B
r
e
w
i
n
D
o
l
p
h
i
n
H
o
l
d
i
n
g
s
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
7
Invested for
the future
Annual Report
and Accounts 2017
Our vision is to become the UK’s
leading provider of personalised wealth
and investment management services,
delivering a compelling client
proposition, rewarding careers and
sustainable shareholder returns.
In this report
Strategic Report
1 Our Investment Proposition
6 Our Results
8 About Us
9 Our Services
10 Our Business Model
12 Our Market
14 Chairman’s Statement
16 Chief Executive’s Review
22 Our Strategy
24 Key Performance Indicators
26 Principal Risks and Uncertainties
30 Financial Review
38 Corporate Responsibility
Governance
42 Board of Directors
44 Chairman’s Introduction
45 Corporate Governance Report
48 Committee Reports
56 Directors’ Remuneration Report
70 Directors’ Report
74 Statement of Directors’ Responsibilities
75 Independent Auditor’s Report
Financial Statements
82 Consolidated Financial Statements
90 Notes to the Financial Statements
Other Information
133 Five Year Record
134 Appendix – Calculation of KPIs
135 Shareholder Information
136 Glossary
137 Branch Address List
Visit our corporate website for more
information: https://www.brewin.co.uk
Our Investment Proposition
Why invest in Brewin Dolphin Holdings PLC?
As a leading UK wealth manager, we are invested for the future of our
stakeholders. We exist to protect and grow our clients’ wealth.
Brewin Dolphin is
recognised and well
known for providing
trusted advice and
investment expertise
During our long history as a
respected provider of
high-quality financial services
to clients, we have earned a
reputation for integrity and
trustworthiness that stands us
in good stead for the future.
The future direction of
our market place is
positive
As the role of the state
diminishes, people need
increasingly to take
responsibility for their financial
affairs such as savings,
investments, retirement
planning and long-term care.
Demand for financial advisory
services and investment
management is growing as a
result, creating good long-
term prospects for
continued growth.
For more information
see page 12
Our brand, scale and
investment in our people
enable us to stand out
We are one of the largest
wealth management
companies. We attract,
develop and retain the best
talent to strengthen existing
relationships, win new clients
and help us build an even
stronger organisation.
For more information
see page 38
We are making good
progress with our
strategy and investing
for the future
We have significantly
strengthened our operations
and improved our operational
efficiency in recent years. Now
we are progressing with our
strategy for growth, constantly
investing to increase the
number of clients we serve
and the proportion of their
wealth that we manage.
For more information
see page 16
Brewin Dolphin
www.brewin.co.uk
1
Invested for
the future
These eight ‘enablers’ ensure we can
deliver the services our clients need
and support our growth strategy.
An evolving
proposition
based on trust
Clients’ needs and ambitions evolve over
time, influenced by changing circumstances
and shifting economic trends. We are there to
track every change, drawing on our flexible
business model, market-leading research and
innovative culture to ensure our advice is
constantly relevant and tailored to their needs.
That is how we earn and preserve our
clients’ trust.
Investing in
talent
We invest in attracting, developing and
retaining the best talent. In doing so, we enable
our employees to be as good as they possibly
can be, providing high-quality advice and
consistently doing more for clients. By
ensuring our people are highly engaged we
can rely on their commitment and expertise
for the long-term.
2
Brewin Dolphin
Annual Report 2017
Using technology
to support
relationships
We are a people business that is enabled by
technology. Our investments in technology help
us to spend more time with clients and meet
growing demand for wealth and investment
management services. By offering new
communication channels, apps and portals,
we are constantly improving efficiency and
expanding contact options.
Client-focused
leadership
We are driving our strategy for growth by placing
client needs at the forefront of our business
thinking. That is why our Executive Committee
includes client-facing specialists who represent
our services – financial planning, advice and
investment management. This is how we ensure
that client needs are an important part of strategic
decision-making.
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
f
n
o
r
m
a
t
i
o
n
Brewin Dolphin
www.brewin.co.uk
3
Strategic Report
We’re always there
for our clients
We are growing our presence in our market place in an
increasingly competitive environment. Our availability,
via technology and our network of 29 offices across the
United Kingdom, the Channel Islands and the Republic
of Ireland, helps us to grow our client base and the
share of their wealth that we manage.
4
Brewin Dolphin
Annual Report 2017
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
f
n
o
r
m
a
t
i
o
n
A progressive
business with
a distinctive
culture
Our values – Genuine, Expert and Ambitious – help
us develop and sustain client relationships. As we
advance and innovate, our culture and values
continue to guide us in growing and protecting
our clients’ wealth, helping them to achieve
their ambitions.
Building long-
term relationships
Strengthening existing client relationships and winning
new ones that last are key to sustainable long-term
value for both clients and shareholders. By building
mutually rewarding relationships and understanding
every client’s lifetime goals and ambitions we can
deliver individually tailored, expert planning and advice
that precisely meets their needs.
A focused strategy
for growth
We are delivering on our strategy to grow our core
revenues by expanding the proportion of wealth we
manage for increasing numbers of clients. We continue to
invest for the future – in our people, services, technology,
infrastructure, culture and above all our client relationships.
Brewin Dolphin
www.brewin.co.uk
5
Strategic Report
Our Results
2017 Financial Highlights1
A year of strong growth and performance
To read about the Key Performance Indicators we use to measure our strategic progress, turn to page 24
Total income (£m)
£304.5m
Adjusted2 profit
before tax (£m)
£70.0m
Statutory profit
before tax (£m)
£57.6m
Discretionary
funds (£bn)
£33.8bn
304.5
70.0
61.0
283.7
282.4
62.2
61.0
57.6
33.8
28.8
50.1
24.8
2015
2016
2017
2015
2016
2017
2015
2016
2017
2015
2016
2017
Adjusted2 PBT
margin (%)
23.0%
Statutory PBT
margin (%)
18.9%
Adjusted2 earnings
per share – diluted3 (p)
Earnings per
share – diluted3 (p)
19.6p
16.0p
23.0
21.5
21.9
21.6
17.7
18.9
19.6
17.1
17.1
16.8
16.0
13.9
2015
2016
2017
2015
2016
2017
2015
2016
2017
2015
2016
2017
1. Continuing operations.
2. These figures have been adjusted to exclude redundancy costs, FSCS levy rebate, onerous contracts, one-off migration
costs, amortisation of client relationships, acquisition costs, incentivisation awards and disposal of available-for-sale
investments – see page 31.
3. See note 13 to the Financial Statements.
6
Brewin Dolphin
Annual Report 2017
Group Highlights
Strong period of organic fund inflows
Our net new funds growth rate in overall discretionary funds was 8% during the year, well in excess
of our 5% per annum target.
Discretionary funds of £33.8bn, increased by 17.4%
Total discretionary funds grew 17.4% (15.3% excluding acquired funds) to £33.8 billion
(2016: £28.8 billion) driven by record gross funds inflows, as well as strong investment performance
and outflows reducing to a level more consistent with prior years.
Successful acquisition of Duncan Lawrie Asset Management
(‘DLAM’)
£0.7 billion of funds acquired on the acquisition of the high-quality wealth management business of
DLAM in May 2017; financed entirely from internal resources. Eighteen new investment professionals
and their clients have been welcomed to Brewin Dolphin.
Margin
Improved operational efficiency has allowed growth in the business within our existing capacity,
reflected in the adjusted PBT margin increasing from 21.6% to 23.0% in the year.
To learn more about progress during the year see the Chief Executive’s Review on page 16
Dividend payout ratio
Full year dividend (p)
Cash (£m)
77%
15.0p
£170.0m
77
77
70
15.0
13.0
12.0
170.8
170.0
149.8
2015
2016
2017
2015
2016
2017
2015
2016
2017
Brewin Dolphin
www.brewin.co.uk
7
Strategic ReportGovernanceFinancial StatementsOther Information About Us
A scalable platform
for growth
Our rich heritage and reputation for trust,
integrity and service alongside our regional
presence provides a strong platform from
which we can grow our business.
Our talented and knowledgeable people are delivering
the right services and expertise across the country
to help clients reach their goals.
Who we are
Founded in 1762, Brewin Dolphin is a leading
independently-owned UK wealth manager. We are
listed on the London Stock Exchange, and a member
of the FTSE 250 Index. We take an integrated,
advice-led approach to protecting and growing our
clients’ wealth by combining our experience and
expertise in financial planning and investment
management. Our success is built upon our belief
in the importance of long-term client relationships
and our commitment to a highly personalised and
high-quality service.
See page 137 for branch address list
1,614
Employees
29
Offices
8
Brewin Dolphin
Annual Report 2017
Our Services
The table below outlines the services provided by the Group. Further information on these and our clients can be found
in the Business Model overleaf.
Available to
Direct private
individuals
Private
individuals via
intermediaries
Corporates
Charities
Core services
Wealth Management
Integrated approach to protecting and growing wealth that combines both
Financial Planning and Investment Management.
Investment Management
Designed for clients who want to benefit from a personal focus on their
investment portfolio but do not require financial planning.
Financial Planning
This service helps address our clients’ wider financial planning needs including
advice on investment, protection or retirement requirements.
Managed Portfolio Service (‘MPS’)
This service is provided for financial advisers who offer a suite of risk rated model
portfolios designed for their clients who do not require, or for whom it is not cost
effective to have, a personalised solution.
Brewin Portfolio Service (‘BPS’)
A cost effective service for clients with smaller sums to invest and who do not
need advice. It combines the investment expertise of Brewin Dolphin with the
freedom for individuals who are happy making their own risk decisions and
investment choices. It gives access to six risk rated portfolios which are primarily
invested in passive funds.
Execution Only
Custody, trade execution and settlement services for clients who have
no need for advice and prefer to make their own investment decisions.
This service is limited and we no longer provide it on a standalone
basis to new clients.
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Core funds
Non-core services
£22.5bn
£10.4bn
£1.6bn
£2.9bn
Advisory
The service provided is either ‘Advisory Managed’, where we provide advice on
both the structure of the portfolio and the individual investments within it, or
‘Dealing with Advice’ where advice is provided on a transactional basis only. We
no longer offer this service for new clients, other than on an exceptional basis.
✓
✓
✓
Total core1 funds
2017
2016
1. Discretionary, BPS and execution only funds.
£37.4bn
£32.4bn
Brewin Dolphin
www.brewin.co.uk
9
Strategic ReportGovernanceFinancial StatementsOther Information Our Business Model
A business model
designed for growth
Resources and relationships
We rely on our resources and relationships
in order to run our business. We actively
engage with our stakeholders throughout
our business cycle.
Employees
Our strength is in our 1,614 people, both client-facing
colleagues and those who provide support to them.
We have a strong commitment to development and
we use initiatives such as the employee engagement
survey to understand what is working well and what
can be improved.
Clients
We help to protect and grow wealth for our clients
and maintaining close personal relationships with
them is key to our business.
How our clients access our services
Brewin Portfolio Service
– Risk rated model portfolios
with no advice
Private
Individuals
Direct
Charities/
Corporates
Wealth & Investment
Management &
Financial Planning
– Full advice (either from a
Brewin Dolphin adviser
or an intermediary)
– Caters for all
clients’ needs
– Full suite of solutions
Investors
We engage with our shareholders and potential
investors at events such as the Company’s AGM
and roadshows.
Indirect
Suppliers
We actively engage with our suppliers at different
stages of our business model, which ensures
commitment and transparency between all parties.
Regulators
We ensure a regular dialogue with regulatory bodies
and can therefore adapt to the changing regulatory
landscape and identify where these changes can
provide opportunities for the business.
Intermediaries
Managed Portfolio Service
– Actively managed risk rated
model portfolios for clients
who receive advice from
an intermediary
10
For more information see page 9
Brewin Dolphin
Annual Report 2017
How our business creates
value for our stakeholders
The creation of value for our clients
is inextricably linked to our business
interests.
For Brewin Dolphin
We earn income from services based on the amount of
funds we manage, fees charged for financial planning
or the investment business we transact on behalf of
our clients.
Our personalised approach to client service combined
with the expertise of our professionally qualified and
experienced staff drives the value of our services and
helps us earn the trust of clients and creates loyal
client relationships. This creates value through brand
enhancement and the generation of new leads via referrals.
Our client relationships are a key source of long-term value
for the Group.
For Clients
Clients with advice
We help clients achieve their long-term goals by managing
their wealth for key stages in their life. Every client is
different so we individually assess their needs and develop
personalised plans.
We guide them through today’s complex financial services
environment, helping them nurture their wealth in the most
tax-efficient manner we can.
Clients without advice
Our Brewin Portfolio Service gives clients a low-cost
alternative to the full wealth management service whilst
enabling them to still benefit from the research and
investment expertise of Brewin Dolphin.
Intermediaries
Both our discretionary investment management service
and managed portfolio service allow intermediaries to
effectively outsource the investment management of their
clients’ portfolios whilst retaining the full client relationship.
Our national business development team and network
of offices mean we can support advisers and their clients
face-to-face across the UK.
How we meet our
clients’ needs
We seek to employ and develop
the best people to help our
clients manage the financial
complexities of life and support
financial intermediaries.
Brewin Dolphin advice
Our people take time to establish strong client
relationships based on a full understanding of
individual circumstances. This enables us to
build a tailored financial solution.
This may include our integrated wealth
management service, just financial planning or
just our investment solutions, depending on
client needs and how they access our services.
Investment solutions
We are an independently owned business
which means we can look across a wide range
of financial products to choose the best and
most appropriate options from the
market place.
Our direct portfolios and our model portfolio
services are underpinned by our in-house
research as well as our Group-wide asset
allocation framework.
We deliver the right
services through our
eight key enablers
• An evolving proposition based on trust
• Investing in talent
• Using technology to support relationships
• Client-focused leadership
• We are always there for our clients
• Building long-term relationships
• A progressive business with a
distinctive culture
• A focused strategy for growth
For more information see pages 2-5
Brewin Dolphin
www.brewin.co.uk
How this value is
reinvested in the
business to drive
growth
The value we
create generates
additional capacity
for us to invest further
in our business.
Our business
model is
underpinned by:
• Our strategy (p 22)
• Risk management
framework (p 26)
• Our high standards
of corporate
governance (p 44)
11
Strategic ReportGovernanceFinancial StatementsOther Information Our Market
Challenges
and opportunities
Societal change
How people save and invest to meet their needs is directly affected by societal influences, from
changing Government policy to evolving consumer preferences.
As the Government’s long-term personal
care policies change and employers
increasingly withdraw from offering final
salary pension schemes, people are
becoming more self-reliant in planning
and securing their long-term futures.
This has created the opportunity for
Brewin Dolphin to help growing
numbers of individuals fulfil their
ambitions via our advice-led,
relationship-based and needs-driven
proposition. Our focus on long-term
relationships is enabling us to meet our
clients’ life-time needs.
As the UK population ages, many
people approaching retirement have
benefited from a positive property
market over recent decades and
generous pension provision. This means
that many have generated substantial
personal and familial wealth that they
now wish to protect and grow. By
basing our client relationships on
in-depth knowledge and understanding
of individual client goals, we can design
tailored solutions that fulfil their goals
and needs.
Consumer demands are changing too,
as individuals increasingly seek
outcome-oriented solutions that help
them fulfil their personal ambitions.
As a result, our emphasis is shifting to
embrace a range of priorities besides
investment performance alone. The fully
bespoke, advice-led wealth
management service we offer is
enabling us to take advantage of this
trend. Critically, our continued focus on
addressing individual client needs
ensures that our offering remains
relevant over the long-term.
A dynamic economic environment
The global investment environment and competitive landscape cannot be separated from
economic forces, which in turn are influenced by world events.
Geopolitical uncertainties across the
world are also highly influential, with
shifting political relationships and other
uncertainties having the potential to
disrupt the global investment
environment. Heightened risk and
volatility can have negative short-term
impacts on business and stock market
performance. At Brewin Dolphin, we
plan for the long-term. By doing so,
we seek to ensure that the interests of
our clients, employees and shareholders
are always upheld.
Closer to home, the UK wealth
management industry is fragmented and
constantly changing, as new entrants
arrive, others depart and consolidation
continues. Within this environment,
Brewin Dolphin’s trusted brand and
established reputation for delivering
sound advice and consistent
performance enable us to sustain
long-term client relationships. During
2017, we further extended and
strengthened our own market presence
with the acquisition of DLAM.
In the UK in particular, a decade of low
interest rates has created challenges for
people seeking low-risk means of
maintaining and growing their capital.
Even slight rises, such as the one
announced on 2 November 2017 by the
Bank of England, are unlikely to make a
substantial positive difference in the
short term. As a result, growing
numbers of people are seeking advice
on how to grow their investments
without taking undue risk. Our ability to
adapt rapidly to changing client needs
and market environments helps us to
optimise investment performance.
We are significantly broadening the
range of clients we can help in this area
with the design and test implementation
of the WealthPilot service.
See page 17 for more information
See page 28 for more information
See page 16 for more information
12
Brewin Dolphin
Annual Report 2017
Social, economic, legislative and technological forces are constantly creating
challenges and opportunities throughout the financial services market place.
Here, we look at how our ability to find the right response to these forces is
enabling us to invest for the future.
Regulatory developments
The 2008 financial crisis continues to exert its influence over the global financial services industry,
most particularly in the form of evermore stringent legislation to protect consumers.
One effect of this is the rising cost of
compliance, with many companies
facing significant and escalating cost
challenges in areas including
recruitment, training and restructuring.
As one of the largest players in the UK
wealth management industry, Brewin
Dolphin not only has the scale to absorb
the costs of change and allocate
resources appropriately – we also have
the expertise to adapt fast and efficiently
to new regulation.
Fees for services are set to become
more transparent during 2018 with the
introduction of the EU’s MiFID II. This will
enable clients to more easily gauge the
value of the services they receive.
At Brewin Dolphin, we believe we can
clearly demonstrate the value of our
advice-led proposition. In addition,
wherever possible we continue to
leverage our scale to reduce the cost of
investments within our client portfolio.
Other material legislative factors include
the growing levels of choice and
complexity that people face as pension
freedom rules and other changes come
into effect, leading more individuals to
seek professional financial advice.
We have a vital role to play in enabling
clients to receive the advice they need,
ensuring through our recruitment and
development practices that our people
can advise on complex needs.
See page 20 for further details
Technological forces
Technology is a differentiator in many areas of the business and complements the way we interact
with clients.
New technology can be both a
powerful enabler and a threat,
particularly in financial services where
it has the potential to transform many
aspects of the wealth management
industry. Our overriding emphasis on
client relationships, however, makes
communication the most important
of these.
As increasing numbers of people use
digital channels to communicate and
engage whenever they wish, we have
embedded digital solutions that increase
client choice to complement our
29-strong branch network.
We also continue to offer new ways of
enabling clients to communicate in the
ways that suit them best, such as using
Skype in our new WealthPilot proposition
(see page 17).
Brewin Dolphin
www.brewin.co.uk
13
Strategic ReportGovernanceFinancial StatementsOther Information Chairman’s Statement
Focused delivery
Huge effort has been spent on ensuring that the Group will
both comply with MiFID II and respond accordingly to the
changes it heralds.
We have examined carefully the services we provide and over
the next few months will continue to develop a broader offering.
In this context we launched the Brewin Portfolio Service. This
provides a cost effective service to clients who have smaller
sums to invest. Additionally, we delivered a new digital portal,
MyBrewin, to allow clients improved access to their portfolios.
Clients and employees
The bedrock of our business lies in the relationship between
our people and our clients. Last year we launched both an
employee and a client satisfaction survey. The employee
engagement score, already above its peer group benchmark,
is again higher. Our annual client survey also shows sustained
high levels of client satisfaction with their adviser and the quality
of advice and service. The survey confirms the continued
importance of trust in the relationship with clients. Both surveys
indicate a sound business.
Brewin Dolphin is a people business. We continue to invest in
talent and attract new people. During the year there was a
concerted and successful drive across the Group to raise the
standard of employee development and training. By way of
illustration, a Financial Planning Academy was set up to ensure
a regular supply of well trained financial planners. Sixteen
planners are currently being trained and another twelve will be
recruited during the year.
Talent and dedication are to be found at all levels of the
organisation which is why I am proud to have been asked to
sponsor a People Awards Scheme, to recognise outstanding
individual performance. The number and quality of nominations
received confirms the depth of expertise throughout
the organisation.
Board
The Board is committed to delivering high standards of
corporate governance and embedding the right culture and
behaviour throughout the business. This determines how we
interact with our clients, our employees, our shareholders, the
communities in which we live, our regulators and all the parties
which we deal with on a regular or one-off basis.
The Board consists of two Executive Directors, four Non-
Executive Directors and me. Angela Knight retired during the
year and I have already paid fulsome tribute to her contribution.
We concluded that we should recruit both a replacement for her
A highlight of the year was the increase in funds under
management which grew by 13.3% to a record of
£40.1 billion. In part due to a strong stock market but also,
and importantly, as a result of creditable investment
performance and a substantial inflow of new business.
Statutory profit before tax from continuing operations
increased by 15% to £57.6 million confirming Brewin Dolphin’s
position as one of the leading UK wealth managers.
The Board is proposing a final dividend of 10.75p per share,
to be paid on 7 February 2018 to shareholders on the register
on 12 January 2018, the ex-dividend date is 11 January 2018.
