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BREWIN DOLPHIN HOLDINGS PLC

Interim Financial Report 2018

Highlights – Another strong period of organic fund inflows and the Group has made further progress towards achieving its strategic plan.

– Total funds stood at £39.7bn at 31 March 2018 (H1 2017: £37.8bn, FY 2017: £40.1bn); with strong net funds flows of £0.9bn offset by lower investment returns; since then total funds have increased and as at 30 April 2018 were c.£41bn.

– Discretionary funds of £34.3bn, increased by 1.5% (FY 2017: £33.8bn).

– Net discretionary funds inflows, including transfers, of £1.3bn (H1 2017: £1.1bn) representing an annualised growth rate of 7.7% (H1 2017: 7.6%).

– Total income for the period of £161.8m (H1 2017: £147.4m).

– Core1 income of £156.3m increased by 11.4% (H1 2017: £140.3m).

– Total fee income of £115.6m (H1 2017: £104.7m), increased by 10.4% representing 71.4% of total income (H1 2017: 71.0%); commission income was £32.9m (H1 2017: £33.0m).

– Adjusted2,4 profit before tax of £38.8m increased by 19.8% (H1 2017: £32.4m).

– Adjusted2,4 profit before tax margin 24.0% (H1 2017: 22.0%).

– Statutory profit before tax of £34.1m, 20.1% higher than H1 2017 (£28.4m).

– Adjusted2,4 earnings per share:

– Basic earnings per share increased by 18.9% to 11.3p (H1 2017: 9.5p).

– Diluted earnings per share3 increased by 18.7% to 10.8p (H1 2017: 9.1p).

– Statutory earnings per share:

– Basic earnings per share of 9.7p (H1 2017: 8.2p).

– Diluted earnings per share of 9.4p (H1 2017: 7.9p).

– Interim dividend of 4.4p per share announced, an increase of 3.5% (2017 interim: 4.25p per share).

1. Core income is defined as income derived from discretionary investment management, financial planning, Brewin Portfolio Service (“BPS”) and execution only services.

2. These figures have been adjusted to exclude redundancy costs – £nil (H1 2017: £0.1m), onerous contracts – £0.4m (H1 2017: £0.1m), amortisation of client relationships – £4.0m (H1 2017: £2.6m), incentivisation awards – £0.6m (H1 2017: £nil), acquisition costs – £nil (H1 2017: £1.2m) and FSCS levy refund – £0.3m (H1 2017: £nil).

3. See note 6.

4. See Annual Report and Accounts 2017 page 31 for the explanation of the adjusted measures and why they have been chosen.

David Nicol, Chief Executive, said:

“I am pleased to report a robust first half of our financial year with strong net discretionary inflows, despite challenges in the wider market. We continue to deliver against our strategy and build on the positive momentum across the business. We remain positive in our outlook and confident in the strength and increasing relevance of

our advice-led service.”

Contents

01 First half review

02 Results and business performance

08 Condensed Consolidated Income Statement

09 Condensed Consolidated Statement of Comprehensive Income

10 Condensed Consolidated Balance Sheet

11 Condensed Consolidated Statement of Changes in Equity

12 Condensed Consolidated Cash Flow Statement

13 Notes to the Condensed Consolidated Set of Financial Statements

24 Independent Review Report

Interim Management Report To the members of Brewin Dolphin Holdings PLC

Brewin Dolphin Holdings PLC 1brewin.co.uk

First half review The first half of the financial year has seen continued positive momentum with adjusted diluted earnings per share increasing by 18.7% compared to the same period last year (statutory diluted earnings per share: 19.0% higher).

We continue to deliver against our strategy, focusing on generating improved and sustainable organic growth across the range of our core services by leveraging our core competencies of offering advice and investment solutions in a personalised relationship-based model.

Total discretionary funds grew by 1.5% in the period to £34.3bn (FY 2017: £33.8bn) with sustained net inflows of £1.3bn; including £0.2bn of net transfers from other services. The annualised growth rate of net discretionary funds flow of 7.7% is in line with the rate for both the first half of 2017 (7.6%) and the full year to 30 September 2017(8.0%).

Net inflows into our direct discretionary service doubled to £0.4bn compared to H1 2017. Gross inflows half-on-half remained stable at £0.5bn. Over 17% of direct private client funds now receive our wealth management service which combines our financial planning and investment management services.

Once again we have seen strong net flows into our intermediaries services, across both our Managed Portfolio Service (“MPS”) and our bespoke discretionary service. The overall product mix has changed, with net flows into our bespoke discretionary service rising by 50% in comparison to the first half of last year to £0.6bn. The combined net flows from our intermediaries services were £0.9bn (H1 2017: £0.9bn).

The strength of the intermediaries net flows has been driven by the continued focus of our Business Development team in engaging new intermediaries and deepening the existing relationships with intermediaries across the UK. We have seen increasing demand for our bespoke discretionary services in relation to advice around pensions freedoms, leading to an increase in our average new case size of 22%. We have also successfully completed the transition of the relevant assets within our MPS portfolios into our four new manager of manager funds, which has significantly reduced the cost of ownership for all clients, as we leverage our scale with Asset Managers.

Growth remains at the top of our agenda. The initiatives we highlighted at our 2017 results announcement are evolving, we are hiring talented individuals, enhancing and developing our services and focusing on distribution, all of which will be supported by an improved use of technology.

As announced in January 2018, we are opening a new office at 8 Waterloo Place in the West End of London aimed at providing clients with more complex needs a tailored service. We have also made progress on our new simplified wealth planning and investment advice service, WealthPilot, which is based in our London office.

