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Brewin Dolphin's £4.8m redundancy cost weighs on profit
by Danielle Levy on Dec 04, 2013 at 07:58
(Update) The costs associated with Brewin Dolphin's strategy to improve profitability and make the business more efficient have weighed on pre-tax profit, with redundancy costs amounting to £4.8 million over the year.
The decision to bring about efficiencies and improved profitability under a strategy that has been implemented over the past two years helped to power a 22% rise in adjusted pre-tax profit to £52.3 million over the period, the group noted in its preliminary results. These figures were adjusted to exclude redundancy costs, additional FSCS levy, onerous contracts provision, amortisation of client relationships and disposal of available-for-sale investments.
When these factors are accounted for, pre-tax profit stood at £28.6 million, representing a 4% decline on the year. Brewin said this was down to restructuring costs and 'material provisions for onerous contracts'.The national wealth manager also paid out an additional FSCS levy of £1.1 million, up from £0.5 million in 2012.
The firm attributed the £4.8 million redundancy costs to two organisational restructures. Firstly in March when various head office roles were restructured, which Brewin said had been done to 'better service business needs' and reduce costs. This resulted in approximately £3 million in redundancy payments and reduced central functions headcount by approximately 100, leading to a £6 milllion saving in ongoing staff costs.
During the second half of the year, Brewin's rationalisation of its branch network, which saw offices in Inverness, Teesside, Hereford and Swansea close, led to a further £1.4 million of redundancy payments. The company said run rate savings to branch staff costs would be felt from 2014 onwards.
A £6.2 million outlay relating to onerous contracts also weighed on profit, with £5.7 million relating to 'surplus property space' that may not be continually sub-let.
On a more positive note, the national wealth manager has reaped the benefits of moving to a unified pricing structure with a 25% fee rise to £152 million over the year. Total income rose 5% over the 12 months to the end of September to £283.7 million.
The board has opted to up the final dividend by 40% to 5.05p, while the full year increased by 20% to 8.6p.
The group said it aims to achieve an operating margin of 25% by the end of the financial year in 2016. Its strategy is underpinned by initiatives to improve market competitiveness and drive organic growth, lower costs and achieve operational efficiency.
Total assets stood at £28.2 billion at the end of September, up from £25.9 billion in 2012. A 17% rise in discretionary assets to £21.3 billion helped to offset a £0.8 billion outflow out of advisory, representing a 10.4% decline on the year. Discretionary assets accounted for 76% of total funds under management.
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