This will bring the total dividend for the year to 15.0p per share,
an increase of 15.4% compared to the full year dividend for the
2016 financial year. This reflects a payout ratio of dividends to
earnings of 77% and lies well within the Company’s target ratio
of 60% to 80%.
Changing environment
We are entering a period of intense change in the wealth
management sector, for which we are well positioned. These
changes are in part driven by regulation, in particular MiFID II,
and in part by external factors including pricing pressure which
has arisen particularly as a result of the exponential growth of
US passive funds.
MiFID II comes into effect in January 2018. It is now embedded
in European law and seeks to harmonise best practice across
all the EU member states. It is designed to give clients greater
transparency across the wealth management industry. Over
time this will stimulate change in service and charging models.
14
Brewin Dolphin
Annual Report 2017
and an additional Non-Executive Director. This is a reflection of
the increasing workload placed upon the Board. On
15 November 2017, Mike Kellard’s appointment to the Board
was announced and will take effect from 1 December 2017.
We will continue to search for an additional Non-Executive Director
and use this as an opportunity to add to the Board’s skillset.
The day to day management of the Group is delegated to the
Executive Committee, chaired by David Nicol as Chief
Executive. The Board continues to work closely with the
Executive team to offer support and challenge.
Annual General Meeting (‘AGM’)
This year’s AGM will be held on 2 February 2018 at
11:30 in Haberdasher’s Hall, 18 West Smithfield Street,
London EC1A 9HQ, a few minutes’ walk from our head office.
Light refreshments will be held after the meeting. I do hope you
will be able to attend. If you are not able to do so, please write
to me with any questions or comments you may have, and I will
ensure that you receive a timely response.
We endeavour to maintain a regular dialogue with our
shareholders, large and small, and your views are always most
welcome. Further details can be found in the Notice of AGM.
Simon Miller
Chairman
28 November 2017
9.9
6.25
3.65
FY14
12.0
8.25
3.75
FY15
13.0
9.15
3.85
FY16
15.0
10.75
4.25
FY17
Dividend history (p)
16
14
12
10
8
6
4
2
0
8.6
5.05
3.55
FY13
Interim
Final
Dividend policy
The Company’s dividend policy is to grow dividends in line
with the Group’s adjusted earnings; with a target payout ratio
of 60% to 80% of annual adjusted diluted earnings per share.
The policy is intended to ensure that shareholders benefit from
the growth of the Group and it aligns with the strategic
objective of growing our dividend. The Board recognises the
importance of dividends to shareholders and the benefit of
providing sustainable shareholder returns.
The payout range has been adopted to provide sufficient
flexibility for the Board to remunerate shareholders for their
investment whilst recognising that there may be a requirement
for capital retention within the Group.
See the Financial Review starting on page 30 for
additional information
Brewin Dolphin
www.brewin.co.uk
15
Strategic ReportGovernanceFinancial StatementsOther Information Chief Executive’s Review
Invested for the future to
deliver long-term growth
Delivering against our strategy
Our focus on delivering a number of strategic initiatives is
helping us to sustain the net new funds growth rate of
the business.
Particularly strong growth in discretionary funds from the
intermediaries channel continues to be the principal driver
of our overall increase in funds. Our success in meeting the
growing demand in this market segment resulted from
deliberate initiatives, supported by a dedicated sales team,
which focused on developing our investment services and
meeting the needs of intermediaries and their clients.
During the year we have continued to increase the proportion
of new direct discretionary private client funds we attract.
This is a result of offering as broad as possible a range of
financial advice to meet client needs, including our integrated
investment management and financial planning services.
This demonstrates our ‘advice-led’ strategy working in practice.
As well as delivering on initiatives to generate current growth,
we continued to make good progress on a range of
programmes aimed at supporting future growth. These are
centred around a number of priorities:
2017 was a successful year for the business, during which we
continued to look after our clients’ investment and advice needs
in increasingly uncertain and complex times. As well as
generating further investment returns for clients in line with their
objectives, we also continued to attract net new client funds.
Total funds grew by 13.3% during the year to a record
£40.1 billion, helping to drive our strong financial performance
for 2017. Adjusted profit before tax from continuing operations
grew by 14.8% to a record £70.0 million. Statutory profit before
tax from continuing operations was 15.0% higher at
£57.6 million.
– expanding the range of services we can offer clients and
further enhancing our services to keep pace with their
changing needs;
– improving the operational efficiency of our organisation;
– sharpening the focus of our marketing and promotional
Net new funds growth rate in discretionary funds was 8% for
the year, well in excess of the 5% per annum target we set
(see our KPIs on page 24). As a result, we are on target to
meet the plan we announced two years ago to increase
discretionary funds by one third from net new funds alone
within five years (see graph below).
£bn
9
6
3
0
16
3.4
24.8
25.8
1.1
2015
2016
2017
* excludes acquired funds
8.2
Growth*
Target
2020
activities; and
– improving support for our employees, via increased
investment in training, skills and professional development.
We have a business with a proud heritage, of evident quality
and strength, founded on a strong culture of personalised client
service, professionalism and expertise in investments and
financial advice.
I believe these foundations, further strengthened under the
current strategy over the last five years, were a key ingredient in
us being the successful bidder in a competitive process for the
high-quality wealth management business of DLAM. Financed
from our internal reserves, this purchase added a further
£0.7 billion in funds when it completed in May 2017. It has also
allowed us to welcome 18 new investment professionals and
their clients to Brewin Dolphin.
Brewin Dolphin
Annual Report 2017
To prosper and remain competitive, successful businesses must
constantly seek to innovate, change and improve. At the core
of our current strategy is an appetite for innovation and
constructive change. While I consider our record in this regard
to be good, I also believe the rate of change in our market
environment is accelerating (see page 12), driven by changing
client needs and the continued evolution of financial regulation
and government policy towards savings and financial advice.
Our strategy aims to position our business so that we can
capitalise on the opportunities these market changes will bring
and in so doing, achieve a higher future market share.
We therefore continue to develop new products and services
while also improving how we deliver all our services to clients.
We aim to ensure we can continue to offer attractive services
that meet the needs of future clients in the changing market
environment in a way that is valuable to them and to all
our stakeholders.
Coupled with a measured approach to risk (see page 26),
our willingness today to innovate for the future by capitalising on
our scale and strength to re-invest some of our growing financial
returns is critical to the long-term prospects of our business.
Key components of this approach are understanding client needs
and how they are changing, then exploring new ways of meeting
those needs with investment and financial planning solutions.
Equally important is an appetite for innovation, together with a
commitment to meeting associated costs, not only in pure
financial terms but also in management time and key resources.
Therefore, during the year we focused innovation in two
new areas:
– We began the design and test implementation of a new
needs-based wealth planning and investment advice service
(‘WealthPilot’) for clients with simpler needs. This is aimed at
a much wider market segment than our traditional services,
at lower cost with simpler investment solutions. For further
details, see the following section.
– Secondly, we have approved the development of an advice-
led proposition designed around the requirements of clients
with more sophisticated and complex needs.
These initiatives are still at an early stage. To date, they entail
modest additional investment in the form of initial staffing and
training costs, as well as some separate office space in central
London to provide an appropriate environment for testing our
new complex advice service.
Both are currently standalone, which we believe will provide the
right environment in which to innovate. However, both these
new initiatives will form the basis of services that we intend to
make available throughout our network of regional offices where
local demand exists.
Our actions during 2017
Improving the direct client offering
It is an ongoing priority for us to free our client advisers from
administrative tasks, enabling them to spend as much time as
possible with clients. These efforts have a direct benefit for our
business development capabilities, as they allow deeper
conversations that lead to better understanding of our clients’
needs, goals and aspirations.
During the year, we made further material progress in
developing and engaging teams and individuals with areas of
specialist expertise, to help clients implement their bespoke
financial plans once they have engaged with an adviser. These
experts tend to operate across groups of offices, enhancing our
collaborative culture, freeing up adviser time to focus on
identifying client needs, enhancing the quality of advice for our
clients and ensuring the most efficient use of our resources.
As I mentioned earlier, we introduced our WealthPilot initiative
during 2017. Initially based in the London office, this is a
needs-based wealth-planning and investment advice service
delivered by qualified advisers. The service is delivered over the
phone, by Skype or face-to-face in our office, whichever the
client prefers.
Critically, this is a simplified version of our core service which
enables us to offer advice to a much wider audience, at lower
cost with simpler investment solutions. While allowing us to serve
this broader new client opportunity, it is also opening up a
multi-generational service, introducing the children and even
grandchildren of existing clients. We will be expanding WealthPilot
across our network during 2018.
See page 22 for a summary of progress and future focus
Brewin Dolphin
www.brewin.co.uk
17
Strategic ReportGovernanceFinancial StatementsOther Information Chief Executive’s Review continued
We have also taken early steps to develop a new service catering
for clients with more complex needs. This will allow us to provide
additional solutions to sophisticated clients as part of a fully
advice-led proposition. The new service will be based and
delivered in an entrepreneurial, standalone environment, where
direct input from our clients will inform development of the
proposition. This will ensure that we continue both to meet clients’
evolving needs and to deliver the tangible value that they require.
We continue to implement and extend the professional services
offering we launched to solicitors and accountants in 2016.
To ensure our wealth managers acquire the correct specialist
knowledge, we have engaged the internal training services of
several law and accountancy firms to work with more than 100
wealth managers from over 20 offices. We ran an extensive
programme of external seminars, workshops and other events
to encourage further uptake and build deeper relationships in
this specialist market.
During the year, we used the benefit of our scale on behalf of
our clients in negotiating our unit purchasing power with
institutional funds. This has reduced the cost of investments
within our client portfolios, with £1.8 billion of funds being
converted to lowest-cost units.
We have enhanced our BPS non-advised solution, launching a
digital on-boarding process which means that it now takes less
time to subscribe to the service. BPS clients now have a fully
transactional portal allowing them to top up, move and
withdraw money online and create direct debits for regular
contributions at any time. We have also looked to take
advantage of the flexible ISA rules and have made the BPS ISA
flexible. The service has proved popular with around 1,000
accounts opened over the last 12 months. MyBrewin, our new
digital portal for clients, is in the process of being rolled out.
Plans for the portal in the near future include providing access
to documents online and continuing to deliver a brand
enhancing experience via our digital front door.
For intermediaries
Intermediaries drove around 90% of our net new fund growth
in the year. In this channel, the advice role lies with the
intermediary, while Brewin Dolphin undertakes the investment
management role.
We launched our intermediaries growth strategy in 2012, three
years before that of the organisation as a whole. This reflects
the importance of maturity when it comes to strategic success,
demonstrating the long-term value of our approach.
Much of our success in this area during 2017 was driven by
the efforts of our 17-strong regionally based team of specialist
business development managers. These individuals help to
feed the sentiment and opinions of intermediaries back to our
corporate centre, ensuring we have an excellent understanding
of the current state of the market. Our intention is to continue to
develop long-term working relationships via our branch network
to mitigate some of the risks posed by sector contraction
and consolidation.
We also responded positively in various ways to the most
important objectives and requirements of intermediaries,
revealed through continuous dialogue. For example, we
continued our strategy of expanding our proposition to meet
a broader range of client needs. This included the launch of
a ‘passive’ version of our Managed Portfolio Service (MPS
Passive Plus), targeting those clients for whom a more complex
or bespoke service may not be necessary or cost-effective.
This service harnesses the benefits of passive investing, which
intermediaries increasingly see as an attractive and streamlined
way to meet their clients’ investment needs. Now intermediaries
have a good breadth of choice in how they work with Brewin
Dolphin, from MPS Passive Plus to the full bespoke
discretionary service.
“Intermediaries drove around 90% of our
net new fund growth in the year.”
18
Brewin Dolphin
Annual Report 2017
“The expertise, attitudes and behaviours of our people
are our most important determinants of success.”
We currently provide the intermediary bespoke discretionary
service to over 1,400 firms, with over 100 new firms signed up in
the last year. Our MPS offering has more than 600 firms invested.
The MPS Passive Plus launch provided further evidence of how
we listen and respond to intermediaries’ needs. During 2017,
use of our overall MPS offering by intermediaries and their
clients increased, MPS represents 22% of our intermediaries
business. This demonstrates the value of working with our
intermediary clients to help us understand changes in market
demand and develop the right solutions.
We invested in a widespread programme of events and
communication to help intermediaries deepen their technical
knowledge and understanding, with a particular focus on
MiFID II. This aims to help them strengthen their own client
relationships and increasingly value their partnership with
Brewin Dolphin.
We are currently working with intermediaries to tailor MyBrewin,
our new digital portal to ensure that the digital offering meets
their needs.
For charities
2017 saw us increase our range of trustee training and other
educational events. We also commissioned an extensive
research project, launched in Autumn 2017, on the subject
of ‘Charity Investment: What matters most?’.
We were successful in a number of major client pitches,
particularly in the South East and North West of England.
This has helped us to balance the span of our charities business
across the country. This has historically been weighted in favour
of Scotland, where we continue to have a strong presence.
As at 30 September 2017, we hold over £3.3 billion on behalf
of charities and are currently the sixth largest UK charity
investment manager.
The year was also notable for a significant strengthening of
co-operation and collaboration between teams, regions and
offices, sharing expertise to benefit our charity operations as
a whole. This is an indication of the ongoing cultural shift
underway in our organisation.
Brand growth
Advice-led documentation on subjects
of particular client interest – see page 21
for more information.
Brewin Dolphin
www.brewin.co.uk
19
Strategic ReportGovernanceFinancial StatementsOther Information Chief Executive’s Review continued
For our people
In an increasingly advice-led organisation, the expertise,
attitudes and behaviours of our people are our most important
determinants of success.
Our 2017 survey of employees shows that people are positively
embracing the changes that are underway. In fact, the rise of
four percentage points to 82% in the engagement score of our
employees, from last year’s already exceptional result, places us
6% ahead of the financial services industry benchmark of 76%.
(See page 38 for further details.)
Our primary focus during 2017 has been on developing and
improving the skillsets of our core teams and providing the culture
and working environment that best sustains service standards of
the highest quality. Our focus on skills extends beyond
technical matters alone – courses on the ‘psychology
of money’, for example, are helping advisers better
understand client needs and ambitions.
We have been active in searching for new talent
to join our business during the year. Continuing
our pursuit of the best people to give advice to
clients, we bolstered our financial planning
capabilities with 26 new hires ranging from
apprentices to highly qualified paraplanners and
financial planners. Combined with manageable
levels of attrition, these hires contributed to a small
increase in client-facing headcount.
Key senior hires elsewhere in the organisation included our new
Chief Operating Officer and Company Secretary, while
investments in our technology team increased headcount in that
area by 10. Our total headcount saw a marginal rise of 2% to
1,614 employees.
We also made an important investment in developing our
client-facing expertise for the future, with the launch of our
Financial Planning Academy. With an initial cohort of 16 aspiring
individuals, this is a key investment in our ability to provide
long-term value for our clients and so enhance Group
performance. See page 39 for further details on this and further
development initiatives, including our graduate and emerging
talent programmes, executive leadership development,
performance management and learning opportunities.
In the same section, you can read about our Diversity &
Inclusion policy, through which we aim to gain diversity from
employing the most talented people from different backgrounds.
All these factors add up to high levels of staff engagement.
I have already mentioned the exceptional results of our 2017
Engagement Survey, which highlights the tangible positive
impact of such activities.
For our operational efficiency
Our strategy includes freeing up time for key staff, wherever
possible and appropriate, by both increasing the automation of
manual business processes and enhancing the client proposition
through the use of technology solutions such as client portals.
During the year, technology investments played an ongoing role
in our journey to improve and increase standardisation
and collaboration across the organisation.
82%
Employee
engagement
score
Technology is an important enabler in improving
collaboration between teams and individuals.
As well as the benefits highlighted earlier, it allows
geographically separate teams to work together
and improves efficiency through
shared resources.
This is just one element of our ongoing commitment
to introducing cost-effective new solutions to support
our people in every area of the business, from further
developing our new HR system to moving to a new trade
execution system.
Our new Order Management System (trade execution system)
has standardised processes across the Group, improving
operating efficiency and controls while providing a strong basis
for compliance with regulatory changes such as MiFID II.
The new client portal, ‘MyBrewin’, will improve our clients’ digital
experience and enable operational efficiencies through features
such as Documents Online. Within our digital programme,
we have continued to adopt cloud technologies and have
successfully moved and tested our disaster recovery capability
in the Microsoft Cloud.
We are also rolling out a new suite of workspace tools to
provide an improved and consistent experience, enhanced
client-engagement capabilities, greater collaboration and flexible
working opportunities. The new tools are also enhancing device
and system security, supporting our ongoing commitment and
investment in maintaining a robust cybersecurity control
environment to protect clients, employees and
Group information.
20
Brewin Dolphin
Annual Report 2017
“The world we face contains many geopolitical uncertainties but
we will continue to address and mitigate these by planning for the
long-term, as we have for more than 250 years.”
Our regulators have issued a significant quantity of regulatory
guidance and change over the last 12-18 months, resulting in
some key regulatory projects for Brewin Dolphin. MiFID II is a
key piece of regulation that will substantially change European
financial markets. We have had a project in place for the last
two years to meet the 3 January 2018 implementation date.
The Group continues to make substantial investment in systems
and processes to achieve compliance. Additionally, the FCA
requires investment firms to comply with the Senior Manager
and Certification Regime (‘SMCR’) during 2018. The Group has
an established project in place and continues to make good
progress towards compliance before the effective date.
For communities
The ways in which we work to support communities, on a
national and local basis, fully reflect how we behave in our client
and employee relationships. This in turn reflects our inherent
cultural imperative of always doing what is right for
our stakeholders.
The Board and I believe that 2017 was a highly significant year
for Corporate Responsibility (‘CR’) at Brewin Dolphin. Our
national approach of supporting education and employability
initiatives resonates with clients and shows them what kind of
organisation we are. This runs alongside the CR activities of our
offices, which select and manage charitable and other initiatives
with a local and regional focus. See page 40 for details.
We believe we lead the wealth management sector in CR,
and I am confident that we are moving in the right direction to
meet our goals. There is still progress to be made, however,
and we will maintain focused discipline within this important area.
For brand growth
This was another year of high-quality marketing activities aiming
to attract awareness, interest and contact from potential clients.
They included the continuation of our carefully targeted
Gardening Club, which in 2017 included gardens at the new RHS
show at Chatsworth as well as Chelsea itself. We harnessed the
burgeoning interest in cycling, with the launch of the Brewin
Dolphin Velo series of four road events in England and Scotland.
Other initiatives included the continuation of placing advice-led
articles in media on subjects of particular client interest. We also
piloted a digital marketing exercise designed to drive down cost
per contact. We will be building on this in the coming year.
Looking ahead: 2018 and beyond
The world we face contains many geopolitical uncertainties but
we will continue to address and mitigate these by planning for
the long-term, as we have for more than 250 years.
Some challenges are imminent, of course, such as the
introduction of MiFID II and the General Data Protection
Regulations (‘GDPR’). However, we believe that organisations
of scale, such as Brewin Dolphin, should regard these
developments as an opportunity to differentiate. For us
transparency is an important element of a high-quality
client service.
When it comes to Brexit, our view is somewhat clearer than
it was in 2016. As a UK-based entity, we will maintain close
oversight on Brexit’s likely effects on our wider operating
environment, to ensure that we are prepared and positioned
to take appropriate measures to address any eventualities
that emerge.
Meanwhile, we believe that momentum remains with us as we
pursue our ambitious growth strategy. We are confident that our
advice-led approach for direct clients is fit for the future, as the
advice gap coincides with a growing market need for advice.
We believe there remains an important window of opportunity
before banks and other major financial institutions re-enter the
financial advice market.
Our continuous ambition to succeed means that we are
preparing for an increasingly competitive future environment
while making the most of current growth opportunities. In any
event, we firmly believe in the long-term value of skilled and
engaged people giving high-quality advice as part of a close
client relationship.
So, by continuing to invest in the capabilities of our people
today, we are also invested for the future.
David Nicol
Chief Executive
28 November 2017
Brewin Dolphin
www.brewin.co.uk
21
Strategic ReportGovernanceFinancial StatementsOther Information Our Strategy
Delivering our
strategy for growth
Our vision is to become the UK’s leading provider of personalised wealth
and investment management services, delivering a compelling client
proposition, rewarding careers and sustainable shareholder returns.
Objective 1
Revenue growth
Grow the business in both absolute and market share terms, by increasing the
number of clients and the proportion of their wealth that we manage.
What we said we would do
– Further new services targeting a range
of discrete segments, based on client
and intermediary research.
2017 progress
– Net new discretionary funds flow of
8%, with approximately 90% from
intermediaries.
Future focus
– Develop an advice-led proposition
for clients with sophisticated and
complex needs.
– Continued development of
intermediary relationships.
– Further segmentation of clients to
increase relevance and increase
funds flow.
– Continued evolution of focused
marketing strategy.
– Continued investment in our Financial
Planning Academy.
– Rollout of WealthPilot, our low-cost
advice platform.
– Continued investment in client-facing
– Achieved £3.4 billion gross fund
new hires.
– Actively develop our already strong
intermediary relationships.
– Further training in business
development capabilities for our people.
– Continued investment in technology
to improve accessibility for clients.
inflows into our core business taking
our total funds to more than
£40 billion.
– Continued to hire the best available
advisory and financial planning
professionals.
– Invested further in training to help
advisers get to the root of our
clients’ needs.
– Approved the development of an
advice-led proposition designed
around the needs of clients with
sophisticated and complex needs.
