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Brewin's profits surge by 25% before tech writedown bites
by James Phillipps on May 28, 2014 at 08:25
Brewin Dolphin saw pre-tax profits soar by over 25% to £29.7 million in the six months to the end of March but faces a £32 million tech writedown in its next accounting period.
The wealth manager's interim results reveal that assets under management rose from £20.4 billion to £22.7 billion year-on-year. Its profit margin also increased to 20.3% from 17.1% in the same period last year, edging closer towards the company's strategic target of over 25%.
However, Brewin's latest results do not include the £32 million writedown it is set to endure as it ditches plans to implement the Figaro software system across its discretionary business.
Chief executive David Nicol (pictured) said: 'The group has made good financial and operational progress over the first half of 2014. The process of streamlining the business is on track and this is reflected in the significant progress made towards the adjusted profit before tax margin target of 25%. It is encouraging to see the rationalisation of the business model begin to bear fruit as organic growth is achieved.
'We are committed to continued improvement and strengthening of the business and will continue to make the difficult decisions necessary to achieve this as evidenced by the refocused systems priorities. The streamlining of the business through improved operating processes and clearer focus on core services should not only secure further shareholder returns, but also substantially reduce risk.'
Brewin has been in the process of consolidating its branch network -it closed its Truro and Chester branches earlier this month- and said operating costs fell by 4% from £42.1 million to £40.4 million on reduced property costs, which it said 'more than offset' higher technology related costs, and legal and professional fees.
Looking at Brewin's asset mix, discretionary funds rose by 7% or £600 million over the six month period and now account for 79% of total assets under management, up from 76% at the end of September, while execution-only also saw net inflows of £600 million, a 10% rise taking assets up to £7.4 billion. However, the group's advisory managed and advisory dealing services saw net outflows of £1 billion. It also said its managed advisory business remains in transition with a portion still to be transferred over to its new rate card in a move which it says will improve margins in this area from 56 basis points last year to 75bps.
This pushed core income by 13% to £134.4 million, although other income continued to fall, down 42% to £11.9 million, which it said was the result of ‘declining margins on cash deposits and a further £6.1 million reduction trail income.' Its cash balance is £109 million.
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