Our Financial Planning Academy is now well established and a second cohort of 12 entrants are due to join in the second half of the year. Additionally, we launched a senior level apprenticeship programme, the Cranfield Executive MBA award, and our first intake into this two-year programme commenced in April 2018.

As ever, we continue to focus on improving operational efficiency, key business processes and upgrades to our technology. A complete technology workspace and communications refresh in Autumn 2017 has aided and increased collaborative working across the Group and enhanced the general working environment.

As we continue to grow the business, we are reviewing both our London head office space requirements and our systems needs in particular those that support client facing staff and our settlement and custody needs.

We completed the changes to our processes and systems to ensure compliance with the Markets in Financial Instruments Directive II (“MiFID II”) requirements ahead of January 2018 and are prepared for the introduction of the General Data Protection Regulation (“GDPR”) which comes into force on 25 May 2018.

Interim Management Report continued

2 Brewin Dolphin Holdings PLC Interim Financial Report 2018

Results and business performance Adjusted profit before tax of £38.8m (H1 2017: £32.4m) increased by 19.8% or 13.3% after adjusting for the impact of the acquisition in H2 2017 (see below). The increase is as a result of growth in total income of 9.8% (7.7% excluding the H2 2017 acquisition) and an improved adjusted PBT margin of 24.0% (H1 2017: 22.0%).

Statutory profit before tax for the period was £34.1m (H1 2017: £28.4m), an increase of 20.1%.

Unaudited period to 31 March

2018 £’m

Unaudited period to 31 March

2017 £’m Change

Core1 income 156.3 140.3 11.4%

Other income 5.5 7.1 (22.5)%

Total income 161.8 147.4 9.8%

Fixed staff costs (57.8) (55.1) 4.9%

Other operating costs (36.4) (34.5) 5.5%

Total fixed operating costs (94.2) (89.6) 5.1%

Adjusted profit before variable staff costs2,5 67.6 57.8 17.0%

Variable staff costs (29.1) (25.4) 14.6%

Adjusted operating profit2,5 38.5 32.4 18.8%

Net finance income 0.3 –

Adjusted profit before tax2,5 38.8 32.4 19.8%

Exceptional items3 (0.7) (1.4)

Amortisation of client relationships (4.0) (2.6)

Profit before tax 34.1 28.4 20.1%

Taxation (7.5) (6.1)

Profit after tax 26.6 22.3 19.3%

Earnings per share

Basic earnings per share 9.7p 8.2p 18.3%

Diluted earnings per share 9.4p 7.9p 19.0%

Adjusted4 earnings per share

Basic earnings per share 11.3p 9.5p 18.9%

Diluted earnings per share 10.8p 9.1p 18.7%

1. Core income is defined as income derived from discretionary investment management, financial planning, Brewin Portfolio Service (“BPS”) and execution only services.

2. These figures have been adjusted to exclude redundancy costs – £nil (H1 2017: £0.1m), onerous contracts – £0.4m (H1 2017: £0.1m), amortisation of client relationships – £4.0m (H1 2017: £2.6m), incentivisation awards – £0.6m (H1 2017: £nil), acquisition costs – £nil (H1 2017: £1.2m) and FSCS levy refund – £0.3m (H1 2017: £nil).

3. Exceptional items include redundancy costs, onerous contracts, acquisition costs, FSCS levy refund and incentivisation awards.

4. See note 6.

5. See Annual Report and Accounts 2017 page 31 for the explanation of the adjusted measures and why they have been chosen.

Impact of H2 2017 acquisition In May 2017, the Group acquired Duncan Lawrie Asset Management Limited. The acquisition contributed £3.1m of income for the 6 months ended 31 March 2018 and £2.1m to adjusted profit before tax (after associated staff costs of £0.7m and administrative, overhead and variable costs of £0.3m); this is equivalent to incremental adjusted diluted earnings per share of 0.4p. The impact on statutory profit before tax was a loss of £0.3m and a reduction of 0.1p to statutory diluted earnings per share after the costs of incentivisation awards and amortisation attributable to the acquisition, both of which are excluded from the adjusted measures.


Funds Total funds were £39.7bn at 31 March 2018 (H1 2017: £37.8bn, FY 2017: £40.1bn); with strong net funds flows of £0.9bn during the period offset by lower investment returns; since then total funds have increased and, as at 30 April 2018 were c.£41bn.

The first six months of the year saw gross discretionary funds inflows of £1.7bn (H1 2017: £1.6bn, FY 2017: £3.4bn) and gross outflows stabilising at £0.6bn, equivalent to a 3.6% annualised outflow rate (H1 2017: 4.2%).