– Launched pioneering Financial Planning
Academy apprenticeship scheme.
– Broadened dialogue with
intermediaries, and introduced services
based on their stated requirements.
– Continued investment in technology
to improve client communications and
service delivery.
22
Brewin Dolphin
Annual Report 2017
Performance against strategy is a factor in remuneration decision making, see page 59
For measurement of progress see our KPIs on page 24
For discussion on priorities and progress see the Chief Executive’s Review on page 16 and for an evaluation
of our principal risks see page 26
Objective 2
Improved efficiency
Maintain an efficient and scalable operating model enabling investment,
developing greater productivity and sustaining competitive pricing.
What we said we would do
– Invest in technology and process
improvement to increase efficiency
and reduce costs.
2017 progress
– Embedded new order management
system, maximising the time advisers
can spend with clients.
Future focus
– Increase efficiency and reduce costs
through continued investment in
technology.
– Continued to improve collaboration
and knowledge-sharing across offices.
– Embedded and further enhanced
internal management systems for HR
and financial reporting and analysis.
– Used our scale to enhance our unit
purchasing power when negotiating
with institutional funds.
Objective 3
Capital sufficiency
Maintain sufficient capital to maximise opportunities and cover risks.
What we said we would do
– Continue to maintain capital at a level
that enables investment in emerging
opportunities from a position of
strength.
2017 progress
– Maintained sufficient capital to enable
investment opportunities, reduce risk
and provide comfort during periods of
uncertainty.
– Acquired DLAM, gaining experienced
wealth and investment managers and
strong client relationships, while
maintaining capital sufficiency.
Future focus
– From a position of strength, continue
to maintain capital at a level that
enables investment in emerging
opportunities.
Objective 4
Dividend growth
Grow our dividend in line with earnings.
What we said we would do
– Continue policy of target payment of
60% to 80% of adjusted diluted EPS
to ensure we grow our dividend in line
with earnings.
2017 progress
– Dividend payout ratio of 77% of
adjusted diluted EPS.
Future focus
– Maintain policy of target payment of
60% to 80% of adjusted diluted EPS
to ensure our dividend grows in line
with earnings.
Brewin Dolphin
www.brewin.co.uk
23
Strategic ReportGovernanceFinancial StatementsOther Information Key Performance Indicators
Measuring progress
We use key performance indicators (‘KPIs’) to measure the progress
and the success of our strategy implementation.
We set out the KPIs for each strategic and financial objective
below, with a measure of our performance to date and an
indication where applicable of potential challenges to success.
Changes to KPIs
We have removed the following KPI after assessing the ongoing
suitability of the KPIs for measuring the success of our
strategy implementation:
– % of managed funds in our discretionary service – this
measure is no longer required, as the focus on discretionary
funds is fully embedded and the target of 90% has been met.
A detailed explanation of the calculations used for the
KPIs is contained in the Appendix on page 134
KPIs marked with an asterisk are included in remuneration
decision making see page 59
1
Revenue growth
Discretionary funds inflows* (%): Target 5%
Discretionary service yield (bps)
8.0
Definition The value of annual net inflows
as a percentage of opening funds for our
discretionary service.
89.0
88.0
81.0
4.6
4.4
2015
2016
2017
Performance during the year Net inflows
were £2.3 billion, more than double the prior
year; higher inflows were combined with
lower net outflows (see page 32 for more
detail).
Potential challenges Failure to successfully
execute on the strategy for attracting
direct inflows.
Definition Total discretionary income over
the average discretionary funds for the
period measured as a percentage.
Performance during the year The yield has
reduced in line with the change in mix of new
fund flows, with higher inflows from
intermediaries and model portfolios which
have lower charges than direct advised
services – see page 32 for detail.
2015
2016
2017
Potential challenges Market volatility
reducing transactional volumes.
Net promoter score (%): Benchmark 41.8%
Overall client satisfaction: Benchmark 7.8
47.9
44.6
n/a
2015
2016
2017
24
Definition An indication of how likely clients
are to recommend us. Scored from -100%
to +100%, measured by a client survey
conducted by an independent third party.
Performance during the year This year
saw a score of 47.9%, significantly above
an industry benchmark measured of 41.8%.
Potential challenges Failure to maintain
reputation may adversely impact client loyalty.
8.4
8.5
n/a
2015
2016
2017
Definition An indication of overall client
satisfaction as a score out of 10, measured
by a client satisfaction survey conducted by
an independent third party.
Performance during the year This year saw
a score of 8.5/10, 9% above the 2017
industry benchmark of 7.8.
Potential challenges Failure to deliver a
good client experience.
Brewin Dolphin
Annual Report 2017
2
Improved efficiency
Adjusted1 PBT2 margin* (%): Target 25%
Discretionary funds per CF30 (£m): Target £75m
21.9
21.6
23.0
2015
2016
2017
Definition Reported total annual adjusted
profit before tax as a percentage of Group
total income.
Performance during the year The adjusted
PBT margin is 1.4 percentage points higher
than 2016, as a result of efficient capacity
utilisation supporting growth in fund revenue.
Potential challenges Failure to achieve
further growth combined with changes in
investment market and economic conditions.
75
64
53
2015
2016
2017
Definition The total value of client funds in
our discretionary service divided by the
period end number of client-facing
professional investment managers and
financial planners (‘CF30s’).
Performance during the year The increase
in the period reflects the net funds inflow and
investment performance.
Average client portfolio (£000): Target 500
Employee engagement (%): Benchmark 76%
659
590
498
2015
2016
2017
Definition The average value of funds per
client for our managed/advised services.
This is calculated based on total reported
managed/advised funds at period end,
divided by period-end number of
client relationships.
Performance during the year The change
in size was primarily due to market growth in
the year and the continued exit of sub
£150k clients.
76
78
82
2015
2016
2017
Definition A survey that measures overall
employee engagement on matters that affect
them. Measured by a specialist external
company. The survey is benchmarked
against other financial services firms.
Performance during the year The
employee engagement survey undertaken
in 2017 resulted in a 4 percentage points
increase in employee satisfaction over the
2016 result with increased employee
engagement – see page 38 for more detail.
Potential challenges Failure to engage our
employees effectively could impact
productivity and could result in loss of
key staff.
3
Capital sufficiency
4
Dividend growth
Capital adequacy ratio (%): Minimum 150%
Adjusted1,3 EPS growth – diluted (%)
248
232
232
Definition The ratio, as a percentage, of the
Group’s period end total regulatory capital
resources to the period end total regulatory
capital requirement.
17
Performance during the year Our capital
adequacy ratio remains well above the target
of 150%.
7
(2)
2015
2016
2017
2015
2016
2017
Definition The annual percentage change in
reported adjusted diluted earnings per share.
Performance during the year Driven by a
15% increase in adjusted PBT.
Potential challenges In the longer term,
failure to effectively execute our growth
strategy. In the short term, investment
market conditions are the biggest driver of
our income and therefore earnings.
1. Excluding redundancy costs, FSCS levy, onerous
contracts, amortisation of client relationships, one-off
migration costs, acquisition costs, incentivisation
awards and disposal of available-for-sale investments.
2. See page 6 for statutory PBT.
3. See note 13 to the Financial Statements.
Dividend growth (%)
21
15
8
2015
2016
2017
Definition The percentage change in
total annual dividend per share (interim
and final).
Performance during the year Dividend
growth driven by adjusted diluted EPS
growth in line with dividend policy see
page 15.
Potential challenges Failure to maintain
capital strength and profitability.
Brewin Dolphin
www.brewin.co.uk
25
Strategic ReportGovernanceFinancial StatementsOther Information Principal Risks and Uncertainties
Managing our risks
Effective risk management is key to the success of delivering our strategic
objectives. Our risk culture continues to strengthen; it ensures identification,
assessment, and management of the principal risks to our business.
The overall level of risk we face continues to increase as a result
of external market conditions; high volumes of regulatory
change; an increasingly uncertain global political environment
and associated market volatility; and increasing cyber criminality.
The key parties involved in the risk management process
within the Group and their respective responsibilities,
and an explanation of how risk management is structured
within the Group, is set out opposite.
The Board promotes a strong risk culture throughout the
business by promoting and encouraging:
– A distinct and consistent tone from the top
– Clear accountabilities for those managing risk
– Prompt sharing and reporting of risk information
– A commitment to ethical principles
– Appropriate levels of conduct and considered risk
taking behaviour
– Recognition of the importance of knowledge, skill and
experience in risk management
– Members of staff at all levels to make suggestions for
improving processes and controls
– An acceptance of the importance of continuous management
of risk, including clear accountability for and ownership of
specific risks.
Every employee within the Group is expected to adhere to the
high standards established by the Board. The benefits of
establishing a strong risk culture is evident; with our employees
self-identifying and escalating risk events and potential issues to
mitigate the probability of risks crystallising.
The Board reviews the effectiveness of this Risk Management
Framework periodically, receiving reports on internal control
from the Audit and Risk Committees and debating key risks for
the Group following more detailed work by the Risk Committee.
Our approach is to maintain a strong control framework to
identify, monitor and manage the principal risks we face,
adequately quantify them and ensure we retain sufficient capital
in the business to support our strategy for further growth.
We assess our principal risks regularly to ensure that our risk
profile is within our risk appetite which is set by the Board.
We categorise risks into risk groups covering potential impacts
to clients, revenue, capital and reputation. The three risk
groups are:
– Business Risk
– Financial Risk
– Operational Risk
We identify and assess specific risks within these risk groups,
mitigate and manage these risks, and monitor and report
against these risks, which provides the foundation to enable us
to deliver against our strategic objectives.
Risk Management Objectives
The primary objectives of risk management at Brewin Dolphin
are to ensure that there is:
– a strong risk culture so that employees are able to identify,
assess, manage and report against the risks the business is
faced with;
– an appropriate balance between risk and the cost of control;
– a defined risk appetite within which risks are managed; and
– a swift and effective response to incidents in order to
minimise impact.
Risk Management Framework
The Board has established a Risk Management Framework to
ensure there is effective risk governance.
We follow industry practice for risk management through the
‘three lines of defence’ model. The first line is the business that
owns and manages the risk, the second line is the control
functions, and the third line is independent assurance provided
by audit.
26
Brewin Dolphin
Annual Report 2017
Risk Management Framework
Top Down Risk Management
Board
– Responsible for ensuring there is an adequate
and appropriate risk management framework
and culture in place.
– Sets risk appetite and is responsible for
ensuring alignment with the Group’s
business strategy.
Business Risks
These are the risks that we
do not set the right strategy,
a material business decision
fails or external market
factors impact the viability of
the business.
Risk Committee
– Oversees the Risk Management Framework.
– Assists the Board in its responsibilities for the
integrity of internal control and risk
management systems.
Audit Committee
– Assists the Board in gaining assurance as to
the integrity of the financial statements and the
effectiveness of the system of internal controls.
– Monitors the effectiveness and objectivity of
internal and external auditors.
Risk Management Committee
– Executive level day to day oversight and
monitoring of the adequacy and effectiveness
of the Risk Management Framework.
– Monitors current and emerging risks
and themes.
– Oversees the Group’s Policy Framework.
Financial Risks
These are the risks facing
our business in terms of
inadequate or failed
management of finances
and the risk introduced by
external factors that could
have a detrimental impact
on our cash flow, capital
and liquidity.
Operational Risks
This is the risk of loss
resulting from inadequate or
failed internal processes,
people and systems, or
from external events.
Risk Identification and Assessment
– Risk and Control Self Assessments to identify
the key risks for each department and for
business change activities.
– Assessment of inherent (pre-control) and
residual risk (post-control).
Risk Mitigation and Management
– Management of events that had a potential or
actual financial, regulatory, operational or
client impact.
– Agreeing action plans to mitigate risk issues.
Risk Monitoring and Reporting
– The business community is primarily responsible
for monitoring risks.
– Risk trends are monitored and analysed.
– Key risk indicators are reviewed monthly.
Risk Assurance
– Annual audit plan to evaluate the adequacy of
processes and systems, and test the operating
effectiveness of key controls.
Bottom Up Risk Management
2017 Developments
Considerable uncertainty in the external environment has
continued in 2017 both in the UK and globally, including ongoing
Brexit negotiations and international political events. Whilst the
Group is predominantly a UK domiciled business with a UK centric
client base, this uncertainty and resulting increased levels of market
volatility may have an impact on some of our principal risks. We are
closely following the Brexit negotiations and will assess the
ongoing impact of these on our principal risks over time.
In 2017 we have focused on reviewing variances in the risks
and controls across our offices. This process has identified
opportunities to strengthen controls and improve operational
efficiency, which will be implemented over the course of 2018.
A risk workshop was conducted during the period to review the
risks facing the Group. For each risk, an assessment was
undertaken of the relative willingness to take that risk to achieve
the Group’s strategic objectives. Key Risk Indicators used to
monitor the profile of each risk against the risk appetite have
been refreshed.
See page 37 for our Viability Statement, which relies on the
evaluation of principal risks
Brewin Dolphin
www.brewin.co.uk
27
Strategic ReportGovernanceFinancial StatementsOther Information Principal Risks and Uncertainties continued
Principal Risks
The tables below detail the principal risks and uncertainties we have identified. We have a process to regularly report key risk
indicators and identify changes in the profile of these principal risks. We also consider emerging risks as part of this process.
Business risks
These are the risks that we do not set the right strategy, a material business decision fails, or external
market factors impact the viability of the business. This could include an inability to introduce or enter
into new business lines effectively, to expand organically or through merger/acquisition, or to enhance
the effectiveness of our operational infrastructure.
Direction of change:
Business risks have increased over the past year as heightened levels of uncertainty in the external environment persist.
Additional risk was taken on during the integration of DLAM to support the Group’s growth objectives.
Key mitigants
– A strategic plan approved by the Board.
– A risk appetite that is set against our strategic objectives,
and monitored on a regular basis by our formal
governance committees.
– A robust governance structure that includes challenge from our
independent Non-Executive Directors.
– Branch and functional plans are set to achieve strategic
priorities, which are subject to thorough challenge and review
by the Board.
– We are focused on delivering long-term value to clients,
positioning portfolios appropriately based on our clients’ risk
profiles and in line with our macroeconomic views.
Principal Risk Nature of the Risk
Business
Strategy
This is the risk that we fail to deliver
against the strategic objectives.
Geopolitical
The external environment continues
to be marked by considerable
uncertainty globally, as we are in a
period of significant political change.
Financial markets can be sensitive
to geopolitical factors and market
volatility can heighten in uncertain
environments, impacting
performance leading to the Group
generating variable returns.
Geopolitical uncertainties and
external market factors are inherent
risks to the financial services industry.
Financial risks
These are the risks facing our business in terms of inadequate or failed management of finances and the risk
introduced by external factors that could have a detrimental impact on our cash flow, capital and liquidity.
Direction of change:
Financial risks remain at a similar level to last year and are impacted by the continued uncertainty in the external
environment. Economic uncertainty has the potential to impact profitability of our counterparties and their credit ratings.
Principal Risk Nature of the Risk
Counterparty Default by our banking or trading
counterparties could put our own
or our clients’ cash deposits or
assets at risk.
Key mitigants
– A Financial Risk Management Framework is in place which
includes managing the Group’s exposure to counterparty
credit risk and setting and monitoring counterparty limits.
– Diversity across our trading and banking counterparties.
– Due diligence is undertaken for all banking and trading
counterparties.
– A Financial Risk Committee provides oversight of the Financial
Risk Management Framework.
28
Brewin Dolphin
Annual Report 2017
Operational risks
This is the risk of loss resulting from inadequate or failed internal processes, people and systems,
or from external events.
Direction of change:
The volume of regulatory change and increasing occurrences of cyber attacks across industries has increased the
inherent risk of change management and criminality. We focus on continually strengthening our monitoring and
oversight of these risks.
Principal Risk Nature of the Risk
Regulatory
& Legal
Compliance
This is the risk that we are not
compliant with all existing applicable
regulation and legislation.
Key mitigants
– Compliance and Legal functions monitor and oversee fulfilment
of our regulatory and legislative requirements and interactions
with our key regulators.
Change
Management
Conduct
The risk that business and regulatory
changes are not delivered which
impact the Group’s performance
and ability to deliver strategic
objectives.
This is the risk of not delivering fair
outcomes for clients.
Criminality
The increasing external risk
of criminality and the difficulty
of complete prevention is
recognised, as the volume
and sophistication of information
security threats (cyber risk)
and fraud attempts across
industries increase.
– We are active in various industry and trade associations to
help influence regulation and legislation.
– A Strategic Projects Committee is responsible for prioritising
projects and reviewing their status and progress.
– A Regulatory Change function within Compliance review new
regulation as it is drafted to ensure we are in compliance
when it is implemented.
– Tone from the top sets a culture which puts delivering
fair outcomes for clients at the core of the Group’s
activities/ethos.
– A conduct risk framework sets our approach to conduct risk
governance, and the ongoing assessment and monitoring
against key metrics and reporting of conduct risk.
– A risk based client on-boarding process which ensures that
we understand our clients’ needs and attitudes to risk.
– A quality assurance process to identify and address any
instances where the best outcomes for clients are not
achieved.
– Robust investment governance supported by:
– an Investment Governance Committee;
– a dedicated research department to set the Group’s asset
allocation framework; and
– a restricted assets policy to prevent investment in
unsuitable assets.
– Financial Crime, Information Security and Data Protection
functions ensure we have robust preventative and detective
measures to reduce this risk.
– Dedicated Information Security and Data Protection team
report directly to the Group Risk & Compliance Director.
– Regular testing of our business continuity, disaster recovery
and crisis management plans.
Brewin Dolphin
www.brewin.co.uk
29
Strategic ReportGovernanceFinancial StatementsOther Information Financial Review
Good growth in our core services
from strong funds inflows
Results
The Group’s financial performance for the year to
30 September 2017 was strong. Statutory profit before tax from
continuing operations was 15.0% higher than last year at
£57.6 million (2016: £50.1 million), or 20.6% higher if the results
of the acquisition in May 2017 are excluded. Adjusted profit
before tax from continuing operations (‘adjusted PBT’) was
14.8% higher at £70.0 million (2016: £61.0 million), or 12.1%
higher if the acquisition in the year is excluded. Adjusted diluted
earnings per share (‘EPS’) was 19.6p per share (2016: 16.8p),
an increase of 16.7%.
The 14.8% increase in adjusted PBT was driven by the growth
in total income of 7.8% to £304.5 million (2016: £282.4 million)
and together with improving operational efficiency. Fixed
operating costs grew by 5.2%, leading to an increase in
adjusted PBT margin to 23.0% (2016: 21.6%). Statutory PBT
margin for the period increased to 18.9% (2016: 17.7%) in line
with adjusted PBT margin.
2017
£m
291.0
13.5
304.5
(110.2)
(71.8)
(182.0)
122.5
(52.5)
70.0
–
70.0
(5.7)
(6.7)
57.6
(12.5)
45.1
16.5p
16.0p
20.5p
19.6p
2016
£m
263.3
19.1
282.4
(103.5)
(69.5)
(173.0)
109.4
(48.7)
60.7
0.3
61.0
(4.6)
(6.3)
50.1
(11.1)
39.0
14.4p
13.9p
17.7p
16.8p
Change
10.5%
-29.3%
7.8%
6.5%
3.3%
5.2%
12.0%
7.8%
15.3%
14.8%
15.0%
15.6%
14.6%
15.1%
15.8%
16.7%
Continuing operations
Core1 income
Other income
Total income
Fixed staff costs
Other operating costs
Total fixed operating costs
Adjusted2 profit before variable staff costs
Variable staff costs
Adjusted2 operating profit
Net finance income and other gains and losses
Adjusted2 profit before tax
Exceptional items3
Amortisation of client relationships
Profit before tax
Taxation
Profit after tax
Earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted4 earnings per share
Basic earnings per share
Diluted earnings 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, onerous contracts, amortisation of client relationships, acquisition costs, incentivisation awards,
one-off migration costs and disposal of available-for-sale investments.
3. See reconciliation of adjusted profit before tax to statutory profit before tax on opposite page.
4. See note 13 to the Financial Statements.
30
Brewin Dolphin
Annual Report 2017
Explanation of adjusted performance measures
We use adjusted PBT, adjusted diluted EPS and adjusted PBT margin (‘adjusted measures’) to measure and report on the
underlying financial performance of the Group, aiding comparability between reporting periods. The adjusted measures are
used by the Board and management for planning and reporting. They are also useful measures for investors and analysts.
Additionally, we use some of the adjusted performance measures as Key Performance Indicators (‘KPIs’), as well as for performance
measures for various incentive schemes, including the annual bonuses of Executive Directors and long-term incentive plans.
These adjusted profit measures are calculated based on statutory profit before tax adjusted to exclude various items of income
or expense. Such adjusted items are typically infrequent or unusual items which the Directors consider to be outside the ordinary
course of business. They can include non-recurring one-off items of either income or expenses. Income or expenditure adjusted
for historically has included items such as material gains on available-for-sale assets. One-off expenses can be items such as
acquisition costs incurred in the year and migration costs incurred during 2016.
Other adjusted-for-items of income or expense may, like the redundancy costs and onerous contract charges, recur from one
period to the next. Although these may recur over one or more periods, they are the result of events or decisions which the
Directors consider to be outside the ordinary course of business, such as material restructuring decisions to reduce the ongoing
cost base of the Group that do not represent long-term expenses of the business. Incentivisation awards costs in relation to the
acquisition in the current year, payable for a predetermined period of time, are adjusted for on this basis.
