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Brewins £32m tech hit: what the analysts said

Brewins £32m tech hit: what the analysts said

Royal Bank of Canada was one of a series of brokers to maintain its outlook on Brewin Dolphin yesterday after the investment manager said it would write down £32 million in IT costs.  

RBC Capital Markets analyst Peter Lenardos pointed out that the pre-tax impairment charge would leave the capital position unchanged, ‘but the £32 million loss could be negative for sentiment’.

Shares in Brewin Dolphin ended yesterday 2.26% down at 320p. RBC has the company on an outperform rating with a price target of 327p. 

Canaccord Genuity reaffirmed its hold rating on the stock and its 304p price target. N1 Singer held the business at a buy with a 324p target, while Numis maintained its hold with a 350p target.

Analysts followed by Reuters rate the business a hold over a buy by a 2:1 margin, with a median current price target of 318p.  

An outstanding £15 million of charges remained to settled over the next 10 years, but Lenardos said in his view ‘the most likely outcome is the non-payment of the £15 million’.

He added that on the upside Brewin Dolphin’s profit margin before tax this year was likely to exceed the company’s target of 20%.

‘While £32 million and potentially £15 million more has been wasted, we would rather that the issue be identified and addressed now as opposed to at the project's conclusion,’ said Lenardos.  

‘We believe the phased-in approach allowed the company to test the system before a broader rollout occurred.

‘Since the company trades at 15.4 times 2015 earnings per share, a premium to the diversified financials sector at 13.5 times, we believe it faces a risk of derating. However, we emphasise that there is no impact on our financial forecasts… the business appears to be performing ahead of guidance and our forecasts.’


 

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Profile: The opportunity set that attracted Brett Williams to wealth management

Profile: The opportunity set that attracted Brett Williams to wealth management

Brett Williams is best known for helping to build some of the biggest platforms in the IFA market.He made the move over to wealth management to head SEI’s UK business earlier this year in the belief that this is where the best opportunities now lie.

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