Total funds by service category

£'bn 31 March

2017 30 September

2017 31 March

2018 Change last 12 months

Change last 6 months

Private clients 18.0 18.9 18.8 4.4% (0.5)%

Charities & corporates 4.4 4.5 4.4 –% (2.2)%

Direct discretionary 22.4 23.4 23.2 3.6% (0.9)%

Intermediaries 7.3 8.1 8.5 16.4% 4.9%

MPS 1.8 2.3 2.6 44.4% 13.0%

Indirect1 discretionary 9.1 10.4 11.1 22.0% 6.7%

Total discretionary 31.5 33.8 34.3 8.9% 1.5%

BPS 0.1 0.1 0.1 –% –%

Execution only 3.4 3.5 3.7 8.8% 5.7%

Core funds 35.0 37.4 38.1 8.9% 1.9%

Advisory 2.8 2.7 1.6 (42.9)% (40.7)%

Total funds 37.8 40.1 39.7 5.0% (1.0)%

Indices

MSCI WMA Private Investor Balanced Index 1,536 1,545 1,527 (0.6)% (1.2)%

FTSE 100 7,323 7,373 7,057 (3.6)% (4.3)%

1. intermediary services

Funds flow by service category

£'bn 30 Sept

2017 Inflows Outflows Internal

transfers Net flows Annualised growth rate

Investment performance

31 Mar 2018 Change

Private clients 18.9 0.4 (0.3) 0.3 0.4 4.2% (0.5) 18.8 (0.5)%

Charities & corporates 4.5 0.1 (0.1) – – –% (0.1) 4.4 (2.2)%

Direct discretionary 23.4 0.5 (0.4) 0.3 0.4 3.4% (0.6) 23.2 (0.9)%

Intermediaries 8.1 0.9 (0.2) (0.1) 0.6 14.8% (0.2) 8.5 4.9%

MPS 2.3 0.3 – – 0.3 26.1% – 2.6 13.0%

Indirect1 discretionary 10.4 1.2 (0.2) (0.1) 0.9 17.3% (0.2) 11.1 6.7%

Total discretionary 33.8 1.7 (0.6) 0.2 1.3 7.7% (0.8) 34.3 1.5%

BPS 0.1 – – – – –% – 0.1 –%

Execution only 3.5 0.3 (0.4) 0.7 0.6 34.3% (0.4) 3.7 5.7%

Core funds 37.4 2.0 (1.0) 0.9 1.9 10.2% (1.2) 38.1 1.9%

Advisory 2.7 – (0.1) (0.9) (1.0) (74.1)% (0.1) 1.6 (40.7)%

Total funds 40.1 2.0 (1.1) – 0.9 4.5% (1.3) 39.7 (1.0)%

1. intermediary services

Total discretionary funds grew by 1.5% driven by funds inflows and a lower rate of outflows offset by negative overall investment performance over the six months. Total discretionary net funds inflows of £1.3bn (H1 2017: £1.1bn) resulted from strong gross inflows of £1.7bn, gross outflows of £0.6bn and net transfers from other service categories of £0.2bn. Annualised growth from total discretionary funds was 7.7% (H1 2017: 7.6%) with positive net inflows in all discretionary services.



Direct discretionary funds grew by 3.4% on an annualised basis resulting from £0.5bn of gross funds inflows, stable outflows and transfers from other service categories. The intermediaries channel continued to grow strongly representing 69% (£0.9bn) of net discretionary funds inflows in the period.

During the period, advisory funds fell by £1.1bn, with £0.9bn of advisory funds transferred into other services within the Group, this included £0.6bn of transfers to direct discretionary from the advisory managed service. The Group has withdrawn from its advisory dealing service, following changes in regulation.

Execution only net fund flows were £0.6bn in the period, with £0.7bn of positive net transfers from other service categories.

Income Core income grew 11.4% to £156.3m (H1 2017: £140.3m) supported by continued organic funds growth and higher financial planning income.

Income is analysed as follows:

Unaudited six months to

31 March 2018 £’m


31 March 2017 £’m Change

Private clients 92.3 85.9 7.5%

Charities & corporates 11.3 10.8 4.6%

Direct discretionary 103.6 96.7 7.1%

Intermediaries 31.1 26.2 18.7%

MPS 3.5 2.3 52.2%

Indirect discretionary 34.6 28.5 21.4%

Total discretionary 138.2 125.2 10.4%

Financial planning 12.2 9.5 28.4%

BPS 0.5 0.5 –%

Execution only 5.4 5.1 5.9%

Core income 156.3 140.3 11.4%

Advisory investment management 4.4 6.9 (36.2)%

Other income 1.1 0.2 n/a

Total other income 5.5 7.1 (22.5)%

Total income 161.8 147.4 9.8%

Positive net funds inflows in all discretionary channels of £1.3bn (H1 2017: £1.1bn) supported the 10.4% growth in discretionary income to £138.2m (H1 2017: £125.2m).

The Group continues to grow its indirect discretionary business, increasing the number of IFA clients who use both the discretionary and model services, which has generated significant income growth over the period.

Financial planning income grew strongly by 28.4% to £12.2m (H1 2017: £9.5m). Other income grew by £0.9m, following the rise in the Bank of England base rate to 0.5%.


Fees and Commissions

Unaudited six months

to 31 March 2018 Unaudited six months

to 31 March 2017 Change

£’m Fees Commission Total Fees Commission Total Fees Commission Total

Private clients 66.0 26.3 92.3 60.5 25.4 85.9 9.1% 3.5% 7.5%

Charities & corporates 9.8 1.5 11.3 9.3 1.5 10.8 5.4% –% 4.6%

Direct discretionary 75.8 27.8 103.6 69.8 26.9 96.7 8.6% 3.3% 7.1%

Intermediaries 30.5 0.6 31.1 25.4 0.8 26.2 20.1% (25.0)% 18.7%

MPS 3.5 – 3.5 2.3 – 2.3 52.2% –% 52.2%

Indirect discretionary 34.0 0.6 34.6 27.7 0.8 28.5 22.7% (25.0)% 21.4%

Total discretionary 109.8 28.4 138.2 97.5 27.7 125.2 12.6% 2.5% 10.4%

BPS 0.5 – 0.5 0.5 – 0.5 –% –% –%

Execution only 2.2 3.2 5.4 1.9 3.2 5.1 15.8% –% 5.9%

Core income excluding financial planning 112.5 31.6 144.1 99.9 30.9 130.8 12.6% 2.3% 10.2%

Core fee income excluding financial planning grew by 12.6% to £112.5m reflecting the growth in funds. Overall fee income yield remained broadly consistent with prior years. Core commission income excluding financial planning grew slightly to £31.6m, reversing the decline seen over the previous 12 months, as a result of more uncertain investment markets leading to increased transaction volumes.