Additionally, the amortisation expense of acquired client relationships is an expense which investors and analysts typically
add back when considering profit before tax or earnings per share ratios.
Reconciliation of adjusted profit before tax to statutory profit before tax
Adjusted profit before tax
Redundancy costs
One-off migration costs
Acquisition costs
Incentivisation awards
Onerous contracts
Total exceptional items
Amortisation of client relationships
Statutory profit before tax of continuing operations
Statutory profit before tax of discontinued operations
Statutory profit before tax
2017
£m
70.0
(0.7)
–
(1.7)
(1.3)
(2.0)
(5.7)
(6.7)
57.6
–
57.6
2016
£m
61.0
(2.7)
(1.6)
–
–
(0.3)
(4.6)
(6.3)
50.1
14.0
64.1
Change
14.8%
15.0%
-10.1%
Impact of acquisition
The acquisition of DLAM added £0.7 billion of funds and contributed £2.5 million of income for 4½ months post completion
to 30 September 2017. After associated staff costs of £0.6 million and administrative, overhead and variable costs of
£0.3 million for the period this resulted in a post-acquisition contribution to adjusted profit before tax of £1.6 million to the
Group, equivalent to incremental adjusted diluted earnings per share of 0.5p. The integration of DLAM was completed
successfully and the achievement of operational cost synergies has exceeded those originally expected by £0.3 million,
on a full year run rate basis.
Additional exceptional costs of £3.0 million resulting from the acquisition were incurred, included within the adjusted items
below and impacting statutory profit but not adjusted profit. These comprise:
– the upfront acquisition costs of £1.7 million covering principally advisory fees and integration expenses;
– £1.3 million for additional awards to DLAM staff to incentivise the successful transfer and integration of the business; and
– an incremental charge for the amortisation of the £25.5 million of client relationships acquired (see note 14 to the Financial
Statements) of £1.4 million within the £6.7 million total amortisation charge for the Group.
Net of these incremental costs the impact of the acquisition on 2017 statutory profit before tax was a loss of £2.8 million,
or a reduction of 1.0 p to statutory diluted earnings per share.
Further exceptional staff incentivisation expense will be incurred over the next five financial years dependent on performance
targets being achieved in May next year.
For more information see our KPIs on page 24
Brewin Dolphin
www.brewin.co.uk
31
Strategic ReportGovernanceFinancial StatementsOther Information
Financial Review continued
Funds
£bn
Private clients
Charities & corporates
Direct discretionary
Intermediaries
MPS
Total discretionary
BPS1
Execution only
Core funds
Advisory
Total funds
30 September
2016
16.9
4.2
21.1
6.5
1.2
28.8
0.1
3.5
32.4
3.0
35.4
1. BPS re-categorised from total discretionary.
Inflows
0.9
0.1
1.0
1.5
0.9
3.4
–
0.4
3.8
–
3.8
Outflows
(0.7)
(0.2)
(0.9)
(0.3)
–
(1.2)
–
(0.8)
(2.0)
(0.1)
(2.1)
Internal
transfers
–
0.1
0.1
(0.1)
0.1
0.1
–
0.3
0.4
(0.4)
–
Net
flows
0.2
–
0.2
1.1
1.0
2.3
–
(0.1)
2.2
(0.5)
1.7
Growth
rate
1.2%
-%
0.9%
16.9%
83.3%
8.0%
-%
(2.9)%
6.8%
(16.7)%
4.8%
Acquired
0.5
0.1
0.6
–
–
0.6
–
0.1
0.7
–
0.7
Investment
performance
1.3
0.2
1.5
0.5
0.1
2.1
–
–
2.1
0.2
2.3
30 September
2017
18.9
4.5
23.4
8.1
2.3
33.8
0.1
3.5
37.4
Change
11.8%
7.1%
10.9%
24.6%
91.7%
17.4%
-%
-%
15.4%
2.7 (10.0)%
13.3%
40.1
Indices
MSCI WMA Private Investor Balanced Index
FTSE 100
30 September
2016
1,457
6,899
30 September
2017
1,545
7,373
Change
6.0%
6.9%
Total funds grew by 13.3% to £40.1 billion at 30 September 2017 (2016: £35.4 billion), as a result of strong net new funds
growth (+4.8%), acquired funds (+2.0%) and investment performance (+6.5%).
Core funds grew by 15.4% (2016: 13.7%) or 13.3% excluding acquired funds, due to continuing strong growth in the intermediaries
and MPS channels which represented 91.3% (£2.1 billion) of net discretionary funds inflows during the year.
The acquisition of DLAM increased core funds by £0.7 billion and included £0.6 billion of discretionary funds.
Total discretionary funds grew 17.4% (15.3% excluding acquired funds) to £33.8 billion (2016: £28.8 billion) driven by record gross
funds inflows of £3.4 billion (2016: £2.4 billion) and lower gross outflows of £1.2 billion (2016: £1.5 billion). Discretionary net funds
inflows of £2.3 billion (2016: £1.1 billion) represents a record annualised growth from discretionary funds of 8.0% (2016: 4.4%),
well above our 5% target.
Total direct discretionary growth was maintained with gross organic inflows of £1.0 billion (2016: £1.0 billion). Total direct
discretionary funds are now £23.4 billion (including £0.6 billion of acquired assets) (2016: £21.1 billion). Charities and corporates
represent 19.2% of our total direct client funds (2016: 19.9%).
Direct discretionary private client funds grew to £18.9 billion (2016: £16.9 billion) with inflows increasing to £0.9 billion
(2016: £0.8 billion) in the year. Of particular note was the growth of the wealth management service, which represented over one
third of total direct inflows in the year, with 15% (2016: 13%) of our direct private client funds now in this service. As anticipated
direct discretionary private client outflows declined from previously elevated levels to £0.7 billion (2016: £1.1 billion). Total net flows
for direct discretionary private clients were £0.2 billion, the same as the prior year.
Net funds inflows into charities and corporates were flat for the year (2016: £0.2 billion), as we saw slightly higher outflows of
£0.2 billion (2016: £0.1 billion) due to the loss of one large client in the early part of the year.
Gross inflows from our intermediaries channel of £1.5 billion (2016: £0.9 billion) were a record high and we saw continuing strong
funds inflows from MPS of £0.9 billion (2016: £0.5 billion). The strength of our intermediaries proposition meant we added over 100
new relationships in the year, taking our total number of relationships to over 1,600. We now have 28 intermediary relationships with
funds of over £50 million, with the top 200 relationships accounting for 70% of our intermediaries funds.
Execution only funds, whilst flat at £3.5 billion, saw the loss of certain larger accounts in the first quarter of the year but with very
low associated fee income loss.
Advisory funds were £2.7 billion (2016: £3.0 billion). The rate of advisory funds net outflows has declined in the year to an
annualised rate of 16.7% (2016: 25.7%), of which £0.4 billion was retained and transferred into other service categories.
32
Brewin Dolphin
Annual Report 2017
Income
Total income increased by 7.8% to £304.5 million (2016: £282.4 million) and is analysed as follows:
Private clients
Charities & corporates
Direct discretionary
Intermediaries
MPS
Indirect discretionary
Total discretionary
Financial planning
BPS
Execution only
Core income
Advisory
Other income
Total other income
Total income
2017
£m
176.4
21.8
198.2
55.3
5.3
60.6
258.8
20.8
1.0
10.4
291.0
12.9
0.6
13.5
304.5
2016
£m
165.9
19.7
185.6
46.0
2.9
48.9
234.5
17.5
0.9
10.4
263.3
15.7
3.4
19.1
282.4
Change
6.3%
10.7%
6.8%
20.2%
82.8%
23.9%
10.4%
18.9%
11.1%
-%
10.5%
-17.8%
-82.4%
-29.3%
7.8%
Core income growth of 10.5% to £291.0 million (2016: £263.3 million) was driven by discretionary funds growth of 17.4%
(2016: 16.5%) and overall core funds growth of 15.4% (2016: 13.7%). With the Group’s continued focus on discretionary funds,
core income now represents 95.6% (2016: 93.2%) of total income.
Income from direct discretionary private clients grew 6.3% as we continued to attract new funds and transfer existing clients into
this service. Charities and corporates income grew in line with funds growth.
Income from our indirect discretionary business grew by 23.9% as a result of continued strong net funds inflows. MPS income
grew strongly in the year to £5.3 million (2016: £2.9 million) as the business benefited from high levels of asset retention and
record inflows.
Financial planning income increased by 18.9% to £20.8 million (2016: £17.5 million) reflecting the increased take up of our wealth
management service.
Total other income reduced by £5.6 million to £13.5 million (2016: £19.1 million) impacted by slowing but continued outflows from
our advisory business, the loss of trail income and the continued low interest rate environment.
Fees and commissions
Core fee income grew by 15.7% to £207.9 million (2016: £179.7 million) in line with the growth in core funds. Core commission
income declined by £3.8 million to £62.3 million (2016: £66.1 million) as a result of a marked decline in market volatility during
the year compared to the second half of 2016.
Core fee income now represents over 71% of core income and has increased steadily from 48% in 2010 and 62% in 2013.
The split of fees and commissions is shown in the table below:
£m
Private clients
Charities & corporates
Direct discretionary
Intermediaries
MPS
Total discretionary
BPS
Execution only
Core income excluding
financial planning
Brewin Dolphin
www.brewin.co.uk
2017
Fees Commission
51.1
3.0
54.1
1.6
–
55.7
–
6.6
125.3
18.8
144.1
53.7
5.3
203.1
1.0
3.8
Total
176.4
21.8
198.2
55.3
5.3
258.8
1.0
10.4
2016
Fees Commission
54.7
3.1
57.8
1.9
–
59.7
–
6.4
111.2
16.6
127.8
44.1
2.9
174.8
0.9
4.0
Total
165.9
19.7
185.6
46.0
2.9
234.5
0.9
10.4
Change
Fees Commission
Total
-6.6%
6.3%
12.7%
-3.2% 10.7%
13.3%
12.8%
6.8%
-6.4%
21.8% -15.8% 20.2%
-% 82.8%
82.8%
-6.7% 10.4%
16.2%
-% 11.1%
11.1%
-%
-5.0%
3.1%
207.9
62.3
270.2
179.7
66.1
245.8
15.7%
-5.7%
9.9%
33
Strategic ReportGovernanceFinancial StatementsOther Information Financial Review continued
Income yield
(bps)
Private clients
Charities & corporates
Direct discretionary
Intermediaries
MPS
Total discretionary
BPS
Execution only
Advisory
Overall
2017
Fees Commission
28
7
24
2
–
17
–
19
13
17
69
43
64
72
28
64
70
11
33
57
Total
97
50
88
74
28
81
70
30
46
74
2016
Fees Commission
34
70
7
43
29
64
3
75
–
30
23
65
–
70
18
11
15
34
21
57
Total
104
50
93
78
30
88
70
29
49
78
Overall income yield declined to 74bps (2016: 78bps).
The overall blended yield across all our discretionary services declined to 81bps (2016: 88bps). This was a result of an increasing
proportion of funds growth through our intermediaries channel and higher market levels moving direct discretionary private clients
into lower priced fee bands. Reduced portfolio turnover rates lowered commission income and consequently the commission yield.
This reflects more benign markets decreasing the need for portfolio rebalancing and a general increase in the use of collectives in
client portfolios.
On a discrete basis, the yield from our direct discretionary private client channel reduced to 97bps (2016: 104bps) primarily due to
lower commission income. Charities and corporates income yield remained consistent with 2016 at 50bps.
Intermediaries yield fell to 74bps (2016: 78bps) as many intermediary relationships grew and became more material in the year.
Our intermediaries clients benefited from lower priced volume based fee tiers. As a significant proportion of our intermediaries
relationships are now on the most cost effective volume based tariff, we expect the overall yield from this business to remain
broadly stable based on the current sources of inflows. The MPS income yield was 28bps (2016: 30bps) as a result of the
introduction of lower priced passive products into the range.
The yield on our execution only business increased to 30bps (2016: 29bps), this was primarily due to increased trading activity
by our clients. The yield on our advisory business declined to 46bps (2016: 49bps), this was primarily due to a reduction in
transactional commission income.
Adjusted PBT margin
The increase in the adjusted PBT margin to 23.0% in the year (2016: 21.6%) was driven by the growth in total income coupled with
the ability of the Group to utilise existing capacity which delivered operational scale benefits. Further, the efficient use of existing
capacity together with rising income levels resulted in our target of £75 million of discretionary funds per CF30 being achieved in the
final quarter of 2017 (see page 25).
The fourth quarter adjusted PBT margin was 25%, in line with our target set in 2013.
Costs
Total fixed operating costs increased by 5.2% to £182.0 million in the year (2016: £173.0 million) with staff costs accounting for
approximately 75% of the increase.
Fixed staff costs
Fixed staff costs increased by £6.7 million to £110.2 million (2016: £103.5 million) as a result of inflationary pay rises and higher cost
of sales from the substantial increase in intermediary inflows compared to prior years. Headcount grew by a net 31 over the course
of the year to 1,614 from 1,583 at the end of last year.
Other operating costs
Overall other operating cost increases were limited to 3.3%, increasing to £71.8 million (2016: £69.5 million). This was largely as a
result of increases in premises costs following rent reviews and higher technology spend ensuring our systems and processes are
ready for the adoption of MiFiD II. These increases were partially offset by further operational efficiencies and lower
depreciation charges.
34
Brewin Dolphin
Annual Report 2017
Variable staff costs
Variable staff costs in the form of profit share increased by 7.8% to £52.5 million (2016: £48.7 million), in line with business
performance. Profit share as a percentage of pre-profit share profit fell from 44.5% in 2016 to 42.8% in 2017 as a result of
higher levels of deferrals and operational efficiency improvements.
Exceptional items
Net exceptional costs of £5.7 million (2016: £4.6 million) were primarily due to the acquisition of DLAM which resulted in £3.0 million
of transaction related and staff incentivisation costs. Redundancy costs, as a result of restructuring, declined materially from
£2.7 million in 2016 to £0.7 million, as the period of major business rationalisation was largely concluded in the year.
The onerous contract charge for the year was £2.0 million (2016: £0.3 million), of which £1.3 million related to the identification of
onerous space available for subletting in our Newcastle office, following a review of space utilisation and subsequent reorganisation
(see note 23 to the Financial Statements for further information). Furthermore, a subdued property market for prime office space in
Edinburgh resulted in the previously identified onerous space not being sublet in line with our expectations; the onerous provision
has been revised to reflect this.
Amortisation of client relationships
Amortisation of client relationships increased to £6.7 million (2016: £6.3 million), including £1.4 million for 4½ months’ amortisation
of the client relationships acquired in the year, offset by a reduction in the amortisation of other previously acquired client
relationships which have now reached the end of their amortisation periods.
Defined benefit pension scheme
The final salary pension scheme moved from a deficit of £7.0 million to a surplus of £4.5 million in the year resulting in an actuarial
gain of £8.6 million being recognised (2016: £7.0 million loss).
Under IAS 19, large annual fluctuations can occur. The swing to a surplus has largely been driven by an increase in the discount
rate, reflecting a rebound in the level of corporate bond yields from their near low point at the end of September 2016. This served
to decrease the present value of liabilities that were significantly higher at 30 September 2016 than in the recent past; this was
partially offset by an increase in the inflation assumption from 3.1% to 3.3% per annum. Changes to post retirement mortality
assumptions, members transferring the value of their benefits out of the scheme and cash contributions to the scheme have also
contributed to the movement.
The Group continues to make contributions of £3.0 million per annum, as part of the funding plan agreed with the trustees of the
Group’s Defined Benefit Pension Scheme (see note 18 to the Financial Statements).
Dividend
The Group’s dividend policy is set out in the Chairman’s Statement, see page 15.
In determining the level of dividend in any year, the Board considers a number of factors including: the level of distributable reserves;
the future cash commitments and investment needs to sustain the long-term growth of the Group; the level of dividend cover;
and anticipated regulatory capital requirements.
The Company is the parent company of the Group and is a non-trading investment holding company. It derives its distributable
reserves from dividends received from its subsidiaries, of which Brewin Dolphin Limited is the principal operating subsidiary.
Before any interim or final dividends are proposed by the Board it satisfies itself that there will be sufficient distributable reserves in
the Company at the respective payment dates.
The distributable reserves of the Company, comprise £38.4 million of the merger reserve (see note 26 to the Financial Statements)
and the majority of the balance on the profit and loss reserve.
The Group is well positioned to continue funding dividend payments in accordance with its policy. The ability of the Board to
maintain future dividends will be influenced by a number of the principal risks identified on pages 28 to 29 that could adversely
impact the performance of the Group.
Furthermore, with the current cash resources available to the Group we continue to be well positioned to support our strategy.
Further details of the Group’s cash flow can be found below; details of its continuing viability and going concern are both
on page 37. The majority of the cash resources are held by the principal operating subsidiary Brewin Dolphin Limited.
Brewin Dolphin
www.brewin.co.uk
35
Strategic ReportGovernanceFinancial StatementsOther Information Financial Review continued
Capital resources and regulatory capital
The Group’s financial position remains strong with net assets increasing to £262.6 million at 30 September 2017
(2016: £242.8 million), primarily as a result of good profit retention and the actuarial gain on the defined benefit pension scheme.
Tangible net assets (net assets excluding intangibles) are £166.8 million (2016: £161.8 million).
At 30 September 2017, the Group had regulatory capital resources of £165.2 million (2016: £164.0 million), see note 28
to the Financial Statements.
The Group’s primary regulator is the Financial Conduct Authority (‘FCA’). The FCA rules determine the calculation of the Group’s
regulatory capital resources and regulatory capital requirements. As required under FCA rules, we perform an Internal Capital
Adequacy Assessment Process (‘ICAAP’) which includes performing a range of stress tests to determine the appropriate level of
regulatory capital that the Group needs to hold.
The Group’s Pillar III disclosures are published annually on our website and provide further details about regulatory capital resources
and requirements.
Cash flow and capital expenditure
The Group had a small cash outflow for the period of £0.9 million (2016: £20.5 million inflow) after paying £25.5 million for the
DLAM acquisition, financed entirely from its cash reserves. This resulted in total net cash balances of £170.0 million as at
30 September 2017 (2016: £170.8 million).
Adjusted EBITDA (see table below) was £85.2 million (2016: £75.6 million), 12.7% higher, the increase being in line with
adjusted PBT growth for the year. £3.0 million was contributed to the defined benefit pension scheme (2016: £3.0 million).
Capital expenditure of £2.0 million was significantly lower than previous periods (2016: £6.4 million), resulting from lower
capitalisation of software due to the nature of IT developments.
Cash outflow for own share ‘matching’ purchases in the period comprised £5.6 million (2016: £6.7 million) for the Deferred Profit
Share Plan and Equity Award Plan, to match the awards made in 2016. All past awards are fully matched. £0.2 million
(2016: £0.2 million) of shares were purchased for the Share Incentive Plan (see note 29 to the Financial Statements). £0.5 million
was received from shares issued in the period in relation to Approved Share Options (2016: £0.4 million).
Dividends paid in the period increased by 11.6% to £36.6 million (2016: £32.8 million).
Adjusted profit before tax
Finance income and costs
Adjusted operating profit
Share-based payments
Depreciation and amortisation
Adjusted EBITDA
Pension funding
Capital expenditure
Proceeds on disposal of trading investments
Working capital
Interest and taxation
Acquisition of subsidiary
Exceptional items
Acquisition costs
Discontinued operations
Shares purchased and disposed of
Shares issued for cash
Cash flow pre-dividends
Dividends paid
Cash flow
Opening cash
Exchange and other non-cash movements
Closing cash
36
2017
£m
70.0
–
70.0
8.1
7.1
85.2
(3.0)
(2.0)
1.1
(1.0)
(9.7)
(25.5)
(2.2)
(1.7)
(0.2)
(5.8)
0.5
35.7
(36.6)
(0.9)
170.8
0.1
170.0
2016
£m
61.0
(0.3)
60.7
8.4
6.5
75.6
(3.0)
(6.4)
–
(0.6)
(8.5)
–
(3.1)
–
5.8
(6.9)
0.4
53.3
(32.8)
20.5
149.8
0.5
170.8
Brewin Dolphin
Annual Report 2017
Going concern
The Group’s business activities, performance and position, together with the factors likely to affect its future development
are set out in the Chairman’s Statement, Strategic Report and Risk Committee Report.
The Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its
financial instruments and its exposure to credit risk and liquidity risk are described in note 28 to the 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 the going concern basis
for the preparation of the Financial Statements. In forming their view, the Directors have considered the Group’s prospects for a
period exceeding 12 months from the date the Financial Statements are approved.
Viability Statement
The Directors have assessed the outlook of the Company over a longer period than the 12 months required by the going concern
statement in accordance with the UK Corporate Governance Code.
The assessment is based on the Group’s Medium Term Plan (‘MTP’), the Internal Capital Adequacy Assessment Process (‘ICAAP’)
and the evaluation of the Group’s principal risks and uncertainties (see page 28), including those risks that could threaten its
business model, future performance or solvency.
The Group maintains a five-year MTP as part of its corporate planning process, which is a financial articulation of the Group’s
strategy. The financial forecasting model is predicated on a detailed year-one budget and higher level forecasts for years two to five.
