Brewin Dolphin

www.brewin.co.uk TICKER: BRW     EXCHANGE: AIM

Brewin Dolphin is the UK's leading independent private client investment manager with the only truly national branch network, with more than 130,000 advisory and discretionary clients, and over £25bn of Assets Under Management. It is currently in the process of divesting its relatively small corporate finance division, leaving it as a pure asset manager/stockbroker. Over 90% of its revenue comes from private clients but it also manages £1.8bn of charitable funds. Its execution-only stockbroking service administers over £4bn of assets for clients but contributes less than 5% of group revenue. The group's size enables it to run a large (and award-winning) internal research department with 21 analysts/economists/researchers - nearly five times the average for the rest of the sector - supplying superior advice at a lower cost per £1m of AUM. Its other distinguishing features are a greater willingness to cater for advisory clients and for the 'mass affluent' rather than just for 'High New Worth' discretionary clients and a very high level (83%) of satisfied customers.

LATEST REPORTS

 
Showing the way forward
Published: Dec 06 2013

Brewin Dolphin's profits rose 13.5% to £48.4m, and the market was pleasantly surprised by the 21% increase in the dividend and the change in the dividend policy to a 60-80% payout ratio.
The changes to the business caused by the greater shareholder orientation of the new management team are becoming clearer with a focus on simplifying and streamlining its business model.
They are the UK leader in a growth sector as rising longevity and tighter limits on pensions increase both need and demand for other long-term savings/investments. 
Having risen more than 50% in a year, the shares now seems fairly valued as a dividend growth stock. Its historic yield is a small discount to the market and its prospective yield is at a premium.. 
 
Interims and placing
Published: Jun 02 2013

Interim results showed the expected improvement in operating margins but a decline in PBT due to a jump in exceptional costs. The progressive roll-out of the new national fee structure has more than offset the loss of trail commission, and a welcome reduction in non-staff operating costs balanced the rise in staff costs excluding profit share, so most of benefit of the rise in revenue fed through to operating profit. The interim dividend was unchanged.
A £40m placing accompanied the interim results, mostly to finance capital expenditure on expansion and on computer systems to improve the quality of service and to support efforts to improve profits, although some of the cash will just sit there to demonstrate the group's financial strength to more than 150% of the FCA regulatory requirement.
At 237p, up 63% in the last year, Brewin shares are less badly undervalued than historically, with its market capitalisation matching the old-fashioned benchmark of 2% of AUM. However, it is still at a discount to the sector PER and looks quite cheap against 2016 estimates of Headline EPS of 20-25p (depending on market conditions).
 
Strategy paying dividends
Published: Dec 05 2012

Brewin Dolphin is the largest independent stockbroker/asset manager with the only truly national branch network and roughly 50% more assets managed and administered than nearest competitors
The drive to improve returns is now visibly paying dividends with a 42% rise in second half profits on a Headline earnings basis giving a 9% rise for the year despite a fall in stock exchange trading activity
The long-term process of converting advisory clients to a discretionary basis, simultaneously improving both revenues and costs, continues. The revised fee scale and a further increase in the more valuable discretionary Funds under Management produced a GBP 22m (20%) rise in fee income, more than offsetting the GBP 16m (16%) drop in commission income for the year, while non-staff operating costs actually declined.
Despite good share performance, Brewin is still rated at a discount of more than 10% to its sector PER or the rule of thumb basis for valuing stockbrokers/asset managers. Our previous minimum share price of 200p, adjusted for inflation to 210p, is undemanding. 
3% of discretionary and 1.5% of advisory AUM plus surplus capital gives a target price of 265p, nearly 40% above current levels
 
Calm in the storm
Published: May 29 2012

Brewin Dolphin is the leading independent stockbroker/asset manager in the British Isles with 40 branches in the UK, Ireland and Channel Isles and over £25bn of Assets under Management (AUM).
The interim figures show, despite a solid performance, that it's hard to run uphill and even harder if you are trying to carry out a major group restructuring at the same time; introducing a new unified charging structure.
The initial effect of introducing the new national charging structure has, unsurprisingly, been the loss of some clients who saw a significant increase in fees, but the benefit of the increased fee income is however much more significant, adding £11m in Brewin's second quarter (first quarter of calendar 2012).
 
