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Categorized | Financial

Wealth manager Brewin Dolphin hit by restructuring costs


Posted on November 30, 2016

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management.

The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year.

Finance director Andrew Westenberger said its 2015 figure was boosted by the one-off sale of a stake in Euroclear, worth £9.7m.

Brewin said it was a “good achievement in the difficult market conditions experienced in the first half of the period and immediately around the UK vote to leave the European Union”.

The wealth manager has spent the past three years transforming itself from an old-fashioned stockbroking group into a more modern wealth manager, increasing its focus on discretionary fund management.

It grew the discretionary arm of its business to £28.9bn over the year, a 16.5 per cent rise from £24.8bn in 2015. Core income was £263.3m, 4.8 per cent higher than the same period last year.

David Nicol, chief executive, said the numbers reflected the recent “strategic transition” of the company. “We have made encouraging progress in 2016,” he added.

Peter Lenardos, analyst at RBC Capital, said the wealth manager had “takeover potential”.

“Following recent sector consolidation, we believe that excess capital, a weak sterling, ultra-low interest rates, and an uncertain outlook could drive further M&A across the sector,” he said, adding that Brewin’s “attractive valuation” and strong balance sheet could make it a “tempting target”.

Paul McGinnis at Shore Capital said the wealth manager’s management team had done “a fine job of turning around the business over the past three years”, but said growth would now be “more of a struggle”.

Mergers and acquisitions swept across the £1.8tn sector this year, with a focus on midsized wealth managers that had between £5bn and £10bn of assets under management.

Brewin, whose results beat analysts’ consensus, was cautious in its outlook, acknowledging a “heightened sense of political and economic uncertainty”, but insisted it was “well placed to withstand any near-term downturns”.

Mr Westenberger said wealth and asset managers would face “pressure on pricing” following increased regulatory scrutiny and forthcoming European regulations known as Mifid II.

“There won’t be change that will happen overnight, but with Mifid II we’re going to have to be transparent for clients,” said Mr Westenberger. “We will participate and become more efficient, and even if pricing is under pressure we can provide a good service to clients.”

Brewin’s adjusted-profit-before-tax figure, which took account of the one-off Euroclear sale and excluded ongoing redundancy costs of £2.7m, was £61m in 2016 — marginally down from last year’s £62.2m. The company increased its full-year dividend by 8 per cent to 13p.