As a matter of good practice and as part of the ICAAP required by the Financial Conduct Authority (‘FCA’), the firm performs a
range of stress tests including reverse stress tests. These assess the Group’s ability to withstand a market-wide stress, a Group-
specific (idiosyncratic) stress and a combined stress taking into account both market-wide and Group-specific events. The stress
tests are derived through discussions with senior management, after considering the principal risks and uncertainties faced by the
Group, and the scenarios involved are refreshed on a regular basis to ensure they remain current.
The stress tests enable the Group to model the impact of a variety of external and internal events on the MTP; to identify the
potential impact of stress events on the Group’s income, costs, cash flow and capital; and the Board to assess the effectiveness of
any management actions that may be taken to mitigate the impact of the stress events.
The reverse stress tests allow the Board to assess scenarios and circumstances that would render its business model unviable.
This enables the identification of potential business vulnerabilities and the development of potentially mitigating actions.
During the year the Group has continued to evaluate the potential risks and opportunities of the UK leaving the European Union.
Although there remains limited clarity on the final outcome of the negotiations, a range of potential scenarios have been considered
and the potential impacts on our clients, the Group and the wider industry have been assessed. This analysis does not present any
reason to believe the Group will not remain viable over the long-term. The Group will continue to engage with industry bodies,
regulators and clients to further understand these impacts and manage the associated risks.
Following the assessment of the above, the Board concluded that the Viability Statement should cover a period of five years.
While the Directors have no reason to believe that the Group will not be viable over a longer period, this period has been chosen to
be consistent with the MTP used as part of the Group’s corporate planning process.
Taking account of the Group’s current position and principal risks and the Board’s assessment of the Company’s prospects,
the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall
due over a period of at least five years.
Andrew Westenberger
Finance Director
28 November 2017
Brewin Dolphin
www.brewin.co.uk
37
Strategic ReportGovernanceFinancial StatementsOther Information Corporate Responsibility
Employee engagement drives
value for all stakeholders
The importance of engagement
It is widely recognised that an organisation whose employees
are engaged with its purpose and culture will perform better
than others, and create value for clients and shareholders.
This is because engaged employees feel a strong connection
with their employer and believe their work is important.
This is certainly what we believe. For us, engagement has a
strong role to play in helping our people be as good as they
possibly can be, and this underpins a superior business
performance. At Brewin Dolphin, our Human Resources (‘HR’)
function and Corporate Responsibility (‘CR’) activities are both
recognised as powerful builders of engagement.
Our rising engagement score
It is very important to us that we understand our engagement
performance. In 2017, we commissioned an employee
engagement survey for the third successive year. Once again,
this is proving to be an active tool that helps us listen to our
people, understand what they want and focus on improvement.
This year’s survey demonstrated that this approach is working.
It showed a rise in the Brewin Dolphin engagement score,
up by four percentage points (‘pp’) on last year’s very strong
result to 82%. This is well ahead of the financial services
industry benchmark of 76%, and continues the year-on-year
improvement that we’ve seen since the survey’s initial launch.
Every office identifies local initiatives that can make a positive
impact on the workplace. Taking the rich data the survey provides
we also focus on a number of Group-wide work streams.
Satisfaction with internal communication, for example, rose by
14 pp, while that for learning and development rose by eight pp.
This is especially good to see, as these are the two key areas in
which HR can most directly improve employee engagement.
These were not the biggest rises, however – working with our
colleagues across our Business Support function saw their overall
engagement score rise from 67% to 80% (13 pp). The employee
participation rate in the 2017 engagement survey, meanwhile, was
88%. This is an exceptional level of participation by any standards,
and we see it as an endorsement of the actions we have taken
following past surveys.
Culture and engagement
We continue to nurture and strengthen the elements of our
culture that we believe will engage our people and drive the best
possible service for our clients.
From both an internal and external perspective, our brand
values are key features of our culture. This is why in 2016 we
involved employees, clients and prospective clients in identifying
our three core values of:
– Genuine: heartfelt advice, delivered by people who care
– Expert: skillfully facilitating important decisions
– Ambitious: making more of life’s opportunities
During 2017, we focused attention on embedding these values
throughout the organisation. In particular, they have become key
factors in our performance management and promotion
processes. They have also provided the platform for the newly
launched Brewin Dolphin People Awards, in which employees
nominate colleagues for their exceptional qualities in these
three areas.
The values also reflect Brewin Dolphin’s cultural desire to do
what is right, which is echoed in how we treat our clients, our
employees and our communities. In particular, they run through
all our ‘people’ processes, covering performance, talent and
development, ensuring that ‘how’ we do things is at least as
important as ‘what’ we do.
Driving diversity and inclusion
Our ongoing commitment to Diversity and Inclusion (‘D&I’)
continued during 2017, focusing on issues wider than gender
and ethnicity to help us ensure that we attract the very best
talent we can find and enable all our people to perform to the
best of their ability. This approach enables Brewin Dolphin’s
people to benefit our clients, our business and society as a
whole, as well as themselves.
During the year, the D&I Committee was reinvigorated to
broaden the scope of the issues that we address. Specific
actions included joining the City of London Mental Health
Alliance, a self-help group aiming to eliminate the stigma
surrounding the subject.
We also started to work with the ‘Outstanding’ LGBT business
network, with employees participating in their mentoring
programme as mentors and mentees.
In addition, we joined the Business Disability Forum, which aims to
open up visibility around the issues of disability in the workplace.
All these organisations, and more, were identified as offering
opportunities for interaction, as they gain from the contributions
of our people as much as we do from theirs.
Last year, we reported on the unconscious bias training initiative
we ran across the organisation. In 2017, we took this a stage
further, addressing all our recruitment literature and selection
processes to reduce unconscious bias and attract the broadest
range of candidates.
During the year, we hired 208 new employees across the
organisation. In seeking the best candidates, we are delighted
that more than half (53%) of these hires have been female.
38
Brewin Dolphin
Annual Report 2017
Janet Barrett, winner in the CR
category at the Brewin Dolphin
People Awards, raised
thousands of pounds by selling
knitted chicks for a
cancer charity.
For more information
https://www.brewin.co.uk
The ‘Women @ Brewin’ initiative that we announced last year
has continued to grow in scale and positive impact. It enables
our employees to meet and discuss career issues with
successful female role models, both from our Board and from
outside the organisation. High-profile external participants in the
programme during 2017 included Heather Hanbury,
headmistress of the Lady Eleanor Holles School, and Ebru
Köksal, a leading figure in global football.
Learning, development and talent
During 2017, we ran a wide range of internal and external
initiatives designed to improve the skills and personal
development of our employees, and to identify the best talent of
the future. In this way, we aim to attract and retain the best
people to achieve competitive advantage by delivering a
superior quality of service.
Our internal development programmes addressed every level of
the Group. For example, we developed in-house a fully bespoke
Executive Leadership Programme that aims to prepare those
individuals identified with the appropriate talent to reach and
perform strongly at the highest levels of the organisation. This
year-long programme took into account our growth strategy
and aspirations, using the input of psychologists and one-to-
one feedback to ensure it matched our organisational needs as
well as the personal requirements of the 13 participants.
At the other end of the scale, we also launched the Financial
Planning Academy, a Government-approved apprentice
scheme aiming to achieve social good as well as providing us
with a sustainable pipeline of planning talent. In this first year, 16
individuals from diverse backgrounds, aged 22 to 47,
participated with the aim of becoming para-planners.
Encouragingly, half of these were female.
We also continued the programmes mentioned in the 2016
report. These included the business apprenticeship programme
we launched in 2016 in our Newcastle-upon-Tyne office. This is
now fully embedded, and is operating on a six-month cycle. Our
emerging talent programme also continued at the expanded
level we announced last year, with 30 graduates participating
this time.
Driving new efficiencies in HR
Our new HR system was fully integrated during the year.
It enables our people to find all HR-related materials, from
performance management data to holiday dates, more efficiently.
We also introduced the use of LinkedIn to our recruitment
programmes, enabling us to develop direct relationships with
candidates and drive down our spend with agencies.
Tax strategy
Our tax strategy, as published on our website, outlines our
governance arrangements, our approach to tax risk and tax
planning, and how we interact with tax authorities. We manage
tax risk within our Group wide risk management and governance
framework where we operate an industry standard ‘three lines of
defence’ model. As befits our operating structure and
straightforward business model, our appetite for tax risk is low.
While we are mindful to run our business in a cost effective
manner in line with our obligations to our shareholders, we do
not participate in aggressive tax planning or condone abusive
tax practices which would contravene our ethics and culture.
Brewin Dolphin
www.brewin.co.uk
39
Strategic ReportGovernanceFinancial StatementsOther Information Corporate Responsibility continued
We use legitimate tax reliefs for the purpose they were intended
and aim to pay the right amount of tax in the territories in which
we operate. We believe in fostering professional working
relationships with HM Revenue & Customs (‘HMRC’) and other
tax authorities and we work with industry bodies and HMRC
supporting initiatives to reduce complexity and unintended
commercial consequences in the development of tax legislation.
Our Corporate Responsibility activities
This was an outstanding year for CR at Brewin Dolphin. The further
development of our strategy and twice-yearly updates to the Board
have ensured that issues involving CR are of increasing importance
to our people at every level of the organisation.
As a result, CR activities become more directly connected to
our values, particularly the ‘genuine’ aspect, which is
underpinned by the authenticity of our people’s commitment to
supporting good causes.
This growing importance is borne out by the findings of our
2017 engagement survey. Last year, we were delighted to be
shortlisted for a major national award on the strength of a 34%
rise to 78% in the importance of CR to our people. This year,
that score rose again to 85% – a full 20 percentage points
ahead of the national benchmark for the financial
services industry.
Significant progress has been made since 2015, which was
when we commenced an intensified strategic focus on CR.
This has seen us bring together a number of previously
disparate corporate-level initiatives in an integrated fashion
under the same management structure.
These include:
– Volunteering Day: every employee is entitled to one paid day
each year to volunteer for a good cause in the community,
either singly or as part of a team. In the year 2016/17, our
people had volunteered for more than 3,000 hours. With
around 25% of employees participating, this is gathering
momentum from a standing start in 2015. Looking ahead to
2020, our target is for 40% of employees to volunteer each
year for the cause of their choice.
– Payroll Giving: all of our employees get the chance to
contribute to charity directly from their pre-tax salary. The
numbers choosing to do so increased by a third this year.
Brewin Dolphin matches donations by up to £20 every
month. As a result of our people’s efforts, we received the
government-supported Payroll Giving Quality Mark Gold
Award for the second successive year.
– Fundraising Matching: every employee can claim a £100
donation from Brewin Dolphin for their chosen cause if they
raise over £100, or £200 if they raise more than £1,000. In
2017, 170 employees collectively raised £136,000, with
£19,500 in match-funding.
– Small Grants: employees can nominate a small local charity
for a grant of up to £1,000. In the year 2016/17 over £20,000
was donated to 25 charities.
Our offices have continued to be active in their communities
through sponsorship of events such as local literary and flower
festivals as well as charitable sporting events.
Children at one of
our partnership events
40
Brewin Dolphin
Annual Report 2017
These initiatives are complemented by a number of key corporate
partnerships with charities or non-profit social enterprises whose
work is aligned with our purpose of creating access to
opportunity. We have deliberately selected small-to-medium-sized
partners so that our input and financial support can make an
important positive difference to them.
These partnerships are with Enabling Enterprise and Dress for
Success Dublin, which promotes economic independence
for women.
Preparing for the world of work
We believe that providing work experience is a highly effective
way of improving opportunities for young people, and this belief
drove much of our CR activity during the year.
For example, we participated alongside other employers in the
‘Capital Experience’ initiative, run by the national Career Ready
charity which prepares young people for a life in work. We ran
networking and Q&A sessions for groups of participating school
students from across the UK, many of whom were visiting
London for the first time.
We further developed our Brewin Dolphin Career Workshops
during 2017, in which 18 school students aged 16 – 18 joined
us for a week-long programme designed to help them
experience the reality of office life. This included a series of
seminars and presentations on areas ranging from marketing
to HR. Participants included pupils from an inner-city school in
London, as well as several young people who applied via the
Brewin Dolphin website.
We have also become the first business partner for the Winning
Scotland Foundation, an independent charity that uses the
inspiration of successful sportspeople to help children and young
people learn important life skills. With a particular focus on the
‘growth mindset’, it aims to create a generation of young people
who can achieve their personal best. Our focus in this first year
was on identifying where we can best support the charity’s goals.
We are always keen to look for opportunities to work with young
people across our wide network of offices, and this year we ran
a series of day-long sessions on career preparation for sixth
form students from Gateshead.
Environmental activities
At Brewin Dolphin, our main environmental impacts are through
largely UK-based travel and the consumption of resources and
emissions at the buildings in our branch network. We do all we
can to reduce any such impacts through sensible policies and
initiatives including Green IT and recycling programmes. Please
see page 72 for our full environmental statement.
Supplier initiatives
Even though we are largely UK based, we are aware of the
risks associated with a supply chain that crosses borders,
potentially into nations where employee rights do not match our
own standards. We take our responsibilities very seriously in this
area and are taking those actions necessary to understand our
supply-chain and carry out any required remedial activities
that we identify.
Skills, experience and aspirations for success
Our national partnership with Enabling Enterprise has developed further this year.
We have hosted students taking part in their school
programmes at a growing number of offices, including those in
Nottingham, Leeds, Birmingham, Manchester and London.
Over the course of the year, 375 students worked with over 50
of our employee volunteers.
“A fantastic Enabling Enterprise day, when the children
thoroughly enjoyed using their problem-solving skills to trade
on the stock market! All of the children shared ideas effectively
and demonstrated great teamwork skills throughout the day.”
Teacher, Gilbertstone Primary School
Enabling Enterprise’s vision is that one day every student will
leave school equipped with the skills, workplace experience
and aspirations they need to succeed. From a single
classroom in 2009, Enabling Enterprise now works with over
85,000 students each year and provides training and support
to more than 3,400 teachers.
One school, Gilbertstone Primary in Yardley, Birmingham is
starting its fourth year of working with Enabling Enterprise. In
June 2017, 20 Year 5 students visited Brewin Dolphin’s office
in the city as part of their Enabling Enterprise programme.
“A great day! The children were fantastic; they had such good
questions and worked really well in their teams to achieve a
great outcome for their client.”
Volunteer, Brewin Dolphin
“I have enjoyed learning about the stock market – something
we have never done before.”
Student, Gilbertstone Primary School
Brewin Dolphin
www.brewin.co.uk
41
Strategic ReportGovernanceFinancial StatementsOther Information Board of Directors
Creating sustainable value for
the benefit of our shareholders
Chairman
Executive Directors
Non-Executive Directors
N
R
E
D
E
D
N
A
RK
Simon Miller
Chairman
David Nicol, CA, Chartered FCSI
Chief Executive
Andrew Westenberger, FCA
Finance Director
Kath Cates
Senior Independent Director
Andrew Westenberger joined
the Board in January 2013.
He was group finance director
of Evolution Group PLC from
2009 until August 2011 and a
director of its principal
subsidiary, Williams de Broe
Limited. Andrew qualified as a
chartered accountant with
Coopers & Lybrand. From
2000 to 2008, he held various
senior finance roles in London
and New York with Barclays
Capital. He is a non-executive
director of the Chartered
Institute of Securities and
Investments and was
appointed as a non-executive
director of Schroder UK
Growth Fund plc in May 2017.
Kath Cates was appointed
as a Non-Executive Director
on 18 December 2014
and became Chair of the
Risk Committee on
1 September 2015. At the
February 2017 AGM, she was
appointed as the Senior
Independent Director. Kath has
over 20 years’ experience in
international financial services,
latterly as chief operating
officer, wholesale banking for
Standard Chartered Bank. She
is currently a non-executive
director and chair of the risk
committee for RSA Insurance
Group plc and a non-executive
director of Threadneedle
Investment Services Limited.
Simon Miller was appointed
Chairman in March 2013.
He joined the Board in 2005
and became Deputy
Chairman and Senior
Independent Director in 2012.
He read law at Cambridge
and was called to the Bar.
He subsequently worked for
Lazard Brothers and County
NatWest. He is also chairman
of Blackrock North American
Income Trust PLC and
JPMorgan Global Convertibles
Income Fund and a non-
executive director of STV.
David Nicol joined the Board
as a Non-Executive Director in
March 2012 and was
subsequently appointed Chief
Executive in March 2013.
He trained and qualified in
1980 as a chartered
accountant with EY and spent
two years working for KPMG
in Hong Kong. He joined
Morgan Stanley in 1984,
where he worked for 26 years
in a number of operations and
finance roles. He was a
director and CAO of Morgan
Stanley International PLC from
2004 to 2010. David was a
non-executive director of
Euroclear plc from 1998 to
2010 and was on the board
of the Chartered Institute of
Securities and Investments
until September 2015. He is
on the Council of the Institute
of Chartered Accountants of
Scotland and is chairman of
the appointment committee
of the Hermes Property
Unit Trust.
42
Brewin Dolphin
Annual Report 2017
Key to our
committees
A Member of the
Audit Committee
N Member of the
Nomination Committee
R Member of the
Remuneration Committee
RK Member of the
Risk Committee
D Member of the
Disclosure Committee
E Member of the
Executive Committee
Denotes Committee Chairman
RK
R
N
A
R
N
A
RK
R
Paul Wilson
Non-Executive Director
Caroline Taylor
Non-Executive Director
Ian Dewar, FCA
Non-Executive Director
Paul Wilson was appointed as
a Non-Executive Director in
December 2013. Paul has
over 25 years’ experience of
the financial services industry.
Until February 2014, he was
an advisory partner at Bain &
Company, previously being
responsible for their financial
services practice. Paul is the
senior independent director of
XL Catlin UK and chair of their
risk and reserving committee.
He is also CEO of the World
Platinum Investment Council
and is a group board
independent director at
Unigestion Holding SA, based
in Geneva. Paul is chairman of
Action Against Hunger (UK).
He holds an MBA from
Harvard Business School.
Caroline Taylor was appointed
as a Non-Executive Director in
May 2014 and is the Non-
Executive Board member
responsible for Corporate
Responsibility within Brewin
Dolphin. Caroline has over 25
years’ experience in the
financial services sector with a
strong background in
investment management and
in-depth knowledge of all
aspects of investment
management operations,
compliance and legal issues.
Caroline was a director of
Goldman Sachs Asset
Management International
from 2005 to 2012 and is
currently a non-executive
director of Ecclesiastical
Insurance Office PLC.
Ian Dewar was appointed as a
Non-Executive Director in
November 2013. He retired
from KPMG in 2012 after a
32-year career, including 19
years as a partner. During that
time, he performed a wide
variety of roles, both within
KPMG and as a non-executive
trustee in the charity sector.
An accountant by training, his
experience has been in audit,
advisory, client relationship and
practice management roles.
He has spent the last 28 years
working in the financial services
sector. Ian is a non-executive
director of Manchester Building
Society, Arbuthnot Banking
Group PLC and The
Aldenham Foundation.
Length of tenure of Directors
at 30 September 2017
Balance of Executive and
Non-Executive Directors at
30 September 2017
Balance of male and female
Directors at 30 September 2017
1
1
1
0-3 years
3-6 years
Over 6 years
4
2
2
Chairman
Executive
Independent
Non-Executive
5
Brewin Dolphin
www.brewin.co.uk
Male
Female
5
43
Strategic ReportGovernanceFinancial StatementsOther Information Chairman’s Introduction to Governance
Following last year’s review of our leadership pipeline, we have
strengthened our emphasis on developing talent at every level
of the organisation. Exemplifying this approach at one end of
the spectrum was the launch during the year of an apprentice
scheme, the Brewin Dolphin Financial Planning Academy.
At the other, we created and introduced an Executive
Leadership Programme which aims to equip those who have
been identified as future leaders of the business with the
necessary skills to enable their development. Further information
on both initiatives can be found on page 39.
Improving engagement
For the third year in a row, we have undertaken an all employee
engagement survey across the organisation. For the second
successive time, this has shown substantial improvements in
engagement under almost every measure.
These results enable the Board and senior management to
understand and act on those areas of the business where there
is room for improvement. The Board was pleased this year to
see significant growth in employee satisfaction with our
career-development and internal communications programmes,
two areas on which we have focused considerable attention.
See page 38 for more information.
We believe that the engagement survey enables Brewin Dolphin
to create, sustain and improve the working environment.
Board effectiveness
In last year’s Annual Report, I said that there would be an
externally facilitated performance evaluation during 2017.
We appointed the London-based corporate advisory firm,
Lintstock Ltd (‘Lintstock’), to carry this out. We have
subsequently engaged them to work with us for a three-year
period. See page 47 for more information.
The next few pages contain our Corporate Governance
Statement and detailed reports from our Board Committees.
Simon Miller
Chairman
28 November 2017
Corporate values
at the heart of
governance
Chairman’s overview
We rely on our values to guide how we govern ourselves at
every level of the organisation. By doing so, we make every
effort to behave as our clients, employees, shareholders and
regulators would expect.
We apply good practice to all aspects of Board leadership and
governance, just as we do to providing clients with the best
possible financial advisory and portfolio-management services.
As a result, the desire to behave ethically and act for the benefit
of clients, employees and shareholders is firmly entrenched in
our culture at every level of the organisation. Brewin Dolphin’s
values – Genuine, Expert and Ambitious – provide the
foundations of our approach to governance.
