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Brewin Dolphin attracts fresh funds

RESULTS: A solid operating performance was marred by news of a £32m impairment charge, after management called time on a software project.
May 29, 2014

The previous year's profits were depressed by a number of one-off items, but even after adjusting for these, asset manager Brewin Dolphin (BRW) pushed half-year profits ahead by 25 per cent to £29.7m. Much of the increase reflected a sharp rise in discretionary funds under management, from £20.4bn a year ago to £22.7bn. That boosted fee and commission income by 13 per cent to £134m.

IC TIP: Hold at 312p

The new management team has set itself some ambitious targets. It expects to achieve a 75 basis-point core revenue yield on advisory funds by the end of the year, and is also targeting a 95 basis-point yield on discretionary funds.

However, a new software system employed for execution-only business has thrown up a number of problems. Plans to use it for discretionary wealth management have now been shelved, which will lead to a £32m non-cash impairment charge in the second half. Management also has to address payments of around £15m over the next 10 years. These may be payable under the terms of the original contract, which anticipated the roll-out into discretionary wealth management.

Analysts at broker Numis Securities are forecasting full-year EPS of 16.1p (from 14.8p in 2013).

BREWIN DOLPHIN (BRW)
ORD PRICE:312pMARKET VALUE:£857m
TOUCH:311-312p12-MONTH HIGH:358pLOW: 214p
DIVIDEND YIELD:2.8%PE RATIO:24
NET ASSET VALUE:84p*NET CASH:£136m**

Half-year to 30 MarPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20136.82.23.55
201421.46.73.65
% change+215+205+3

Ex-div: 4 Jun

Payment: 4 Jul

*Including intangible assets of £126m, or 46p a share

**Includes £27.2m of client settlement cash