Brewin Dolphin Holdings plc Interim Management Report 2022

11 May 2022

Brewin Dolphin Holdings PLC

Interim Management Report For the Half Year Ended 31 March 2022 Strong organic fund inflows of £1.9bn

Recommended offer

• On 31 March 2022, RBC Wealth Management (Jersey) Holdings Ltd¹announced a recommended cash acquisition of Brewin Dolphin Holdings PLC for 515p per share.
• The acquisition is conditional on shareholder and regulatory approvals and is expected to complete by the end of calendar Q3 2022.

H1 financial highlights

• Gross discretionary inflows of £1.9bn (H1 2021: £1.6bn) show continued organic growth driven by our advice-focused strategy and broad range of propositions and investment solutions.
• Total discretionary net flows of £1.0bn (annualised growth rate of 4.0%).

o  MPS/ Voyager H1 net flows of £0.5bn (annualised growth rate 16.4%).

o  Direct client retention rates increased to 99% in H1 2022 (FY 2021: 97%).

• Total funds for the first half were broadly flat at £56.3bn (FY 2021: £56.9bn) due to volatile market performance driven by the conflict in Ukraine and the macroeconomic environment. Total discretionary funds were broadly flat in the first half and up 8.1% year-on-year at £49.4bn (FY 2021: £49.8bn; H1 2021: £45.7bn).
• Total income increased by 4.8% year-on-year to £209.5m (H1 2021: £199.9m), driven by higher fund levels year-on-year partly offset by normalised levels of commission, as expected.

o  Financial planning income grew 24.6% year-on-year to £23.8m (H1 2021: £19.1m); driven by higher fund levels year-on-year and continued demand for our advice-focused services.

o  Direct discretionary commission income was down 15.4% year-on-year at £32.3m (H1 2021: £38.2m), as expected.

• Adjusted profit before tax²increased 2.3% to £48.1m (H1 2021: £47.0m).
• Strong cash balance of £139.8m (H1 2021: £145.8m) and capital adequacy ratio of 210%.
• Following the announcement of the recommended offer for the Company, the Board is not recommending an interim dividend.

Delivering on our strategic priorities

• Parallel running of the custody and settlement systems, full functionality of the new system by the end of the summer this year.
• Built and integrated a central sales function, establishing and supporting client leads across the direct business.
• Voyager funds reached £0.5bn, a year and a half after launch.
• A year into our operational excellence programme; accounts opened c.80% faster.

Outlook

• Whilst markets remain volatile, our strong inflows and resilient advice-focused strategy gives us confidence in our full year outlook.
• No change to our opex guidance of mid-high single digit percent growth. 
• Full year capex guidance changed to c.£32m from c.£26m, of which c.£26m is on our custody and settlement system. The cost increase on our custody and settlement system is driven by higher than expected inflationary pressure on technology costs and delivery now set to the end of summer, as we continue to focus on mitigating any implementation risks.

NOTES:

1. An indirect wholly-owned subsidiary of Royal Bank of Canada (“RBC”).
2. See note 20.
3. See note 7.

Robin Beer, Chief Executive Officer, said:

“We continued to see strong inflows across both our direct and indirect discretionary funds throughout the first half, with a record first quarter performance despite the volatility in the markets driven by macroeconomic and geopolitical challenges. The resilience in our organic growth, demonstrates our strategy of being an advice-focused wealth manager, supported by our broad range of propositions and investment solutions, is the right one. The business is preparing for the final stage of dress rehearsals and training on our new custody and settlement system and the switch over of systems will be completed at the end of the summer this year.

We believe that the proposed acquisition by RBC will bring new and exciting opportunities for our clients and people. Whilst the transaction is still to complete, we remain focused on delivering our strategic priorities for the year, which will enable us to become a leading advice-focused digitally enabled wealth manager.”