In this brief introduction to corporate governance at Brewin Dolphin
we highlight some of the Board’s most significant actions and
initiatives taken during 2017. These are designed to ensure our
growth strategy is driven by our culture and values.
Leadership for growth
During the year, we continued to ensure that the Board
collectively has the skills and experience to guide and advise
our executive management as they pursue an ambitious
growth strategy.
At our AGM in February 2017, Kath Cates became our Senior
Independent Director. This followed the retirement of Angela
Knight, who served the Board with great distinction for
nine years.
As announced on 15 November 2017, Mike Kellard will join the
Board as a Non-Executive Director with effect from
1 December 2017. Mike has over 25 years’ experience in the
life, pensions and wealth management markets and we look
forward to his contribution. We continue the search for an
additional Non-Executive Director with experience to
complement the Board’s existing skill set.
Effective succession planning ensures that we can identify and
develop those individuals with the talent, cultural awareness and
ambition to assume senior positions.
44
Brewin Dolphin
Annual Report 2017
Corporate Governance Report
Leadership
The Board has a majority of independent Non-Executive Directors. Further information on the Directors’ range of skills and expertise
can be found on pages 42 and 43. In order for the Directors to discharge their responsibilities as set out in the Matters Reserved for
the Board, the Board meets at least eight times a year (a full list of Matters Reserved for the Board can be found on our website).
In addition to this, the Board attends a strategy day to discuss in depth the Group’s direction with executive management.
Key areas of discussion that took place during the year:
Routine
– Reports from the Chief Executive
– Reports from the Finance Director
Non-routine
– People strategy
– Corporate Responsibility strategy
– Reports from the Group Risk & Compliance Director
– Duncan Lawrie Asset Management Limited (‘DLAM’)
– Group strategy review
– Broker reports on shareholder feedback
– Medium-term plan and ICAAP
– Board and Committee evaluations
– Management presentations
– Training
acquisition
– Deep dive on Investment Governance
Board composition and roles
The Board is collectively responsible for the long-term success of the Group, in accordance with the UK Corporate
Governance Code, there is a clear division of roles and responsibilities as shown below:
Chairman
– Provides leadership to the Board, promoting constructive
Chief Executive
– Provides leadership to the Group.
debate and challenge between the Executive and
Non-Executive Directors.
– Ensures that there is good information flow to the Board,
and from the Board to its key stakeholders.
– Supports and advises the Chief Executive, particularly in
the development of strategy.
– Builds an effective and complementary Board, regularly
considering its composition and balance, diversity and
succession planning.
– Develops strategy proposals for recommendation to the
Board and is accountable for business performance.
– Maintains a dialogue with the Chairman on all important
matters and strategic issues facing the Group.
– Ensures that there is an effective framework of internal
controls, including risk management, covering all
business activities.
– Ensures that the Board is fully informed of all key matters.
Finance Director
– Supports the Chief Executive in
developing and implementing
strategy.
– Oversees the financial delivery and
performance of the Group and
provides insightful financial analysis
that informs key decision making.
– Leads investor relations activities and
communication with investors
alongside the Chief Executive.
– Works with the Chief Executive to
develop budgets and medium-term
plans to support the agreed strategy.
Senior Independent Director
– Acts as a sounding board for the
Chairman and serves when required
as an intermediary for the other
Directors.
– Meets with the Non-Executive
Directors (without the Chairman
present) at least annually and leads
the Board in the ongoing monitoring
and annual evaluation of the
Chairman’s performance.
– Available to meet with major
shareholders and acts as a point of
contact for shareholders and other
stakeholders.
Independent Non-
Executive Directors
– Constructively challenge management
and decisions taken at Board level.
– Oversee the performance of
management in meeting agreed
goals.
– Support the Chairman and Executive
Directors in instilling appropriate
culture, values and behaviours in the
boardroom and across the Group.
– Challenge the adequacy and quality
of information received prior to
Board meetings.
Brewin Dolphin
www.brewin.co.uk
45
Strategic ReportGovernanceFinancial StatementsOther Information Corporate Governance Report continued
Governance Framework
Brewin Dolphin Holdings PLC
Board
Remuneration
Committee
Nomination
Committee
Audit Committee
Risk Committee
The Board delegates certain responsibilities to formal Board Committees whilst maintaining an appropriate level of oversight
through regular reports from the Committee chairs. Further information on the individual committees’ composition and activities
in the year can be found throughout this section of the Annual Report and Accounts.
Executive Committees
Responsibility for the Group’s day to day management is delegated to the Chief Executive, who chairs an Executive Committee.
The purpose of this Committee is to support the Chief Executive in the implementation and formation of strategy, as well as
overseeing the day to day running of the Group. Further, it agrees operational decisions that are otherwise not reserved for the
Board. The Committee consists of eight members of senior management from different areas of the business and meets monthly.
There is a Disclosure Committee which is a delegated Committee of the Board. It focuses on discharging the Company’s duties in
accordance with the EU Market Abuse Regulation. It comprises the Chief Executive, Finance Director, either the Group Risk and
Compliance Director or the Head of Compliance (as alternate), and either the Company Secretary or Head of Legal (as alternate).
Effectiveness
Composition
A review of the Board composition is conducted by the Nomination Committee and since Angela Knight’s retirement at the 2017
AGM, the Committee has been searching for potential Non-Executive Directors based on merit against objective criteria.
More information on this search can be found in the Nomination Committee Report on page 48.
Induction of Directors
All new Directors receive a tailored induction programme designed to broaden their understanding of the Group’s operations,
strategic aims and culture. This involves meetings with the Directors and members of the senior management team and the
provision of any relevant training.
Time commitment
The expectation of the Non-Executive Directors’ time commitment is set out in their letters of appointment. Copies of which are
available for inspection at the Company’s Registered Office and will also be available at the AGM. Their attendance, along with
Executive Directors, at meetings during the year is set out in the table below.
Board and Committee attendance record
Member
Executive Director
David Nicol
Andrew Westenberger
Non-Executive Director
Simon Miller
Kath Cates1
Paul Wilson
Caroline Taylor
Ian Dewar
Angela Knight2
Independent
Board
Nomination
Committee
Risk
Committee3
Audit
Committee3
Remuneration
Committee
N
N
N
Y
Y
Y
Y
Y
8/8
8/8
8/8
8/8
8/8
8/8
8/8
3/3
n/a
n/a
3/3
2/2
3/3
3/3
n/a
1/1
n/a
n/a
n/a
5/5
5/5
n/a
5/5
n/a
n/a
n/a
n/a
8/8
n/a
8/8
8/8
5/5
n/a
n/a
5/5
n/a
5/5
5/5
5/5
n/a
1. Kath Cates was appointed as a member of the Nomination Committee following Angela Knight’s retirement.
2. Angela Knight attended all meetings until her retirement at the 2017 AGM.
3. The Risk Committee and the Audit Committee held one joint meeting during the year to discuss the ICAAP.
46
Brewin Dolphin
Annual Report 2017
Directors’ conflicts of interest
The Board has a policy in place for managing and, where
appropriate, approving conflicts or potential conflicts of interest.
All Directors are provided with an opportunity to disclose any
changes in conflicts at the start of every meeting.
Independence of Directors
All Non-Executive Directors are considered to be independent in
character and judgement and do not hold any positions that will
conflict with their responsibilities with the Group.
Information flow
As part of the annual cycle, all Board Committees forward plan
their agendas for the year to ensure that important issues are
addressed. The Chairman of each Committee works closely
with the Company Secretariat and other relevant members of
senior management to agree areas of discussion or approval.
Board evaluations
The Board and its Committees undertake an annual evaluation
of their performance. The appraisal process provides an
opportunity for the Board to appraise its own effectiveness and
identify areas of development as well as follow up on the actions
raised from the previous review.
In 2017 Lintstock Ltd were appointed as a retained adviser, for
a three year programme to facilitate Board evaluations and to
provide continuity. Lintstock designed a set of questionnaires for
this year’s review, focusing on areas of specific relevance to the
Group. Topics included the composition of the Board and its
Committees, board dynamics, risk management, strategy
oversight, board efficiency, board training and priorities for
change. It is intended that an interview exercise will be
conducted next year followed by a questionnaire only approach
in the final year.
Lintstock produced anonymised reports from the online
questionnaires and these were discussed by the Board and its
committees at their relevant meetings. Overall the results were
positive and a number of actions were agreed. Progress against
these actions will be reviewed during the year. Lintstock has no
other connections to the Company.
Evaluation topic Action
Board
composition
Review of skills matrix to ensure the correct
balance of skills and experience.
Continuing succession discussions for
Executive, Non-Executive and senior
management roles.
Improvements to be made to length and focus
of Board papers. Improved clarity to avoid
duplication between Board and Committee
agendas.
Increased opportunities for Board members to
meet with senior management and wider
employee population to enhance challenge and
improve evaluation.
Redesigned agendas to ensure more meeting
time focused on strategy, mergers and
acquisitions and other key issues.
Board
support and
efficiency
People
Strategic
oversight
Brewin Dolphin
www.brewin.co.uk
Director evaluation
During the year, the Chairman evaluated the performance of the
Directors in one-to-one meetings and the Senior Independent
Director evaluated the performance of the Chairman. It was
confirmed that each Director continued to deliver the required
commitment to their role and made an effective and valuable
contribution to the Company.
Accountability
Please see pages 26 to 29 in the Strategic Report for an
overview of the Group’s Principal Risks and Uncertainties and a
description of the risk management framework.
Please see page 71 of the Directors’ report for a description of
how the Board has discharged its responsibilities in relation to
internal controls and risk management.
Shareholder relations
The Chairman, Chief Executive and Finance Director meet
regularly with the Group’s major shareholders. The Chairman
communicates the shareholder feedback at the following Board
meeting. The Board also receives regular broker reports which
detail shareholder feedback.
Following the release of our annual results, an analysts and
investor presentation is held. The presentation is available on
our website for those unable to attend.
This year’s AGM will be held in Haberdashers’ Hall, 18 West
Smithfield, London EC1A 9HQ on 2 February 2018 at 11.30am.
Further details can be found in the Notice of AGM, a copy
of which can be found on the Company’s website
(www.brewinmedia.co.uk/investor-relations).
UK Corporate Governance Code
Compliance statement
We have complied with all principles and provisions of the 2016
UK Corporate Governance Code (‘the Code’) throughout the
financial year ended 30 September 2017. The Corporate
Governance Statement and the cross referenced reports within
set out our approach to applying the Code.
47
Strategic ReportGovernanceFinancial StatementsOther Information Nomination Committee Report
Chairman’s overview
The main focus of the Nomination Committee is to consider
the composition of the Board and to review and manage
succession planning.
The Company has in place succession plans for the Board, and for
senior management, to ensure there is the appropriate balance of
skills and experience within the Board.
During the year we strengthened further our focus on
developing talent throughout the Group. This included the
launch of our Group Executive Leadership Programme, which
draws upon our values to ensure its relevance to our growth
strategy and culture.
Angela Knight retired at the AGM last year and Kath Cates
became the Senior Independent Director. During the summer
we commissioned external consultants to help identify non-
executive candidates and Mike Kellard will join the Board on
1 December 2017. A copy of his biography will be included in
the Notice of AGM. The external search consultancy retained
by the Board in respect of the appointment of Mike Kellard was
Odgers Berndtson, who have no connection to the Company.
We are presently conducting a search for an additional non-
executive director and we have asked our external adviser to
focus on candidates who will ensure that the Board continues
to represent a diversity of views.
During the year there was an externally facilitated performance
evaluation of the Board by a London based board consultancy,
Lintstock. This evaluation looked at the workings of both the
Board and the Board Committees and formed the basis for the
annual Board appraisals. In overall terms the outcomes of these
assessments confirmed that progress was being made.
Simon Miller
Chairman of the Nomination Committee
28 November 2017
Committee composition
The Committee comprises the Board Chairman, Simon
Miller, and three independent Non-Executive Directors.
The Chief Executive and Group Human Resources
Director are standing attendees at Committee meetings;
the Chief Executive will exclude himself from discussions
relating to his own appointment. Angela Knight was a
Committee member in her capacity as Senior
Independent Director and was succeeded by Kath Cates
during the year. Details of membership and attendance
can be found on page 46.
The role of the Committee
The purpose of the Committee is to ensure that the
Board retains an appropriate balance of skills to support
the strategic objectives of the Group and that there are
appropriate procedures in place for the nomination,
selection, training and evaluation of Board members as
well as to ensure that there is an effective framework for
succession planning.
The responsibilities of the Committee are defined in the
Committee’s Terms of Reference, a copy of which can
be found at www.brewinmedia.co.uk/investor-relations.
48
Brewin Dolphin
Annual Report 2017
Risk Committee Report
Chairman’s overview
The Committee’s key roles are to oversee the Group’s
identification of its principal risks, the setting of risk appetite and
to recommend these to the Board. The Committee provides
oversight of the Group Risk Management Framework to ensure
that the risks are appropriately managed within the Group.
During the year the Committee attended a risk workshop which
was hosted by the Risk Management Committee, an Executive
forum. At the meeting the current key risks were reviewed and
discussed at length and in light of our strategy and risk appetite.
Emerging risks were also discussed to determine whether any of
these risks should now be considered as a key risk to the Group.
The results of the risk workshop helped the Group to refresh and
update its key risks. For further information please refer to the
Principal Risks and Uncertainties section on page 26.
The Committee regularly receives updates from management
on risk management practices and this year particular areas of
focus were IT risk, including change management and
cyber risk.
The Committee also receives regular updates on regulatory
changes, and how the Group plans and implements these to
ensure compliance. Throughout the year special focus has been
on MiFID II to ensure the Group is ready for the January 2018
implementation date.
In addition, we continued to examine the key risks which are
relevant to the Group’s strategic objectives.
Kath Cates
Chairman of the Risk Committee
28 November 2017
Committee composition
The Committee is made up of three independent
Non-Executive Directors. There is cross-membership
between the Committee and the Audit and
Remuneration Committees to ensure that agendas are
aligned and key information is appropriately shared
across the Board Committees. The Chairman of the Risk
Committee is also a member of the Audit Committee.
Standing attendees at Committee meetings include the
Chief Executive, Finance Director and the Group Risk &
Compliance Director. Further details on membership and
attendance can be found on page 46.
The role of the Committee
The purpose of the Committee is to provide oversight of
the Risk Management Framework of the Group and
assist the Board with its responsibilities for ensuring the
integrity of the Group’s internal control and risk
management systems.
The responsibilities of the Committee are outlined in the
Committee’s Terms of Reference, a copy of which can
be found at www.brewinmedia.co.uk/investor-relations.
Brewin Dolphin
www.brewin.co.uk
49
Strategic ReportGovernanceFinancial StatementsOther Information Risk Committee Report continued
Committee activities during the year
Risk Management and
Investment Governance
Frameworks
– The Committee reviewed and
challenged key components of the
Risk Management Framework and
monitored the implementation of the
updated Investment Governance
Framework, and enhancement to
client money controls.
Regulatory change
– The regulatory changes in relation to
MiFID II, GDPR and SMCR and the
implications they will have on the
Group were assessed. The
management responses to these
were discussed to ensure the Group
adopts the regulations and that the
right behaviours will be embedded in
the business.
16%
9%
Key risks
– The Committee reviewed and
recommended the risk appetite
statements and tolerance for key
risks to the Board. These were
monitored on an ongoing basis to
ensure they remained relevant and
appropriate, adding any emerging
risks if necessary.
– In depth discussions on cyber risk
and change management took
place.
45%
Internal Capital Adequacy
Assessment Process
(‘ICAAP’)
– The key components of the ICAAP
were challenged in a six monthly
review, exploring scenarios and
stress tests to determine an
appropriate regulatory capital
requirement. This was at a joint
meeting with the Audit Committee
prior to recommendation to the
Board.
24%
Training
– Training sessions were held on the
Performance evaluation
– The Committee conducts a
ICAAP and SMCR.
4%
performance evaluation every year
and this year Lintstock distributed a
questionnaire for anonymous
completion to all Committee
members and those executives who
regularly attend the Committee’s
meetings. The results were
discussed by the Committee and
helped to inform next year’s
forward-looking agenda.
2%
50
Brewin Dolphin
Annual Report 2017
Audit Committee Report
Chairman’s overview
As an Audit Committee, our focus throughout the year has been
on quality: the quality of our financial reporting, the quality
of our internal and external audits and the quality of our
control environment.
We have taken note of the various papers issued by the
Financial Reporting Council (‘FRC’) during the year and remain
committed to ensuring that our Financial Statements are ‘clear,
balanced and understandable’. Our 2016 Financial Statements
were subject to an in-depth review by the FRC and they had no
points to raise. This year’s Financial Statements are built on that
firm base and reflect both changes in reporting requirements
and the changes in our business.
Our internal audit is outsourced to BDO and Christian Bellairs,
our partner, reports to the Audit Committee. We have a
comprehensive programme of internal audit work and the
Committee follows up on the actions taken by management in
response to issues raised. The Committee recently held a
workshop with BDO to review areas of risk and to finalise the
internal audit plan for 2018. BDO have now completed two
years as our Internal Auditor and we have recently completed
a comprehensive assessment of their effectiveness.
As I mentioned last year, the FRC’s Audit Quality Review team
reviewed the audit of the 2015 Brewin Dolphin FInancial
Statements as part of their 2015 annual inspection of audit
firms. Following that review an action plan was agreed with
Deloitte for changes to be made to the 2016 audit which
included a change of partner. The 2016 audit was reviewed by
the FRC and no matters arose from that review which required
action. The Committee has also conducted a review of the
effectiveness of the External Auditor and concluded that Deloitte
LLP continues to provide an effective audit. It remains the
intention of the Committee to hold a formal external audit tender
during the course of Robert Topley’s (audit partner) five-year
term. He has just completed his second year.
The Audit Committee has worked closely with the Risk
Committee on key risks and the control environment,
reviewing areas in depth and receiving reports on issues raised
by all three lines of defence: the business, the Risk Department
and Internal Audit. We monitor those issues and the timeliness
and effectiveness in which they are dealt with by management.
During the year the Committee has received an in-depth report
on how revenue is recognised as well as a presentation on the
effectiveness of controls in the Group’s new Order Management
System. We took part in a whistleblowing training session
during the year which was facilitated by our in-house
Legal Department. The Committee approved a new
Whistleblowing Policy during the year and training was
provided to assist Committee members in discharging their
duties under the policy.
Angela Knight stepped down from the Committee in
February 2017 and I would like to thank her for her wise
counsel, input and challenge at Committee meetings. I am also
grateful for the enthusiasm and insight that Kath Cates and
Caroline Taylor bring to the Committee.
Ian Dewar
Chairman of the Audit Committee
28 November 2017
Committee composition
The Committee comprises only independent Non-
Executive Directors. There is always a cross-
membership with the Risk Committee, to help ensure
that agendas are aligned and key information is shared
appropriately across the Board Committees. Further
details on membership and attendance can be found on
page 46. The Chief Executive, Finance Director and
Group Risk & Compliance Director are invited to attend
at the Committee’s request and, in addition, all Non-
Executive Directors including the Chairman are entitled
to attend. The External Audit partner and our Internal
Audit partner are standing attendees. We have
considered the FRC requirement for the Committee to
have competence relevant to the financial services
sector and have concluded that the Committee as a
whole satisfies this requirement.
Role and responsibilities
The Committee helps the Board meet its responsibilities
for the integrity of the Group’s financial reporting,
including the effectiveness of its internal financial control
system, and for monitoring the effectiveness and
objectivity of the internal and external auditors.
The responsibilities of the Committee are outlined in the
Committee’s Terms of Reference, a copy of which can
be found at www.brewinmedia.co.uk/investor-relations.
Brewin Dolphin
www.brewin.co.uk
51
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee Report continued
Committee activities during the year
Financial reporting
– Reviewed the Annual Report and
Accounts, the Interim Management
Statements, the Half-Year Report and
the investor presentation to ensure
that, taken as a whole, they were fair,
balanced and understandable and that
they provided the necessary
information for shareholders to assess
the Group’s performance, its business
model and strategy.
– Reviewed reports from the external
auditor on both the Financial
Statements; including the significant
audit risks, areas of audit focus and the
appropriateness of the significant
management judgements used in
preparing the accounts, and on the
effectiveness of systems of internal
financial control.
– Reviewed reports from management on
the preparation of the Annual Report
and Accounts and the Half-Year Report,
including both the key judgements and
accounting policies followed in their
preparation, as well as updates on
changes to guidance regarding
financial reporting.
– Reviewed the Group’s going
concern assumption and
Viability Statement.
37%
ICAAP
– Reviewed the ICAAP jointly with the
Risk Committee. After review and
challenge of the ICAAP and its key
components, recommended its
approval to the Board.
9%
Internal Audit
– Assessed the effectiveness of the
Internal Auditor and reviewed and
approved the new internal audit
plan for the year.
External Auditor
– Approved the plan, terms of
engagement and fees to be paid to
the External Auditor for the audit of the
30 September 2017 Annual Report.
– Received internal audit reports,
challenged the robustness of
their findings and agreed
appropriate actions.
– Reviewed how issues identified
for action, whether arising from
internal audit reports or from
internal control processes, are
identified, progressed and
reported; this ensures there is
an effective framework for the
management of issues within
the Group.
21%
– Assessed the independence,
objectivity and effectiveness of the
External Auditor.
– Enforced the policy relating to
non-audit services provided by the
External Auditor and approved
non-audit services in accordance
with the policy which can be found
on our website.