Costs Total fixed operating costs increased by 5.1% to £94.2m (H1 2017: £89.6m).

Fixed staff costs increased by 4.9% to £57.8m (H1 2017: £55.1m) as a result of higher average headcount, the H2 2017 acquisition, pay rises and higher cost of sales from the continued intermediary net inflows.

Total employee numbers have increased by 52 to 1,646, since 31 March 2017, including the H2 2017 acquisition. During the last 6 months, there has been a net 32 increase, following selective hiring of investment managers and financial planners, as well as strategic hires in support functions.

Variable staff costs in the form of profit share have increased in line with business performance.

Other operating costs increased by 5.5% to £36.4m (H1 2017: £34.5m), primarily as a result of inflationary pressures, higher IT related, communication and market data costs and higher premises costs.

Exceptional items of £0.7m (H1 2017: £1.4m) include onerous lease costs and incentivisation awards offset by a FSCS levy refund. These are substantially lower than H1 2017 exceptional items which included acquisition costs relating to the acquisition in H2 2017.

Amortisation of intangible client relationships increased to £4.0m (H1 2017: £2.6m) and includes £1.8m of amortisation in relation to the H2 2017 acquisition.

Capital The Group has a strong balance sheet with cash balances at the period end of £142.0m (H1 2017: £152.3m). These underpin its strong regulatory capital resources.

Dividend The Group’s dividend policy is to grow dividends in line with adjusted earnings, with a target payout ratio of 60% to 80% of annual adjusted diluted earnings per share. The interim dividend has been increased to 4.4p per share (2017 interim: 4.25p per share) and will be payable on 15 June 2018 to shareholders on the register at the close of business on 25 May 2018 with an ex-dividend date of 24 May 2018.



Going concern As stated in note 1 to the condensed set of interim financial statements, the Directors believe that the Group is well placed to manage its business risks successfully. The Group’s forecasts and projections, taking account of possible adverse changes in trading performance, show that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt a going concern basis for the preparation of the condensed interim financial statements. In forming their view, the Directors have considered the Group’s prospects for a period exceeding twelve months from the date the condensed interim financial statements are approved.

Principal risks and uncertainties The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Group’s performance during the remainder of its financial year remain unchanged from those identified on pages 28 and 29 of the 2017 Annual Report and Accounts available on our website www.brewin.co.uk.

Board changes Mike Kellard was appointed as a Non-Executive Director of the Company on 1 December 2017. As previously announced, Andrew Westenberger will stand down as a director with effect from 16 May 2018. We would like to thank Andrew for his significant contribution over the last five years and wish him well in the future. The Board is fully compliant with the UK Corporate Governance Code with respect to Board composition and, as outlined in the year end accounts, we hope to appoint an additional Non-Executive Director shortly.

Outlook We remain confident in the prospects for long-term growth for the Group, which have once again been clearly demonstrated by continued positive momentum on all fronts, despite recent market volatility. We remain confident in the strength and increasing relevance of our advice-led service and committed to ensuring that we have skilled and engaged people providing high quality advice as part of a close client relationship. To that end, we believe that the business is on track as we continue to deliver our organic growth strategy.

David Nicol Chief Executive

15 May 2018

Condensed Consolidated Income Statement for the six months ended 31 March 2018


Note


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Revenue 160,676 147,185 303,896

Other operating income 1,081 229 568

Income 161,757 147,414 304,464

Staff costs (86,816) (80,496) (162,689)

Redundancy costs – (104) (742)

Onerous contracts (374) (142) (1,969)

Amortisation of intangible assets – client relationships 8 (3,978) (2,616) (6,650)

Acquisition costs – (1,159) (1,683)

Incentivisation awards (579) – (1,297)

FSCS levy refund 288 – –

Other operating costs (36,433) (34,494) (71,766)

Operating expenses (127,892) (119,011) (246,796)

Operating profit 33,865 28,403 57,668

Finance income 4 293 102 161

Other gains and losses – – 2

Finance costs 4 (35) (123) (188)

Profit before tax 34,123 28,382 57,643

Tax 5 (7,499) (6,065) (12,490)

Profit for the period 26,624 22,317 45,153

Attributable to:

Equity holders of the parent 26,624 22,317 45,153

26,624 22,317 45,153

Earnings per share

Basic 6 9.7p 8.2p 16.5p

Diluted 6 9.4p 7.9p 16.0p

Condensed Consolidated Statement of Comprehensive Income for the six months ended 31 March 2018



31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Profit for the period 26,624 22,317 45,153

Items that will not be reclassified subsequently to profit and loss:

Actuarial gain on defined benefit pension scheme 388 9,061 8,558

Deferred tax charge on actuarial gain on defined benefit pension scheme (35) (2,142) (1,383)

353 6,919 7,175

Items that may be reclassified subsequently to profit and loss:

Revaluation of available-for-sale investments (29) 31 (75)

Deferred tax credit/(charge) on revaluation of available-for-sale investments 5 (6) 14

Exchange differences on translation of foreign operations (31) (45) 92

(55) (20) 31

Other comprehensive income for the period net of tax 298 6,899 7,206

Total comprehensive income for the period 26,922 29,216 52,359

Attributable to:

Equity holders of the parent 26,922 29,216 52,359

26,922 29,216 52,359

Condensed Consolidated Balance Sheet as at 31 March 2018


Note

Unaudited as at

31 March 2018

£'000

Unaudited as at

31 March 2017

£'000

Audited as at

30 September 2017

£'000

Assets

Non-current assets

Intangible assets 8 89,681 76,462 95,791

Property, plant and equipment 9 7,160 3,975 3,840

Other receivables 200 288 200

Defined benefit pension scheme 12 6,442 3,541 4,487

Net deferred tax asset 4,270 4,818 6,743

Total non-current assets 107,753 89,084 111,061

Current assets

Available-for-sale investments 10 701 867 736

Trading investments 10 328 1,170 36

Trade and other receivables 238,910 225,035 243,144

Cash and cash equivalents 141,955 152,303 169,995

Total current assets 381,894 379,375 413,911

Total assets 489,647 468,459 524,972

Liabilities

Current liabilities

Trade and other payables 221,036 208,490 245,309

Current tax liabilities 4,715 4,457 4,993

Provisions 11 4,719 2,759 3,755

Total current liabilities 230,470 215,706 254,057

Net current assets 151,424 163,669 159,854

Non-current liabilities

Provisions 11 7,954 6,330 8,339

Total non-current liabilities 7,954 6,330 8,339

Total liabilities 238,424 222,036 262,396

Net assets 251,223 246,423 262,576

Equity

Share capital 13 2,834 2,833 2,833

Share premium account 13 152,432 152,268 152,320

Own shares (26,948) (26,542) (25,921)

Revaluation reserve (109) 1 (85)

Merger reserve 70,553 70,553 70,553

Profit and loss account 52,461 47,310 62,876

Equity attributable to equity holders of the parent 251,223 246,423 262,576

Condensed Consolidated Statement of Changes in Equity for the six months ended 31 March 2018


Attributable to the equity holders of the parent

Share capital £'000

Share premium account

£'000

Own shares

£'000

Revaluation reserve

£'000

Merger reserve

£'000

Profit and loss account

£'000 Total £'000

At 30 September 2016 (audited) 2,830 151,836 (29,294) (24) 70,553 46,908 242,809

Profit for the period – – – – – 22,317 22,317

Other comprehensive income for the period

Deferred and current tax on other comprehensive income – – – (6) – (2,142) (2,148)

Actuarial gain on defined benefit pension scheme – – – – – 9,061 9,061

Revaluation of available-for-sale investments – – – 31 – – 31

Exchange differences on translation of foreign operations – – – – – (45) (45)

Total comprehensive income for the period – – – 25 – 29,191 29,216

Dividends – – – – – (24,996) (24,996)

Issue of share capital 3 432 – – – – 435

Own shares acquired in the period – – (5,741) – – – (5,741)

Own shares disposed of on exercise of options – – 8,493 – – (8,493) –

Share-based payments – – – – – 4,149 4,149

Tax on share-based payments – – – – – 551 551

At 31 March 2017 (unaudited) 2,833 152,268 (26,542) 1 70,553 47,310 246,423



Deferred and current tax on other comprehensive income – – – 20 – 759 779

Actuarial loss on defined benefit pension scheme – – – – – (503) (503)

Revaluation of available-for-sale investments – – – (106) – – (106)

Exchange differences on translation of foreign operations – – – – – 137 137

Total comprehensive (expense)/income for the period – – – (86) – 23,229 23,143

Dividends – – – – – (11,618) (11,618)

Issue of share capital – 52 – – – – 52

Own shares acquired in the period – – (66) – – – (66)

Own shares disposed of on exercise of options – – 687 – – (687) –



At 30 September 2017 (audited) 2,833 152,320 (25,921) (85) 70,553 62,876 262,576



Deferred and current tax on other comprehensive income – – – 5 – (35) (30)

Actuarial gain on defined benefit pension scheme – – – – – 388 388

Revaluation of available-for-sale investments – – – (29) – – (29)

Exchange differences on translation of foreign operations – – – – – (31) (31)

Total comprehensive (expense)/income for the period – – – (24) – 26,946 26,922

Dividends – – – – – (29,516) (29,516)

Issue of share capital 1 112 – – – – 113

Own shares acquired in the period – – (13,422) – – – (13,422)

Own shares disposed of on exercise of options – – 12,395 – – (12,395) –



At 31 March 2018 (unaudited) 2,834 152,432 (26,948) (109) 70,553 52,461 251,223

Condensed Consolidated Cash Flow Statement for the six months ended 31 March 2018


Note


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Net cash inflow from operating activities 14 20,126 13,006 67,463

Cash flows from investing activities

Purchase of intangible assets – client relationships (121) – –

Purchase of intangible assets – software (33) (988) (1,437)

Purchases of property, plant and equipment (4,874) (144) (589)

Purchase of available-for-sale investments – (18) (18)

Purchase of trading investments (300) – –

Acquisition of subsidiary – – (25,500)

Proceeds on disposal of trading investments – – 1,149

Proceeds on disposal of available-for-sale investments 6 15 42

Net cash used in investing activities (5,322) (1,135) (26,353)

Cash flows from financing activities

Dividends paid to equity shareholders 7 (29,516) (24,996) (36,614)

Purchase of own shares (13,422) (5,741) (5,807)

Proceeds on issue of shares 113 435 487

Net cash used in financing activities (42,825) (30,302) (41,934)

Net decrease in cash and cash equivalents (28,021) (18,431) (824)

Cash and cash equivalents at the start of period 169,995 170,766 170,766

Effect of foreign exchange rates (19) (32) 53

Cash and cash equivalents at the end of period 141,955 152,303 169,995

Notes to the Condensed Set of Financial Statements


1. Accounting policies Basis of preparation The annual financial statements of Brewin Dolphin Holdings PLC are prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union.

