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Brewin takes £32m hit on failed IT system
by James Phillipps on May 13, 2014 at 07:40
Brewin Dolphin is to ditch plans to implement the Figaro software package across its wealth management business at a cost of £32 million
The company will retain Figaro solely for Stocktrade, its execution-only arm, and in a stock market announcement, said that following an internal review, ‘it is no longer believed to be an appropriate operating system for the group’s discretionary wealth management business’.
Brewin said that it will instead look to upgrade its existing internal systems and stressed that improving its IT strategy remains important to the group. That decision will see Brewin pay an exceptional pre-tax impairment charge of £32 million in the second half of the year and it warned that it will need to pay a further £15 million over the next 10 years under the original contracts. Brewin added that it is ‘engaged in negotiations to vary and settle these arrangements’.
Brewin started to implement Figaro in 2011, when it was under the leadership of Jamie Matheson (pictured), as part of the company’s drive to improve its operating margins from 15% to 20% and said its goal remains to raise this to 25% by 2016. The board said it is on track to be above 20% in the first half of the year up from 18.5% in the first half of 2013.
‘The board believes the decision to cease the roll out of Figaro is in the best commercial interests of the group. Moreover, it remains confident that the 2016 operating margin target will be achieved through on-going business improvements,’ the company said in a statement.
Brewin raised £40 million in a share placing last year, which it said would be used to fund expansion and improve efficiency and in 2013 its pre-tax profits grew by 22% to £52.3 million. Its stock is widely held by fund managers with Aviva yesterday announcing to the market that it had raised its stake in the firm above 3%, while earlier last month, Artemis' AAA-rated Tim Steer told Wealth Manager that Brewin scored 100 out of 100 on his screening tool, making it the most attractive stock on the market.
Its share price was up 6.7p, or 2.09%, at 327.4p in early morning trading.
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