– Reviewed a letter of recommendation
from the External Auditor for improving
the systems of internal control.
18%
Financial Crime
– There was a formal report from the
Group’s Money Laundering
Reporting Officer on the operation
and effectiveness of systems and
controls relating to anti-money
laundering (‘AML’) and the
prevention of financial crime.
Control Oversight
– Reviewed year-end reports providing
assurance on the effectiveness and
robustness of the Group’s system of
internal controls.
– The Committee conducted a deep
dive on the controls around the
Order Management System.
– Participated in whistleblowing
refresher training.
– Maintained oversight of regulatory
requirements.
6%
9%
52
Brewin Dolphin
Annual Report 2017
Performance evaluation
The evaluation of the Committee’s performance was captured as part of the wider, externally facilitated Board effectiveness review.
The results of the Committee evaluation were discussed at the meeting in October 2017.
Ian Dewar met regularly during the year with the Board Chairman, Finance Director, Chief Executive, Head of Internal Audit
and the external audit partner to review the Group’s governance processes and discuss the effectiveness of the internal and
external audit functions.
Key sources of estimation uncertainty related to the Financial Statements
We reviewed the significant issues set out below in relation to the Group’s Financial Statements for the year ended
30 September 2017. We discussed these issues with management at various stages during 2016/17 and during the preparation
and approval of the Financial Statements. Having reviewed the presentations and reports from management, we are satisfied that
the Financial Statements appropriately address the critical judgements and key estimates, in respect both of the amounts reported
and the disclosures made. We also reviewed these issues with the auditors during the audit-planning process and at the conclusion
of the year-end audit. We are satisfied that our conclusions in relation to these issues are in line with those drawn by the auditors.
Issue
Business combinations
(see notes 4.a.i and 4.b.i to
the Financial Statements)
Key considerations
Appropriate application of IFRS
in relation to the acquisition of
DLAM, specifically:
– establishing whether the
acquisition of DLAM
constituted a business or a
group of assets; and
– establishing the fair value of all
the assets/liabilities acquired
in the business combination.
Impairment review of goodwill
and client relationships, including
the valuation assumptions
used in the calculation of the
fair value of the relevant
cash-generating units.
Determination of the useful
economic life of client
relationships, which establishes
the quantum of the amortisation
expense.
Goodwill and client
relationships (see note 4.b.ii
to the Financial Statements)
Role of the Committee
We considered management’s
proposed accounting treatment
of the DLAM acquisition
(see note 27 to the Financial
Statements) including the
determining factors with regard
to whether the transaction
should be accounted for as a
business combination or as a
purchase of a group of assets
under IFRS 3 and we satisfied
ourselves as to the fair value
attributed to the client
relationships shown in the
Financial Statements as an
intangible asset.
We satisfied ourselves as to the
valuation assumptions used in
the calculation of the fair value of
the cash-generating units.
We considered the paper
prepared by management on
the average client tenure and
useful economic life
expectations.
Conclusion
We concluded firstly, that it was
appropriate to account for the
acquisition as a business
combination given a separate
legal entity was acquired and all
of the value of the business was
transferred and secondly, that the
determination of the fair value of
the assets was appropriate.
We concluded that the
assumptions and judgements
used were reasonable and that
the carrying values of goodwill
and client relationships in the
financial statements were
appropriate.
Assumptions underlying the
calculation of the defined
benefit pension scheme
asset/liability (see note 4.b.iii
to the Financial Statements)
Determination of the actuarial
assumptions such as discount
rate, the life expectancy of
scheme members and the
inflation rate used when
calculating the defined benefit
pension scheme asset/liability.
We considered management’s
paper explaining the
assumptions used in the
calculation, the resulting impact
on the Balance Sheet and the
movement in the deficit during
the period.
We concluded that the
assumptions and judgements
used in determining the defined
benefit pension scheme asset
were appropriate.
Brewin Dolphin
www.brewin.co.uk
53
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee Report continued
Issue
Likelihood of meeting
performance conditions for
the Long Term Incentive Plan
(see note 4.b.iv to the
Financial Statements)
Key considerations
Determining the likelihood of
meeting the performance
conditions which impact the
quantum of the expense in the
period.
Role of the Committee
We considered management’s
paper explaining the
assumptions for the likelihood of
meeting the performance
conditions.
Conclusion
We concluded that the
assumptions used in calculating
the expense were appropriate.
Assumptions underlying the
estimation of the provision
relating to onerous leases
(see note 4.b.v to the
Financial Statements)
Appropriate application of
IFRS and underlying recognition
principles.
Determining the best estimate of
the likely cash flows and other
assumptions.
We reviewed management’s
paper explaining the assumptions
and calculation methodologies
applied in the determining
provisions. This included ensuring
that the provisions represent
present obligations arising from
past events.
We concluded that the
provisions were appropriate and
complete for obligations that
existed at the year end. We also
confirmed that there had been
no new information following the
year end that would result in an
adjustment to the provision.
We satisfied ourselves that the
procedures performed by
management to identify the
requirement for provisions were
robust and comprehensive.
External Auditor
The Audit Committee is responsible for developing, implementing and monitoring the Group’s policy on external audit. The policy
sets out the categories of any pre-approved non-audit services which the External Auditor is authorised to undertake. It also
provides an approval process for the provision of any other non-audit services. This policy is available to view on the Investor
Relations section of the Group’s website, under the Board Committees subsection.
The Board generally only uses the auditor for audit and related activities. If there is a business case to use the External Auditor to
provide non-audit services, prior permission is required from the Committee. In such an instance, the Committee will review the
proposal to ensure that it will not impact the auditor’s objectivity and independence. The majority of tax advisory and similar work
is carried out by another major accountancy firm. An analysis of the auditor’s remuneration is provided in note 8 to the
Financial Statements.
The Committee assesses the effectiveness of the External Auditor on an annual basis, taking account of the following factors:
Factor
The role of
management
The audit partner
The audit team
The audit approach
The communications
and formal reporting
by the auditor
The independence and
objectivity of the
auditor
Assessment
That information provided by management to the External Auditor is timely and correct, that it has
proper supporting papers and that accounting systems and internal controls work effectively.
The extent to which the partner demonstrates a strong understanding of the business, the industry
and the challenges faced by the business. The length of time the partner acts as the lead
engagement partner.
The extent to which the audit team understands the business and industry and is properly resourced
and experienced.
That the audit approach is discussed with management, targets the significant issues early, is
communicated properly, is appropriate for the business and industry and includes an appropriate level
of materiality.
That management and the Committee are kept appropriately informed as the audit progresses and that
the formal report is appropriate and contains all relevant material matters.
That the auditor complies with the FRC’s ethical standards, has the required degree of objectivity
(including their arrangements to identify, report and manage any conflicts of interest), and that the overall
extent of non-audit services provided by the External Auditor does not compromise independence.
The Committee is satisfied that Deloitte LLP has conducted an effective audit for the 2016/17 financial year. The Committee has
therefore recommended to the Board that Deloitte be reappointed at the 2018 AGM.
The Committee has considered the Competition and Markets Authority (‘CMA’) and EU requirements for mandatory tendering and
rotation of the audit firm. As previously stated, the Committee had previously intended to initiate a re-tendering process during
2017/18 in line with the previous audit partner’s rotation. However, as we changed the audit partner during 2015/16, we did not
believe that a re-tendering process would be beneficial during 2017/18. As stated last year, the intention remains to re-tender prior
to the end of the Robert Topley’s five-year term. This will be kept under review and the Committee will use its regular reviews of
auditor effectiveness to assess the most appropriate time for re-tendering during that period.
54
Brewin Dolphin
Annual Report 2017
The Committee has considered the likelihood of the External Auditor withdrawing from the market and has noted that there
are no contractual obligations to restrict the choice of replacement external auditor.
The External Auditor meets privately with the Committee at least twice a year without senior executive management being present
and regularly with the Audit Committee Chairman.
Internal Audit
BDO was appointed Internal Auditor in January 2016. The Committee approves an internal audit plan at the start of the financial
year and then receives quarterly reports on all internal audits. The plan is reviewed every six months to ensure it fully covers the
Group’s key risks. The Committee appraises the Internal Auditor’s processes to determine the effectiveness of their findings.
Fair, balanced and understandable Report and Accounts
The Committee has performed a review of the Group’s Annual Report and Accounts to ensure that it is fair, balanced and
understandable. What is meant by these terms, and the questions that the Committee considers as part of this review,
are shown below:
Term:
Fair
Description:
Not exhibiting any bias.
Questions:
Is the whole story being presented?
Reasonable or impartial.
Have any sensitive material areas been omitted?
Performed according to the rules.
Term:
Understandable Having a meaning or nature that
Description:
Questions:
Is there a clear and cohesive framework for the Annual Report?
can be understood.
Is the report written in accessible language?
Able to be accepted as normal.
Are the messages clearly drawn out?
Term:
Balanced
Description:
Even-handed.
Taking account of all sides on their
merits without prejudice or
favouritism.
Questions:
Is there a good level of consistency between the front and back sections
of the Annual Report?
Does the reader get the same message from reading the two sections
independently?
Are the key judgements referred to in the narrative reports and the significant
issues reported in the Audit Committee Report consistent with the
disclosures of key estimates and uncertainties and critical judgements set
out in the financial statements?
This report has been prepared in compliance with the CMA Order in relation to mandatory audit tendering and the responsibilities
of the Audit Committee.
Brewin Dolphin
www.brewin.co.uk
55
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Remuneration Report
Performance for the 2014 LTIP grants has been assessed,
covering the three financial years to September 2017.
The targets set in 2014 were especially demanding; 16.2% of
the award will vest. The number of shares that vested (net of
tax) will be subject to a further two year holding period.
Although not an LTIP performance metric, it is worth noting
the Group’s strong TSR performance. In the nine years to
September 2017, Brewin Dolphin has delivered over 300%
TSR, compared with just 55% for the FTSE All Share Index
for the financial services sector.
LTIP awards to be granted in 2018 will be based on adjusted
Earnings Per Share (‘EPS’) (50% weighting) and growth in
discretionary net funds inflows (50% weighting), which are key
drivers of growth and value creation for shareholders.
Other activities
During 2017, we have received updates on trends in executive
pay in the wider market, forthcoming changes to corporate
governance requirements and continued to keep abreast of
the developing regulatory landscape in financial services.
We will also be reporting on the Gender Pay Gap, in
accordance with regulatory requirements.
Paul Wilson
Chairman of the Remuneration Committee
28 November 2017
The role of the Committee
The purpose of the Committee is to exercise competent
and independent judgement on remuneration policies
and practices, and the incentives to manage risk, capital
and liquidity as well as directly overseeing personal
objectives, performance appraisal and individual
compensation packages for the Chairman, Executive
Directors, members of the Executive Committee and any
other employees designated as material risk takers
(‘MRTs’) under the FCA Remuneration Code.
The responsibilities of the Committee are defined in the
Committee’s Terms of Reference, a copy of which can
be found at www.brewinmedia.co.uk/investor-relations.
Committee composition
The Committee is made up of independent Non-
Executive Directors and the Non-Executive Chairman of
the Board, who was independent upon his appointment.
There is cross-membership with the Risk Committee to
help ensure that there is alignment between the Group’s
key risks and its Remuneration Policy. Further details on
membership and attendance can be found on page 46.
Chairman’s overview
On behalf of the Board, I am pleased to present the 2017
Directors’ Remuneration Report. The report comprises this
overview, the Annual Report on Remuneration, and the
Directors’ Remuneration Policy (‘the Policy’) that was approved
at the 2017 AGM and is included for information. We were very
pleased to receive the support of nearly 99% of shareholders
who voted for the Policy, which was largely unchanged from the
Policy initially approved in 2014. The Policy is designed to help
drive sustainable performance for shareholders, through annual
bonus and long term incentive plans. It also maintains long term
shareholder alignment through a three-year deferral of part of
the annual bonus into shares, and a three-year Long Term
Incentive Plan (‘LTIP’) vesting followed by a two year post-
vesting sale restriction period, and ongoing Executive Director
shareholding requirements.
Base salary
The Committee reviewed the Executive Directors’ base salaries
at the 1 October 2017 review date, and decided that no
increases should be awarded. It is also important to note that
the Executive Directors do not receive a pension allowance.
Pay for performance
Performance relative to annual financial targets was very strong
with adjusted profit before tax (‘adjusted PBT’) of £70 million,
14.8% higher than the prior year, operating margin of 23%
compared with 21.6% last year, and discretionary funds inflows
of 8% compared with 4.4% in the prior year. There was also
good progress against strategic non-financial targets. This
strong performance resulted in an annual bonus award of 124%
of base salary for the Chief Executive and Finance Director.
36.6% and 36.2% of the awards, respectively, will be deferred
into options over shares under the Deferred Profit Share Plan
(‘DPSP’) and will become exercisable after three years.
Annual bonus for the year to September 2018 will be related to
adjusted PBT (30% weighting), net inflows of discretionary funds
(30% weighting), and key non-financial performance indicators
(40% weighting).
56
Brewin Dolphin
Annual Report 2017
Annual Report on Remuneration
This part of the Directors’ Remuneration Report has been prepared in accordance with Part 3 of the revised schedule 8 set out in
the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and 9.8.6 of the
Listing Rules. The financial information in this part of the Directors’ Remuneration Report has been audited where indicated.
The Annual Report on Remuneration will be put to shareholder vote at the 2018 AGM.
Committee activities during the year
During the year the Committee focused on the following items:
– Considered and reviewed reward structures.
– Assessed and approved 2017 annual bonuses based on previously agreed criteria and vesting of 2017
awards for Executive Directors.
– Reviewed Chairman fees and Executive Directors’ fixed remuneration.
– Approved 2018 annual bonus and LTIP performance criteria.
– Received a report in relation to conduct risk from the Group Risk & Compliance Director.
– Approved the Remuneration Policy Statement and Pillar III disclosures.
– Received updates on changes in regulation and trends in remuneration reporting.
– Identified and approved individual compensation for Material Risk Takers (‘MRTs’).
– Reviewed the Committee’s Terms of Reference.
– Reviewed the outcomes of the Committee performance evaluation.
– Assessed the effectiveness of our External Adviser (New Bridge Street).
TSR vs Chief Executive and FTSE All Share - Financial Services Index
Source: Datastream (Thomson Reuters)
400
350
300
250
200
150
100
50
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Brewin Dolphin Holdings PLC
Chief Executive single figure (Indexed)
FTSE All Share Financials
This graph shows the value, by 30 September 2017, of £100 invested in Brewin Dolphin Holdings PLC on 28 September 2008,
compared with the Total Remuneration figures of the CEO, rebased to £100 on the same date, as well as the FTSE All Share –
Financial Services Index.
The other points plotted are the values at intervening financial year-ends.
Brewin Dolphin
www.brewin.co.uk
57
Strategic ReportGovernanceFinancial StatementsOther Information
Directors’ Remuneration Report continued
Total remuneration for the financial year to 30 September 2017 (Audited)
£’000
Executive Directors
David Nicol
Andrew Westenberger
Non-Executive Chairman
Simon Miller
Non-Executive Directors
Kath Cates
Ian Dewar
Caroline Taylor
Paul Wilson
Former Directors
Angela Knighta
Stephen Fordb
Total
Total
Salary & fees
Benefits1
Pension2
Annual
bonus3
Long term
incentive4
Compensation
for loss of
office5
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2016
2017
2016
425
375
375
325
180
175
78
62
71
60
68
56
68
60
21
70
80
1,286
1,263
1
1
3
3
–
–
–
–
–
–
–
–
–
–
–
–
1
4
5
–
–
–
7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
527
337
465
293
–
–
–
–
–
–
–
–
–
–
–
–
81
992
711
68
–
59
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
127
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
162
n/a
162
Total
1,021
713
902
628
180
175
78
62
71
60
68
56
68
60
21
70
324
2,409
2,148
Note 1: Executives can elect to use part of their total fixed remuneration to fund benefits including Permanent Health Insurance and these amounts are disclosed as part
of the ‘salary and fees’ figure. Benefits relate to death in service insurance and private medical insurance.
Note 2: Executives can elect to sacrifice part of their annual bonus into the Group’s defined contribution pension scheme. Where employees choose to do this, the
Company contributes 13.8% of the sacrificed amount, equal to the employer’s national insurance that would have been due had the amount been paid as salary.
Sums sacrificed from bonus have been shown in the bonus column, with the related employer contribution of 13.8% shown in the pension column.
Note 3: This relates to the payment of the annual bonus for the year ending 30 September 2017. Annual bonus is subject to a mandatory deferral policy as
set out on page 66.
Note 4: 16.2% of the 2014 LTIP has been treated as vested in the period. David Nicol will receive 19,605 shares and Andrew Westenberger will receive 16,804 shares.
For the purpose of this table, the average Q4 market price (£3.49) was used to determine the value of the awards vested. Options granted under the Deferred
Profit Share Plan are included in the bonus amount disclosed in the year.
Note 5: Stephen Ford received a payment of £148,404 in relation to his notice period to 6 July 2016 following his departure from the Board on 7 January 2016. He also
received a statutory redundancy payment of £9,738 and a contribution towards legal fees of £3,500. The information is being used solely as a comparator.
Note a: Stepped down from the Board on 3 February 2017. In addition to the fees set out above in relation to her Brewin Dolphin Holdings PLC directorship, Angela
Knight continues to receive an annual fee of €30,000 in relation to her capacity as Chairman of TBD, the Group’s Irish subsidiary.
Note b: Stepped down from the Board on 7 January 2016.
Base salary review (Audited)
The Committee decided not to award salary increases at the October 2017 review date.
David Nicol
Andrew Westenberger
Salary as at
30 September
2017
£425,000
£375,000
Salary as at
30 September
2016
£425,000
£375,000
Change
0%
0%
58
Brewin Dolphin
Annual Report 2017
Annual variable pay outcomes for 2017
Annual bonuses for the Executive Directors are determined by the Committee based on an assessment of performance relative to
Key Performance Indicators (‘KPIs’), which are selected to achieve a direct relationship between progress towards the Group’s
strategic goals and the bonuses that are awarded.
Performance against financial criteria
Key Performance
Indicator
Adjusted PBT1
Adjusted operating
margin1,2
Discretionary
net fund inflow
Threshold 25%
of total
fixed pay
£56.9m
On-target 100%
of total fixed
pay
£67.5m
Maximum
150% of total
fixed pay
£74.5m
Weighting
20%
Actual for year
ending 30
September
2017
£70.0m
20%
20.3%
22.7%
24.0%
23.0%
20%
2.5%
5.0%
7.5%
8.0%
Outcome (straight average)
1. See explanation of adjusted performance measures on page 31.
2. Adjusted PBT margin.
Performance against non-financial criteria
% of
maximum
bonus awarded Comment
78.6% Targets set in relation to
prior year performance
and budget
74.4% Targets set in relation to
prior year performance
and budget
100.0% Targets set in relation to
prior year performance
and budget
84.3%
Criteria (equally weighted)
Strategy
Commentary on performance
Continued successful implementation of organic growth strategy.
% of maximum bonus
awarded for this criteria
90.0%
Talent
Client Service
Successful integration of DLAM.
Successful development of new business opportunities (eg. WealthPilot).
Extensive work of investment solutions has been undertaken.
Successful implementation of the Executive Leadership Programme
and completed extensive work on succession planning for senior
management.
Enhanced delivery of business development training to enable
strategic delivery.
Continued development of training, guidance and systems to streamline
processes and enhance efficiency.
Introduction of the Brewin Dolphin Awards to focus on recognition
and values.
Enhanced Corporate Responsibility initiatives with charity fundraising.
Continued to ensure high quality, consistent client outcomes.
Improved client retention.
ARC measurement for MPS and bespoke discretionary funds
management was maintained in the first and second quartiles for the
peer group.
80.0%
80.0%
Risk Management and Compliance Improved engagement and relationship with the Regulators.
70.0%
Completion of several projects to enhance the Risk Management and
Compliance Framework.
Ongoing work to prepare for the impact of MiFID II, SMCR and GDPR.
Outcome (straight average)
Brewin Dolphin
www.brewin.co.uk
80.0%
59
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Remuneration Report continued
Overall outcome
Criteria
Financial
Non-financial
Total
% of maximum
bonus awarded
84.3%
80.0%
82.6%
Weighting
60%
40%
Bonus outcomes (Audited)
Based on their assessment of performance, the Committee has awarded the following annual bonuses to Executive Directors,
with the split between cash and deferred shares as indicated in the table below:
Name
David Nicol
Andrew Westenberger
1. See deferral table below.
Role
Chief Executive
Finance Director
Cash Deferred shares1
£193,000
£168,333
£334,000
£296,667
Total % of base salary
124%
124%
£527,000
£465,000
The maximum annual bonus for each individual Executive Director is 150% of base salary.
Annual bonus awards are delivered part in cash and part in deferred shares that vest after three years:
Portion of variable pay
Up to £50,000
Between £50,000 and 1 x fixed remuneration
Above 1 x fixed remuneration
Fraction deferred
None
One-third
Two-thirds
The Committee has the discretion to adjust the final outcome to take account of overall company performance and exceptional events.
Both cash and share elements of the bonus are subject to malus provisions. Please see the Directors’ Remuneration Policy table
for further details.