The current share price of 143p is a 30.4% discount to the old rule of thumb of 2% of AUM and leaves the shares on a generous 5% yield and a PER at a substantial discount to the sector average. 
 
Attractive outlook from secure base
Published: Jan 12 2012

Brewin Dolphin is the largest asset manager/stockbroker in the British Isles, operating from 41 branches with over £25 billion of assets under management
The group has embarked upon a programme to transform its profitability over the next three years, which should increase the level of profits before exceptional items by around 50% 
Demographic trends mean sums available for investment by High Net Worth Individuals and the 'mass affluent' will continue to grow for twenty-odd years even if we see no/negligible economic growth; Wealth Management will grow faster because the destruction of private sector defined benefit pension schemes by Gordon Brown is leading many to make their own provision for retirement; the FSCS levy that distorted the 2010/11 IFRS results is non-recurring and has weakened several of the group's smaller competitors; and divestment of the corporate finance division will relieve irrational worries that have been depressing the share price
The group is a cyclical growth stock but remains undervalued by the market with an above-average yield and a below-average PER and our conclusion is that a fair price per share is at least 200p, versus current 144p
 
Solid performance in a testing year
Published: Dec 07 2011

Brewin Dolphin is the largest independent asset manager / stockbroker in the British Isles, operating from 41 branches with £24bn funds under management
Results again show growth in pre-exceptional profits and funds under management despite a fall in the market: Assets under management and revenue both outperformed. AUM grew 3.4% despite the 8.1% fall in the All-Share index,  revenue grew 10% against a weighted average rise of 7% in the average APCIMS index for the year
The strategic initiative to increase revenue and reduce costs is expected to increase operating margins to 20% over the next three years, which should raise pre-exceptional earnings by one-half. Despite this, the market capitalisation is lower than the rule-of thumb valuation (2% of AUM plus surplus cash) by more than 35%; the PER on a Headline earnings basis is 25% below the sector average; the yield of 5.3% is 50% higher than that on the All-Share index
We consider that a fair value for the shares should be at least £2, roughly 50% above the current price
 
Joining the multi-nationals
Published: May 31 2011

Brewin Dolphin is one of the UK's largest private client investment managers operating from 41 branches, offering a wide range of financial services and with £25 billion funds under management (prior to today's transaction).

It has announced the acquisition of Tilman Asset Management (Tilman), a small high-quality investment management company based in Dublin with Assets under Management (AUM) of just over £800m, of which approximately 70% is discretionary: for an initial £18.3m and up to £13.2m of deferred consideration, all payable in shares.

Tilman invests around 30% of its client's funds in the UK where Brewin has one of the largest teams of buy-side analysts; Tilman's back office will benefit from using Brewin's new system when that shall have been completed and fully tested in a couple of years; Brewin's size and strength, and its known policy of sharing rewards with those who earn them, will help it attract good quality staff. Tilman is more oriented towards the higher margin HNW/UHNW segment than Brewin's UK business. Consequently, Tilman Brewin Dolphin will contribute a greater percentage share of group profits, particularly after tax thanks to the lower Irish tax rate, than it will of group revenue.

 
We think that this deal adds materially to Brewin's medium- and long-term prospects.

ARCHIVE

2011
Disposal of the Corporate Advisory and Broking Division
Published: Feb 16 2011

The disposal of the Corporate & Advisory Broking Division will marginally reduce Headline Earnings, upon which I focus, but add a few £m to IFRS reported profits for the current year and, because it reduces perceived risk, enhance the group's market capitalisation.

The stock market has responded by increasing the Brewin share price to 176.5p, at which point we still think that it is significantly undervalued on a PFER of less than 12.5x

Clear market leader and still growing
Published: Feb 07 2011

As a cyclical growth stock with an above-average yield on a well-covered dividend and a below-average PER, Brewin Dolphin remains anomalously undervalued by the market.  Having established itself as the undisputed leader in private client asset management/stockbroking with the largest share of the market whether by number of advisory/discretionary clients, funds under management, or revenue and the only truly national branch network, it is still gradually increasing its share of a growing market.
2010
Outstripping the market
Published: Dec 01 2010

Brewin Dolphin achieved impressive growth in funds under management of 13.2% and in profits before exceptional items of 24% (43% in IFRS pre-tax profits) with only modest help from the market environment and despite significantly lower interest returns.