The condensed set of financial statements included in this Interim Financial Report has been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’ (‘IAS 34’), as adopted by the European Union and the Interim Financial Report has been prepared in accordance with the Disclosure and Transparency Rules (‘DTR’) of the Financial Conduct Authority.

The condensed set of financial statements included in this Interim Financial Report for the six months ended 31 March 2018 should be read in conjunction with the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2017.

Going concern The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly they continue to adopt the going concern basis in preparing the condensed financial statements.

Significant accounting policies and use of estimates and judgements The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the Group’s accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of Brewin Dolphin Holdings PLC for the year ended 30 September 2017.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial statements for the year ended 30 September 2017.

Several amendments to accounting standards apply for the first time during the period; they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

2. General information Brewin Dolphin Holdings PLC (the ‘Company’) is a public limited company incorporated in the United Kingdom. The shares of the Company are listed on the London Stock Exchange. The address of its registered office is 12 Smithfield Street, London, EC1A 9BD. This Interim Financial Report was approved for issue on 15 May 2018.

A copy of this Interim Financial Report including Condensed Financial Statements for the period ended 31 March 2018 is available at the Company’s registered office and on the Company's investor relations website (www.brewin.co.uk).

The information for the period ended 30 September 2017 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3. Segmental information For management reporting purposes the Group currently has a single operating segment. This forms the reportable segment of the Group for the period. Please refer to the Condensed Consolidated Income Statement and the Condensed Consolidated Balance Sheet, for numerical information.

The Group’s operations are carried out in the United Kingdom, Channel Islands and the Republic of Ireland. All segmental income related to external clients.

The accounting policies of the operating segment are the same as those of the Group.


4. Finance income and costs


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Finance income

Interest income on defined benefit pension scheme 67 – –

Interest on bank deposits 226 102 161

293 102 161

Finance costs

Interest expense on defined benefit pension scheme – 68 119

Unwind of discounts on provisions 25 20 58

Interest on bank overdrafts 10 35 11

35 123 188

5. Taxation The Group calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings.


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Current tax

United Kingdom:

Charge for the period 5,193 4,833 11,594

Adjustments in respect of prior periods 287 (49) (157)

Overseas:

Charge for the period 151 28 309

Adjustments in respect of prior periods – (1) (8)

Total current tax 5,631 4,811 11,738

Deferred tax

United Kingdom:

Charge for the period 2,148 1,205 705

Adjustments in respect of prior periods (280) 49 47

Total deferred tax 1,868 1,254 752

Tax charged to the Income Statement 7,499 6,065 12,490

Notes to the Condensed Consolidated Set of Financial Statements continued


6. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data:


31 March 2018 '000


31 March 2017 '000

Audited year to

30 September 2017 '000

Number of shares

Basic

Weighted average number of shares in issue in the period 274,397 272,442 272,840

Diluted

Effect of weighted average number of options outstanding for the period 8,004 8,701 10,162

Diluted weighted average number of options and shares for the period 282,401 281,143 283,002

Adjusted1 diluted

Effect of full dilution of employee share options which are contingently issuable or have future attributable service costs 3,094 5,265 2,406

Adjusted1 diluted weighted average number of options and shares for the period 285,495 286,408 285,408

£'000 £'000 £'000

Earnings attributable to ordinary shareholders

Basic and diluted profit for the year 26,624 22,317 45,153

Redundancy costs – 104 742

Onerous contracts costs 374 142 1,969

Amortisation of intangible assets – client relationships 3,978 2,616 6,650

Acquisition costs – 1,159 1,683

Incentivisation awards 579 – 1,297

FSCS levy refund (288) – –

Disposal of available-for-sale investments – – (2)

less tax effect of above (381) (398) (1,481)

Adjusted basic and diluted profit for the period and attributable earnings 30,886 25,940 56,011

Earnings per share

Basic 9.7p 8.2p 16.5p

Diluted 9.4p 7.9p 16.0p

Adjusted2 earnings per share

Basic 11.3p 9.5p 20.5p

Adjusted1 diluted 10.8p 9.1p 19.6p

1. The dilutive shares used for this measure differ from that used for statutory dilutive earnings per share; the future value of service costs attributable to employee share options is ignored and contingently issuable shares for Long-term Incentive Plan (‘LTIP’) options are assumed to fully vest. The Directors have selected this measure as it represents the underlying effective dilution by offsetting the impact to the calculation of basic shares of the purchase of shares by the Employee Share Ownership Trust (‘ESOT’) to satisfy options.

2. Excluding redundancy costs, onerous contracts costs, amortisation of client relationships, acquisition costs, incentivisation awards, FSCS levy refund and disposal of available-for-sale investments.


7. Dividends


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Amounts recognised as distributions to equity shareholders in the period:

2016/2017 Final dividend paid 7 February 2018, 10.75p per share (2017: 9.15p per share) 29,516 24,996 24,996

Interim dividend paid 16 June 2017, 4.25p per share – – 11,618

29,516 24,996 36,614

An interim dividend of 4.4p per share was declared by the Board on 15 May 2018 and has not been included as a liability as at 31 March 2018. This interim dividend will be paid on 15 June 2018 to shareholders on the register at the close of business on 25 May 2018 with an ex-dividend date of 24 May 2018.

