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Brewin Dolphin increases capital expenditure

The wealth manager continues to increase its spending on client systems
November 28, 2019

As chief executive David Nicol puts it, the growth of Brewin Dolphin’s (BRW) funds under management happened “in the face of a reasonably difficult environment” in the 12 months to September 2019. Net inflows are always encouraging, although investors might take more comfort from the wealth manager’s investments in its own business – a fact which helps to explain stalling statutory and adjusted profits. 

IC TIP: Hold at 344p

Capital expenditure more than doubled to £16.7m in the period, as Brewin expanded its office network in the south of England, spent £4m on its west London base, and poured cash into its client facing systems. Investors can expect more in 2020. Some £30m has been set aside for infrastructure upgrades, two-thirds of which will be spent on a better custody and settlement system, and will be capitalised as an intangible asset on the balance sheet.

Another major recent investment – the acquisition of Investec’s Irish arm – completed after the year-end, though the equity issued in May to fund the deal partly accounts for the dip in earnings per share and the flattering net cash figure in the table below.

Analysts at RBC expect adjusted earnings of 22.6p per share for the 12 months to September 2020, rising to 24.2p in FY2021.

BREWIN DOLPHIN (BRW)  
ORD PRICE:344pMARKET VALUE:£1.04bn
TOUCH:342-344p12-MONTH HIGH:352pLOW: 284p
DIVIDEND YIELD:4.8%PE RATIO:20
NET ASSET VALUE:111p*NET CASH:£229m
Year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201528461.017.712.0
201628050.114.413.0
201730457.616.515.0
201832668.519.516.4
201933662.517.016.4
% change+3-9-13-
Ex-div:9 Jan   
Payment:12 Feb   
*Includes intangible assets of £117m, or 39p a share