The market muted response of a 0.25p rise in the share price leaves it on a 30% discount to the sector average PER and a similar discount to the rule-of-thumb valuation for asset managers/stockbrokers instead of a premium appropriate for the leading company in its sector.

Resilient results
Published: Jun 01 2010

The largest asset manager / stockbroker in the UK and Channel Isles

First half adjusted pbt + 21%

Assets managed at a record £23bn

Yield of 5.7% and PFER of under 10x
Leading the field
Published: Feb 11 2010

the leading private client asset manager / stockbroker; £22bn fum

resilient in volatile markets having cut costs

substantially undervalued with low PER and attractive yield

2009
"The worst is over for the equity market"
Published: Jun 01 2009

Brewin Dolphin has produced a solid set of interim results, in line with analysts' expectations, despite a steep fall in share values during one of the most volatile and bruising periods for the stock market in my lifetime.
Resilient in falling markets and continuing to outperform rivals
Published: Jan 28 2009

The leading private client asset manager/stockbroker

High level of employee share ownership aligns interests with external investors

Fixed costs cut

£17 billion of funds under management

Undervalued by market on multiple valuation metrics
2008
Sector leader is still growing
Published: Dec 01 2008

Investment Management revenue and profit up despite fall in market

AUM outperform benchmarks

Investment Banking still profitable

Shares undervalued - high yield, low PER, market cap less than 1% of AUM plus cash
Interim profits rise in the face of weakening markets
Published: Jun 03 2008

Asset management continues to grow, despite decline in FTSE

Investment banking achieves £1m PBT despite market conditions

Balance sheet still exceptionally strong

Shares appear very undervalued on FUM
Undervalued by market
Published: Jan 07 2008

Strong growth from previous records in all key metrics

The leading independent private client asset manager and stockbroker

High level of employee share ownership aligns interests with external investors

£21 billion of funds under management

 

2007
Excellent results
Published: Nov 30 2007

Investment reaping dividends with growing market share

FUM are one third larger than any other stockbroker

22% rise in the dividend

Impressive results again
Published: May 25 2007

Discretionary FUM rose by 15%

15% rise in interim dividend

Brewin Dolphin has new teams in a number of provincial cities

Clear market leader
Published: Jan 26 2007

Record profits reported

Brewing Dolphin now leading independent private client asset manager and stockbroker

High level of employee share ownership aligns interests with external investors

£19 billion of funds under management

2006
Brewin Dolphin - Record interim results
Published: May 30 2006

  • Real growth, well ahead of indices
  • Now leading independent asset manager/stockbroker
  • Still gaining market share

 

Brewin Dolphin; excellent 2005 results continues success story
Published: Jan 26 2006

  • Excellent results for both 2004 and 2005
  • Long-term growth more than six times as fast as market
  • Continual gain of market share
  • Growth prospects enhanced by pensions crisis
  • Extremely strong financially


2005
Brewin Dolphin; Strong results at half year
Published: Jun 02 2005

  • EPS plus 36%
  • Dividend plus 33%
  • Forward planning at management level

Brewin Dolphin; the trend is up
Published: Jan 07 2005

  • Recovery allied with growth
  • Pre tax profit trebled
  • Dividend fully restored
  • Switch of clients to feepaying basis improves both quality and quantity of future profits

  • Split Capital Trusts cloud lifted

  • Continued outperformance of market averaging 5%pa

2004
Brewin Dolphin; Private Clients are Back
Published: Jun 17 2004

The first half of 2002-03 saw the nadir of the bear market so it was predictable that Brewin Dolphin's revenues in the latest half would benefit from the partial stock market recovery but the 400% rise in pre-tax profits was better than expected thanks to the group's continuing efforts to improve revenues and reduce costs.
Price and estimates for 04 marked up as Brewin takes 03 on the chin to turn corner
Published: Feb 19 2004

Brewin was able to deliver a second half advance at the operating level, despite a tough 2003, with restructurings and the miserable first half holding back full year earnings and making for a reduced dividend.
2003
Brewin Dolphin July 2003
Published: Jul 01 2003

Despite entering the fourth year of the longest bear market for fifty years, with both share price indices and trading volumes below half of peak levels, Brewin Dolphin has continued to be profitable and has increased market share.

Brewin Dolphin is now the clear leader in terms of Funds Under Management ('FUM') thanks to above-average portfolio performance and incremental growth.