8. Intangible assets

Goodwill

£'000

Client relationships

£'000 Software

£'000 Total £'000

Cost

At 30 September 2016 (audited) 48,637 107,902 18,206 174,745

Additions – 119 616 735

Exchange differences – (2) – (2)

At 31 March 2017 (unaudited) 48,637 108,019 18,822 175,478

Additions – 25,589 263 25,852

Exchange differences – 5 – 5


Additions – 329 33 362


Disposals – – (968) (968)


Accumulated amortisation and impairment

At 30 September 2016 (audited) – 85,105 8,587 93,692

Amortisation charge for the year – 2,616 2,709 5,325


At 31 March 2017 (unaudited) – 87,720 11,296 99,016

Amortisation charge for the period – 4,034 2,491 6,525

Exchange differences – 3 – 3

At 30 September 2017 (audited) – 91,757 13,787 105,544

Amortisation charge for the period – 3,978 2,494 6,472


Disposals – – (968) (968)

At 31 March 2018 (unaudited) – 95,734 15,313 111,047

Net book value






9. Property, plant and equipment

Leasehold improvements

£'000

Office equipment

£'000

Computer equipment

£'000 Total

£'000

Cost


Additions 24 40 97 161

Exchange differences (3) (8) – (11)

Disposals – (6) – (6)


Additions 666 58 88 812

Exchange differences 7 20 – 27

Disposals (178) (2) – (180)


Additions 215 62 4,239 4,516


Disposals – (1,300) (3,813) (5,113)


Accumulated depreciation and impairment


Charge for the period 500 240 265 1,005


Eliminated on disposal – (6) – (6)


Charge for the period 526 148 238 912

Exchange differences 6 16 – 22

Eliminated on disposal (138) (2) – (140)


Charge for the period 432 103 660 1,195


Eliminated on disposal – (1,300) (3,813) (5,113)


Net book value

At 31 March 2018 (unaudited) 2,657 341 4,162 7,160

At 30 September 2017 (audited) 2,874 383 583 3,840

At 31 March 2017 (unaudited) 2,773 469 733 3,975


10. Investments Trading investments (Level 1)

Listed investments

£'000

At 31 March 2018 (unaudited) 328

At 30 September 2017 (audited) 36

At 31 March 2017 (unaudited) 1,170

The trading investments are measured at fair value which is determined directly by reference to published prices in an active market where available. They are held in an unregulated subsidiary, Brewin Dolphin MP, whose sole objective is to provide seed capital to the model portfolios managed under an investment mandate by Brewin Dolphin Limited.

Available-for-sale investments (Level 3)

Unaudited as at

31 March 2018

£'000

Unaudited as at

31 March 2017

£'000

Audited as at

30 September 2017

£'000

At start of period 736 833 833

Additions – 18 18

Net (loss)/gain from changes in fair value recognised in equity (29) 31 (75)

Disposals (6) (15) (40)

At end of period 701 867 736

Current assets

Available-for-sale investments

– Equity 88 127 95

– Asset-backed security 613 740 641

Total investments 701 867 736

The asset-backed security is a USD fixed rate note, due to mature on 23 September 2019. The available-for-sale investments are held at fair value.

Fair value measurement recognised in the statement of financial position The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

– Level 2 fair value measurements are those derived from inputs other than the quoted price included within Level 1 that are observable for the asset or a liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

– Level 3 fair value measurements are those derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).



Fair value of the Group’s financial assets and liabilities that are measured at fair value on a recurring basis Some of the Group’s financial assets and liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and liabilities are determined.

Unaudited fair value

as at 31 March

2018 £'000

Unaudited fair value

as at 31 March

2017 £'000

Audited fair value

as at 30 September

2017 £'000

Valuation technique(s) and key input(s)

Significant unobservable input(s)

Relationship of unobservable inputs to fair value

Level 1

Trading investments 328 1,170 36

Quoted bid prices in an active market.

n/a n/a

Level 3

Available-for-sale investments – Equity

56 95 63

The valuation is based on published monthly NAVs.

Marketability discount up to 30%.

As the marketability discount increases the valuation decreases.

32 32 32

The valuation is based on the fair value of the loan notes as presented in the most recent audited financial statements of the company. A marketability discount is applied as this investment is highly illiquid.

Marketability discount ranging between 30-50%.


Available-for-sale investments – Asset-backed securities

613 740 641

The valuation is based on the fair value of the loan notes as presented in the most recent audited financial statements of the company. A marketability discount is applied as this investment is highly illiquid.

Marketability discount ranging between 30-50%.


Sensitivity analysis A sensitivity analysis of the significant unobservable inputs used in valuing the Level 3 financial instruments is set out below:

Financial asset Assumption Change in assumption Impact on valuation

Current assets – Available-for-sale investments – Equity Marketability discount Increase by 5% Decrease by £2,500

Current assets – Available-for-sale investments – Asset-backed securities

Marketability discount Increase by 5% Decrease by £47,000


11. Provisions

Sundry claims and associated

costs £'000

Onerous contracts

£'000

Social security and levies on share awards

£'000

Acquisition related

payments £'000

Leasehold dilapidations

£'000

Unaudited as at

31 March 2018

£'000

Unaudited as at

31 March 2017

£'000

Audited as at

30 September 2017

£'000

At start of period 587 5,367 3,474 622 2,044 12,094 9,697 9,697

Additions 536 873 674 786 63 2,932 1,316 5,004

Utilisation of provision (152) (612) (1,245) – (44) (2,053) (1,559) (1,941)

Unwinding of discount – 13 – 13 – 26 20 58

Unused amounts reversed during the year (234) – (36) – (56) (326) (385) (724)

At end of period 737 5,641 2,867 1,421 2,007 12,673 9,089 12,094

Included in current liabilities 737 1,199 1,570 1,213 – 4,719 2,759 3,755

Included in non-current liabilities – 4,442 1,297 208 2,007 7,954 6,330 8,339

737 5,641 2,867 1,421 2,007 12,673 9,089 12,094

The Group recognises a provision for settlements of sundry claims and associated costs. The timing of the settlements is unknown, but it is expected that they will be resolved within 12 months.

