the Group had access to a revolving credit
facility of GBP10m which is undrawn (2020: GBP10m).
There has been no change to the Group's exposure to liquidity
risk or the manner in which it manages and measures the risk during
the year.
The following are the undiscounted cash flows of financial
liabilities so will not always reconcile with the amounts disclosed
on the Balance Sheet. The undiscounted cash flows are based on the
earliest date on which payment is required.
At 30 September 2021
Group
===========================================================
1 month 3 months
Up to to to 1 to Over
1 month 3 months 1 year 5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================= ======== ========= ======== ======== ======== ========
Financial liabilities
Shares to be issued including
premium - - - 3,875 - 3,875
Financial liabilities at
FVTPL - deferred and contingent
consideration - - - 4,051 - 4,051
Other financial liabilities
at amortised cost 171,235 46,486 30,193 30,292 15,138 293,344
================================= ======== ========= ======== ======== ======== ========
171,235 46,486 30,193 38,218 15,138 301,270
================================= ======== ========= ======== ======== ======== ========
At 30 September 2020
1 month 3 months
Up to to to 1 to Over
1 month 3 months 1 year 5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================= ======== ========= ======== ======== ======== ========
Financial liabilities
Shares to be issued including
premium - - - 3,875 - 3,875
Financial liabilities at
FVTPL - deferred and contingent
consideration - - 2,859 3,875 - 6,734
Other financial liabilities
at amortised cost 181,387 34,564 29,900 34,641 20,300 300,792
================================= ======== ========= ======== ======== ======== ========
181,387 34,564 32,759 42,391 20,300 311,401
================================= ======== ========= ======== ======== ======== ========
At 30 September 2021
Company
===========================================================
1 month 3 months
Up to to to 1 to Over
1 month 3 months 1 year 5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ======== ========= ======== ======== ======== ========
Financial liabilities
Shares to be issued including
premium - - - 3,875 - 3,875
Other financial liabilities
at amortised cost 7,334 - - - - 7,334
============================== ======== ========= ======== ======== ======== ========
7,334 - - 3,875 - 11,209
============================== ======== ========= ======== ======== ======== ========
At 30 September 2020
1 month 3 months
Up to to to 1 to Over
1 month 3 months 1 year 5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ======== ========= ======== ======== ======== ========
Financial liabilities
Shares to be issued including
premium - - - 3,875 - 3,875
Other financial liabilities
at amortised cost 7,334 - - - - 7,334
============================== ======== ========= ======== ======== ======== ========
7,334 - - 3,875 - 11,209
============================== ======== ========= ======== ======== ======== ========
Fair value measurement recognised on the Balance Sheet
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from formal
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Fair value hierarchy
At 30 September 2021
Group
======================================
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
=========================== ======== ======== ======== ========
Financial assets at FVTPL
Equities 2,974 - - 2,974
Financial assets at FVTOCI
Equities - - 37 37
=========================== ======== ======== ======== ========
Total 2,974 - 37 3,011
=========================== ======== ======== ======== ========
At 30 September 2020
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
=========================== ======== ======== ======== ========
Financial assets at FVTPL
Equities 379 - - 379
Financial assets at FVTOCI
Equities - - 68 68
=========================== ======== ======== ======== ========
Total 379 - 68 447
=========================== ======== ======== ======== ========
Sensitivity analysis
Sensitivity analyses for Level 3 assets have not been carried
out due to the immateriality of the balance.
17. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. The primary
statements of the Company include amounts attributable to
subsidiaries. These amounts have been disclosed in aggregate in the
relevant notes to the financial statements of the Company and in
detail in the following table:
Company
============================================
Amounts owed Amounts owed
by related parties to related parties
===================== =====================
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
================================ ========== ========= ========== =========
Bell Lawrie White & Co. Limited - - 2,434 2,434
Brewin Dolphin Limited 41,849 35,042 - -
Brewin Broking Limited - - 4,900 4,900
================================ ========== ========= ========== =========
41,849 35,042 7,334 7,334
================================ ========== ========= ========== =========
All amounts owed by related parties are interest free and
repayable on demand.
The only effect of related party transactions on the profit and
loss of the Company was in respect of dividends. The Company
received dividends of GBP45m (2020:GBP45.5m) from Brewin Dolphin
Limited and GBP3.47m (2020: GBPnil) from Brewin Dolphin Wealth
Management Limited.
The Group companies did not enter into any transactions with
related parties who are not members of the Group during the
year.
All amounts outstanding with related parties are unsecured and
will be settled in cash. No guarantees have been given or
received.
No provisions have been made for doubtful debts in respect of
the amounts owed by related parties.
Remuneration of key management personnel ('KMP')
Key management personnel are responsible for planning, directing
and controlling the activities of the Group. Key management
personnel for the Group have been determined to be the Directors
and members of the Executive Committee.
The remuneration expense for key management personnel is as
follows:
Group
==================
2021 2020
GBP'000 GBP'000
======================================= ======== ========
Short-term employee benefits 4,598 4,646
Post-employment benefits 22 22
Share-based payment:
Lapses where KMP have left the Group - (109)
Continuing KMP 1,523 1,221
======================================= ======== ========
6,143 5,780
======================================= ======== ========
The remuneration of individual Directors is set out in the
Directors' Remuneration Report to the 2021 Annual Report and
Accounts in addition to the disclosure above.
A number of the Group's key management personnel and their close
family members make use of the services provided by companies
within the Group. Charges for such services are made at various
staff rates.
Directors' transactions
There are no contracts, loans to Directors or other related
party transactions with Directors.
18. Annual General Meeting
The Annual General Meeting will be held at our London Office, 12
Smithfield Street, EC1A 9lA on 4 February 2022 at 10:30am and will
also be broadcast via a live webinar.
19. Forward-looking statements
This announcement contains certain forward-looking statements
with respect to the Brewin Dolphin's Group's financial condition,
operations, and business opportunities. Forward-looking statements
sometimes use words such as "aim", "anticipate", "target",
"expect", "estimate", "intend", "plan", "goal", "believe", "seek",
"may", "could", "outlook" or other words of similar meaning. These
forward-looking statements represent the Group's expectations or
beliefs concerning future events and involve known and unknown
risks and uncertainty that could cause the Brewin Dolphin's Group's
actual results, performance, or events to differ materially from
those expressed or implied in such statements. Past performance
cannot be relied on as a guide to future performance. Any
forward-looking statements made in this Announcement by or on
behalf of the Brewin Dolphin Group speak only as of the date they
are made. Except as required by applicable law or regulation, the
Brewin Dolphin Group expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this announcement to
reflect any changes in the Brewin Dolphin Group's expectations with
regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.
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END
FR KZMZMMFKGMZZ
(END) Dow Jones Newswires
November 24, 2021 02:00 ET (07:00 GMT)
Brewin Dolphin (LSE:BRW)
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