The onerous contracts provision at 31 March 2018 is in respect of surplus office space. The valuation of an onerous contract is based on the best estimate of the likely costs discounted to present value. Where the provision is in relation to leasehold obligations on premises and it is more likely than not that the premises will be sublet, an allowance for sublease income has been included in the valuation.

Provision of £5.6 million (30 September 2017: £5.4 million) has been made for surplus office space which the Group may not be able to sublet in the short term. The maximum exposure is the current estimated amount that the Group would have to pay to meet the future obligations under these lease contracts which is approximately £11.0 million as at 31 March 2018 (30 September 2017: £13.4 million), if the assumption regarding future sublets is removed and the time value of money is ignored. The longest lease term covered by the provision has 15.0 years remaining and accounts for £4.3 million of the provision.

The Group has made a provision of £2.0 million (30 September 2017: £2.0 million) for leasehold dilapidations. These costs are expected to arise at the end of the lease. The leases covered by the provision have a maximum remaining term of 15.0 years.

The social security and levies on share awards provision is for Employer’s National Insurance and Apprenticeship Levy on awards outstanding at the end of the period. The provision is based on the Group’s share price, the amount of time passed and likelihood of the share awards vesting and represents the best estimate of the expected future cost.

The provision recognised for acquisition related payments is in respect of both incentivisation awards and deferred consideration payable for the acquisition of client relationships. The incentivisation award provision is £1.2 million (30 September 2017: £0.6 million) and is payable to employees in relation to the retention and acquisition of funds and is based on the best estimate of the likely future obligation discounted for the time value of money. The deferred consideration provision is £0.2 million (30 September 2017: £nil) and is based on the best estimate of the likely future obligation discounted for the time value of money.



12. Defined benefit pension scheme The main financial assumptions used in calculating the Group’s defined benefit pension scheme are as follows:

As at 31 March

2018

As at 31 March

2017

As at 30 September

2017

Discount rate 2.50% 2.60% 2.60%

RPI Inflation assumption 3.20% 3.30% 3.30%

CPI Inflation assumption 2.20% 2.30% 2.30%

Rate of increase in salaries 3.20% 3.30% 3.30%

LPI Pension Increases 3.10% 3.20% 3.20%

Average assumed life expectancies for members on retirement at age 65.

Retiring today

Males 88.4 years 88.8 years 88.6 years

Females 89.5 years 90.0 years 89.6 years

Retiring in 20 years' time

Males 89.7 years 90.5 years 89.9 years

Females 91.0 years 91.8 years 91.1 years

The value of the defined benefit pension liability as at 31 March 2018 was estimated in accordance with International Accounting Standard 19 by a qualified independent actuary. The latest full actuarial funding valuation was carried out as at 31 December 2014 and the 31 December 2017 actuarial funding valuation is underway.

13. Called up share capital The following movements in share capital occurred during the period:

Date No. of shares

Exercise price

(pence)

Share capital £'000

Share premium account

£'000 Total

£'000

At 1 October 2017 283,331,882 2,833 152,320 155,153

Issue of options Various 68,068 131.3p – 168.0p 1 112 113

At 31 March 2018 283,399,950 2,834 152,432 155,266


14. Note to the cash flow statement


31 March 2018

£'000


31 March 2017

£'000

Audited year to

30 September 2017

£'000

Operating profit 33,865 28,403 57,668

Adjustments for:

Depreciation of property, plant and equipment 1,195 1,005 1,917

Amortisation of intangible assets – client relationships 3,978 2,616 6,650

Amortisation of intangible assets – software 2,494 2,709 5,200

Loss on disposal of fixed assets – – 40

Defined benefit pension scheme (1,500) (1,500) (3,000)

Share-based payment expense 4,279 4,149 8,052

Translation adjustments (13) (11) 40

Interest income 226 102 161

Interest expense (10) (35) (11)

Operating cash flows before movements in working capital 44,514 37,438 76,717

(Decrease)/increase in payables and provisions (23,570) (13,852) 25,662

Decrease/(increase) in receivables and trading investments 4,242 (6,975) (25,011)

Cash generated by operating activities 25,186 16,611 77,368

Tax paid (5,060) (3,605) (9,905)

Net cash inflow from operating activities 20,126 13,006 67,463



15. Related party transactions There have been no related party transactions that have taken place in the period that have materially affected the financial position or the performance of the Group during the period and no changes to related party transactions from those disclosed in the 2017 Annual Report and Accounts available via our website www.brewin.co.uk that could have a material effect on the financial position or the performance of the Group. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed. There were no other transactions with related parties which were not part of the Group during the period, with the exception of remuneration paid to key management personnel.

Cautionary statement The Interim Management Report (the ‘IMR’) for the period ended 31 March 2018 has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Statement of Directors’ Responsibilities The Directors confirm that to the best of their knowledge:

a) the condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the EU;

b) the interim management report includes a fair view of the information required by Disclosure and Transparency Rules (‘DTR’) 4.2.7R (indication of important events during the period ended 31 March 2018 and their impact on the condensed set of financial statements; and description of principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a fair view of the information required by DTR 4.2.8R (disclosures of related parties’ transactions and changes therein).

By order of the Board

David Nicol Chief Executive

15 May 2018

Independent Review Report to Brewin Dolphin Holdings PLC


We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018, which comprises the condensed consolidated statement of income, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” as adopted by the European Union.

Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Deloitte LLP Statutory Auditor London, United Kingdom

15 May 2018

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