LTIP outcome in 2017
The Executive Directors received a conditional share award granted under the LTIP in December 2014. The performance period
for the grant was three years to 30 September 2017 and performance against the criteria set is shown below:
Criteria
Adjusted EPS CAGR1
Adjusted PBT Margin1
Weighting
50%
50%
Threshold
target
6%
25%
Full vesting target
16%
27%
Actual for
year ending
30 September 2017
7%
23%
% of award to vest
16.2%
0%
1. See explanation of adjusted performance measures on page 31.
60
Brewin Dolphin
Annual Report 2017
Chief Executive pay for performance comparison
The graph below shows the value by 30 September 2017, of £100 invested in Brewin Dolphin Holdings PLC on
28 September 2008, compared with the Total Remuneration figures of the Chief Executive, rebased to £100 on the same date.
The other points plotted are the values at intervening financial year-ends.
Chief Executive total pay vs TSR
Source: Datastream (Thomson Reuters)
400
350
300
250
200
150
100
50
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Brewin Dolphin Holdings PLC
Chief Executive single figure (Indexed)
The total remuneration figure for the Director undertaking the role of Chief Executive during each of the previous eight financial years
is shown below. The total remuneration figure includes the annual bonus which was awarded based on performance in those years.
Where this bonus was subject to deferral, it is shown in the year in which it was awarded. The annual bonus is shown as a
percentage of the maximum for 2012 to 2017 only as there was no maximum amount for bonus in the preceding years.
The LTIP awards granted in December 2014 have partially vested during the period.
Total remuneration (£’000)
Annual bonus (% max)
LTIP vesting (% of award)
Year ending September
2009
589
n/a
n/a
2010
643
n/a
n/a
2011
593
n/a
n/a
2012
557
39
n/a
2013
577
63
n/a
2014
770
80
n/a
2015
702
67
n/a
2016
713
60
nil
2017
1,021
82.6
16.2
The movement in the salary and annual bonus for the Chief Executive, who is the highest paid Director, between the current and
previous financial year compared to that for the average UK Group employee is shown below. Rather than having separate base
salary, pension and benefit components, Executive Directors and other senior staff receive a total fixed pay sum which they can
receive part as a defined pension contribution and/or benefits such as long-term illness/disability insurance. More junior employees
receive a base salary plus pension contributions. As such, an analysis of the movement in benefits for the Chief Executive and the
average employee was not considered to be practical or meaningful and has not been included in the below comparison.
Criteria
Chief Executive
Salary
Bonus
Average per employee
Salary
Bonus
2017
2016
% change
£425,000 £375,000
£527,000 £337,500
£51,106
£33,358
£49,347
£27,759
13%
56%
4%
21%
Brewin Dolphin
www.brewin.co.uk
61
Strategic ReportGovernanceFinancial StatementsOther Information
Directors’ Remuneration Report continued
Directors’ share interests (Audited)
Outstanding share options and conditional share awards
The tables below set out details of Executive Directors’ outstanding share awards (which will vest in future years subject to
performance and/or continued service).
Share options:
Plan
Grant date
Exercise
price
David Nicol
DPSP 05/12/2013 0.00p
DPSP 04/12/2014 0.00p
DPSP 03/12/2015 0.00p
DPSP 01/12/2016 0.00p
Total
Andrew Westenberger
DPSP 05/12/2013 0.00p
DPSP 04/12/2014 0.00p
DPSP 03/12/2015 0.00p
DPSP 01/12/2016 0.00p
Total
Conditional share awards:
Plan
Grant date
David Nicol
LTIP
LTIP
LTIP
LTIP
26/02/2014
04/12/2014
03/12/2015
01/12/2016
Total
Andrew Westenberger
LTIP
LTIP
LTIP
LTIP
26/02/2014
04/12/2014
03/12/2015
01/12/2016
Total
Number
of share
options
as at 1
October
2016
Granted
during
year
Exercised
during
year
Lapsed
during
year
Number
of share
options
as at 30
September
2017
End of
performance
period
Maturity date
End of exercise
period
29,584
50,714
37,174
–
117,472
– 29,584
–
–
–
–
33,344
–
33,344 29,584
45,065
42,646
30,978
118,689
– 45,065
–
–
–
–
–
28,125
28,125 45,065
–
–
–
50,714
–
37,174
–
33,344
– 121,232
–
–
–
42,646
–
30,978
–
28,125
– 101,749
n/a 05/12/2016 05/12/2019
n/a 04/12/2017 04/12/2020
n/a 03/12/2018 03/12/2021
n/a 01/12/2019 01/12/2022
n/a 05/12/2016 05/12/2019
n/a 04/12/2017 04/12/2020
n/a 03/12/2018 03/12/2021
n/a 01/12/2019 01/12/2022
Number
of share
awards
as at 1
October
2016
Granted
during
year
Vested
during
year
Lapsed
during
year
Number
of share
awards
as at 30
September
2017
104,916
121,023
130,111
–
– 104,916
– 19,605* 101,418
–
–
–
– 147,877
–
–
– 130,111
– 147,877
356,050 147,877 19,605 206,334 277,988
89,928
103,734
111,524
–
– 89,928
– 16,804* 86,930
–
–
–
– 130,480
–
–
– 111,524
– 130,480
305,186 130,480 16,804 176,858 242,004
End of
performance
period
Vesting date
30/09/2016 26/02/2017
30/09/2017 04/12/2017
30/09/2018 03/12/2018
30/09/2019 01/12/2019
30/09/2016 26/02/2017
30/09/2017 04/12/2017
30/09/2018 03/12/2018
30/09/2019 01/12/2019
The share price at 29 September 2017 was £3.49.
* Actual vesting date is 4 December 2017. Figures shown are the number of shares vested at the end of the three year performance period (30 September 2017).
62
Brewin Dolphin
Annual Report 2017
Beneficial interests
To further align the interests of Executive Directors with shareholders, Executive Directors are required to build up a shareholding
through the retention of shares vesting under the Group’s share incentive plans within five years of appointment (January 2013
and March 2013 for Andrew Westenberger and David Nicol, respectively). The minimum shareholding requirement for the Chief
Executive is 150% of base salary and the minimum shareholding requirement for the Finance Director is 100% of base salary.
Shares that count towards these requirements include shares owned outright by the Executive Director, an amount equal to net
of tax unvested awards granted under the DPSP as they are unfettered by performance criteria, and net of tax LTIP awards that
have vested.
Director
Kath Cates
Ian Dewar
Angela Knight
Simon Miller
David Nicol
Caroline Taylor
Andrew Westenberger
Paul Wilson
Beneficially
owned at
30 September 20171
5,587
6,358
4,790
75,000
98,651
5,000
50,000
8,596
1. Or date of resignation if earlier.
Percentage
of shareholding
target held as at
30 September 2017
n/a
n/a
n/a
n/a
95%2
n/a
105%2
n/a
Outstanding DPSP
share options at
30 September 2017
–
–
–
–
121,232
–
101,749
–
Outstanding LTIP
share awards as at
30 September 2017
–
–
–
–
277,988
–
242,401
–
Beneficially
owned at
28 November 20171
5,587
6,358
4,790
75,000
98,651
5,000
50,000
8,596
Beneficially
owned at
30 September 2016
2,500
6,358
4,790
75,000
83,000
5,000
25,000
8,596
2. Includes 53% of outstanding DPSP options and 53% of the 2014 LTIP award which will vest at 16.2% on 4 December 2017 but met its performance criteria on
30 September 2017. These are included on a net of tax basis.
Deferred bonus
The Executive Directors receive part of their annual variable pay under the DPSP as a deferred award in Company shares, normally
in the form of a nil-cost option. The option vests and becomes exercisable three years from the date of grant.
Share Incentive Plan (‘SIP’)
Employees may use funds from their gross salary up to a maximum of 10% of their gross salary in regular monthly payments (being
not less than £10 and not greater than £150) to acquire Ordinary Shares in the Company (‘Partnership Shares’). Partnership Shares
are acquired monthly. For every Partnership Share purchased, the employee receives one Matching Share up to a total value of
£20, these shares are held in an employee benefit trust (the ‘Trust’). Market purchase shares are used to satisfy all shares
purchased under the SIP and it is the intention of the Directors to continue this practice for the forthcoming financial year.
Dilution
By agreement with shareholders, the aggregate number of shares which may be issued at any date of grant, when aggregated with
shares issued or issuable pursuant to options or awards granted in the preceding 10 years under any employee share plan
operated by the Group shall not exceed 10% of the issued share capital.
The current cumulative dilution level over the 10-year period to 30 September 2017 is 2.14%.
Brewin Dolphin
www.brewin.co.uk
63
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Remuneration Report continued
Material contracts with Directors
There were no material contracts between the Group and the Directors, except for their contracts of employment or letters
of appointment. The Directors undertake transactions in stocks and shares in the ordinary course of the Group’s business for
their own account. The transactions are not material to the Group in the context of its operations. £nil was outstanding in respect
of these transactions at 30 September 2017 and 30 September 2016.
Total pension entitlements
Executive Directors may opt to waive part of their aggregate fixed pay amount and receive an equivalent pension contribution
instead. They may also receive part of their annual bonus in the form of pension contribution.
Defined Contribution Scheme
Executive Directors may join the Group Defined Contribution Scheme. Andrew Westenberger and David Nicol have not made
contributions to the scheme and do not receive any benefit under the scheme.
Defined Benefit Scheme (Audited)
Entry to the Group Defined Benefit Scheme was withdrawn in 2004 for new employees.
Death-in-service benefits
Executive Directors are eligible for death-in-service benefit cover which is equal to six times their individual fixed remuneration.
Relative importance of the spend on pay (Audited)
Staff costs
Dividends
2017
’000
£147,043
£41,048
2016
‘000
£141,217
£35,309
% change
4%
16%
Average salary and bonus per employee has increased by 4% and 21% respectively (see page 61).
External advisers
The Remuneration Committee is advised by New Bridge Street (‘NBS’), appointed by the Committee. NBS is a member of the
Remuneration Consultants Group and abides by its Code of Conduct which requires its advice to be impartial and objective.
NBS has no other connections with the Company. The total fees paid to NBS in respect of its services to the Committee during
the year were £49,322.
External directorships
Details of external directorships held by the Executive Directors during the year and any fees that they received in respect of their
services are shown below.
David Nicol
Company
Hermes Property Unit Trust
Position
Chair of appointment committee
2017
£30,762
2016
£27,500
The remuneration for 2017 increased following appointment as chairman of the committee with effect from 6 June 2017.
Andrew Westenberger
Company
Schroder UK Growth Fund plc Non-executive director
Position
2017
£6,190
2016
n/a
The fee was a prorata amount for the year as the appointment took effect from 5 May 2017.
Statement of shareholder voting
The Directors’ Remuneration Policy and the Annual Report on Remuneration received the following votes from shareholders:
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
64
Remuneration
Policy
(2017 AGM)
180,850,144
2,547,005
183,397,149
12,019,257
%
Annual Report on
Remuneration
(2017 AGM)
98.6% 145,976,316
1.4% 22,227,659
168,203,975
27,212,432
%
86.8%
13.2%
Brewin Dolphin
Annual Report 2017
How the policy will be applied in 2018 onwards
Fees for the Chairman and the Non-Executive Directors
As detailed in the Policy, the Group’s approach to setting Non-Executive Directors’ remuneration is with reference to the market
levels in comparable sized FTSE companies, levels of responsibility and time commitments. The Chairman’s fee was last reviewed
in October 2016 and there have been no recommendations made to increase the fee.
The Non-Executive Directors’ fees were last reviewed in 2016, where it was agreed to increase the fees with effect from
1 January 2017. There has been no recommendation made by the Board to increase the fees for 2017/18.
Chairman
Base fee
Senior Independent Director
Committee Chair
30 September 2017
£180,000
£60,000
£10,000
£10,000 – £15,000
30 September 2016
£180,000
£50,000
£10,000
£5,000 – £12,000
Performance targets for the 2017/18 annual bonus and LTIP awards to be granted in the 2018 financial year
For the 2018 financial year, the annual bonus will be based on performance against a balanced scorecard comprising three
Key Performance Areas: adjusted PBT (30% weighting); discretionary net funds inflow (30%); and non-financial targets (40%).
The LTIP awards to be granted in the 2018 financial year will be subject to two separate performance metrics shown below,
each accounting for one-half of the award.
These targets have been set with reference to market consensus and internal medium-term plans.
There is also a general underpin: the Committee will assess the overall health of the business and whether prudent risk
management has been applied and may scale back the vesting level if it considers this to be appropriate.
Performance metric
Adjusted EPS Compound
Annual Growth Rate (‘CAGR’)
Average Annual Discretionary
Net Funds Growth
Weighting (each
measured
independently)
50%
Threshold (25%
vesting)
5%
Stretch (100%
vesting) Measurement period
15% CAGR measured over the three financial years
2017/18, 2018/19, and 2019/20, using 2016/17
as the base year.
50%
2.5%
7.5% Average over the three financial years 2017/18,
2018/19 and 2019/20.
Directors’ Remuneration Policy
This Policy describes the policies, principles and structures that guide the Remuneration Committee’s decision making process in
the area of executive remuneration. The Policy was approved by the shareholders at the 2017 AGM and will apply for a period of
three years, unless a revised policy is proposed to shareholders before the end of this period.
Remuneration principles and objectives
The primary objectives of the Policy are:
– To attract, retain and motivate talented Directors and senior management of the calibre required to manage the business
successfully, whilst seeking to avoid paying more than is necessary to meet this objective.
– To motivate and reward good performance.
– To meet relevant regulatory requirements, including the requirements of the FCA Remuneration Code so far as these
apply to the Group.
The main principles of the Policy are:
– To ensure that total remuneration is set at a level that is market competitive by benchmarking against relevant external
comparators, taking account of size, complexity and sector, and to ensure that the overall package takes account of
market practice.
– To maintain appropriate proportions of fixed and performance related pay, to help to drive performance over the short and longer
term, maintain a flexible cost base, and avoid creating incentives for excessive risk taking.
– To align incentive plans with the business strategy, prudent risk management and shareholder interests.
– To achieve consistency with the general remuneration philosophy applied to the Group’s employees as a whole.
Brewin Dolphin
www.brewin.co.uk
65
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Remuneration Report continued
Summary of remuneration elements for Executive Directors
Element
Fixed pay
(Discretionary)
Purpose and
link to short and
long-term strategy
Provides a level of
fixed remuneration
sufficient to recruit
and retain necessary
talent, and to permit
a zero variable pay
award should that be
appropriate.
Operation, performance measures and periods, deferral and clawback
Executive Directors receive a base salary and can elect to benefit from life
insurance at a level of six times annual salary and private medical insurance.
Executive Directors can choose to sacrifice salary into the Group’s defined
contribution pension scheme. The Company does not make any other
pension contributions to the Executive Directors.
Individual levels of total fixed pay are reviewed annually, with any increases
normally effective from 1 January, unless there are exceptional reasons for an
increase at another time of the year. Any increases are generally targeted at
around the general level of salary inflation in the Group, but may vary from this
for exceptional reasons such as a change in the individual’s role or
responsibilities, or a need to bring an individual’s remuneration to a market
competitive level.
Rewards annual
Group and personal
performance, and,
through the use of
deferral into shares,
also aligns reward
with longer-term
performance.
Portion of variable pay
Portion up to £50,000
Portion between £50,000 and 1 x fixed remuneration One-third
Two-thirds
Portion above 1 x fixed remuneration
What fraction is deferred?
None
The Remuneration Committee may seek to clawback annual variable pay in
exceptional situations, such as misstatement of performance, failure of risk
management or serious misconduct.
Annual
variable pay
(Discretionary)
Rewards
achievement
of long-term
performance
objectives.
LTIP
(Discretionary)
Executive Directors will be eligible to be considered each year for a conditional
award over BDH shares, which will vest in one tranche, normally no earlier
than three years from the date of award. Vesting will be subject to
performance conditions and targets set prior to each grant by the Committee.
These performance conditions will be related to financial performance (e.g.
EPS growth and net discretionary funds flow) and will be aligned to the
business strategy. For each performance metric used, there will be a threshold
level of performance at which no more than 25% of the portion of the award
relating to that KPI will vest, and a stretch level of performance, at which
100% of the portion of the award relating to that KPI will vest.
Executive Directors will be required to hold net of tax vested shares for a
period of two years following vesting.
The Committee may seek to clawback LTIP in exceptional situations, such as
misstatement of performance, failure of risk management or serious
misconduct.
Maximum opportunity
Total Fixed Pay is
benchmarked against
relevant market levels
of aggregate fixed
pay (i.e. base
salary+pension
contribution+benefits,
paid in the market),
and is targeted to
be not more than
the approximate
median of relevant
comparators.
The maximum individual
award of annual variable
pay is currently 150%
of base salary.
The normal maximum
annual award under
the LTIP rules is up to
100% of base salary
(in face value of shares
at grant), but may be up
to 150% in exceptional
circumstances.
66
Brewin Dolphin
Annual Report 2017
Potential Reward Opportunities (£000)
1600
1400
1200
1000
800
600
400
200
0
28.55%
42.83%
23.64%
38.14%
28.50%
42.74%
23.58%
38.04%
100.00%
38.22%
28.62%
100.00%
38.38%
28.76%
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Chief Executive
Finance Director
Fixed Pay
Annual Bonus
LTIP
The potential reward opportunities illustrated above were calculated using base salary effective from 30 September 2017.
Illustrations are intended to provide further information to shareholders regarding the pay for performance relationship; however,
actual pay delivered will be influenced by changes in share price and the vesting period of awards. The assumptions below have
been made in compiling the above charts:
Assumptions
Minimum
Total fixed remuneration
Target
Total fixed remuneration
Maximum
Total fixed remuneration
Fixed pay
Annual
bonus
LTIP
No annual bonus payable
On-target annual bonus of 100% of
base salary
Maximum annual bonus of 150% of
base salary
Zero vesting – threshold not
achieved
Share award of 100% of base salary
Median vesting (62% of award)
Share award of 100% of base salary
Full vesting (100% of award)
Policy on share ownership
The Remuneration Committee has a policy of encouraging Executive Directors to acquire and retain a significant number of shares
in the Company with the objective of further aligning their long-term interests with those of other shareholders. The Committee
determines the requirement and reviews this periodically. The current limits are set out in the Annual Report on Remuneration.
How the views of shareholders are taken into account
The Remuneration Committee regularly compares the Policy with shareholder guidelines and takes account of the results of
shareholder votes on remuneration. The Remuneration Committee Chairman will consult with major investors ahead of any material
changes to the Policy and, along with the Company Secretary, is available to meet with institutional shareholders to discuss any of
the policy related disclosures or outcomes contained in this Directors’ Remuneration Report.
Details of votes cast for and against the resolution to approve last year’s Remuneration Report and Remuneration Policy are
provided on page 64.
Consideration of employment conditions elsewhere in the Group
A consistent remuneration philosophy for employees is applied at all levels and the aggregate rate of base salary increase for all
employees is one of the factors considered when determining increases in fixed pay for Directors.
All employees are eligible for discretionary performance-related annual bonus and the principle of bonus deferral applies to annual
bonuses for employees whose bonuses exceed certain thresholds.
A formal employee consultation on remuneration is not operated; however, employees are able to provide direct feedback on the
Group’s remuneration policies to their managers or the Human Resources department and as part of an annual employee
engagement survey. The Group Human Resources Director is a standing attendee at Remuneration Committee meetings and
presents regular reports on people strategy, including the effectiveness of the Group’s remuneration policies and how they are
viewed by employees.
Brewin Dolphin
www.brewin.co.uk
67
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Remuneration Report continued
Fixed ratios between the total remuneration levels of different roles in the Group are not applied, as this would prevent us from
recruiting and retaining the necessary talent in a highly competitive employment market.
Benchmarking
The Remuneration Committee takes account of market benchmark data when setting total remuneration packages for Executive
Directors and comparisons are made with other FTSE listed companies of similar size and business profile to the Group. Practices
in the wealth management sector and other related sectors are also considered. Benchmark data is used as a reference point,
alongside other factors such as the individual’s role, experience and performance, rather than as a direct determinant of pay levels.
Differences in remuneration policy for Executive Directors compared to other employees
The approach to remuneration for the Executive Directors is generally consistent with that for employees across the Group as a
whole. However, there are some differences which the Remuneration Committee believes are necessary to reflect the different
responsibilities of employees across the Group, and the need to recruit, retain and motivate employees in a variety of roles. For
example, below Executive Director level, the portion of annual variable pay that is deferred is structured differently and is capped at
one-third rather than the two-thirds deferral that applies to Executive Directors. Awards of market purchased shares are made to
selected individuals from time to time, excluding Executive Directors, which vest subject to continued service, to recognise
individuals’ value to the Group and to create further alignment with shareholders.
External non-executive director positions
Executive Directors are permitted to serve as non-executive directors of other companies, on the grounds that this can help to
broaden the skills and experience of the Director, provided there is no competition with the Group’s business activities and where
these duties do not interfere with the individual’s ability to perform his duties for the Group. The number of external directorships an
Executive Director can hold is limited to two non-executive directorships.
Where an outside appointment is accepted in furtherance of the Group’s business, any fees received are remitted to the Group.
If the appointment is not connected to the Group’s business, the Executive Director is entitled to retain any fees received.
Approach to remuneration for new Executive Director appointments
The remuneration package for a new Executive Director would be set in accordance with the terms and maximum levels of the
Group’s approved remuneration policy in force at the time of appointment.
The Committee may also offer additional cash and/or share-based elements when it considers these to be in the best interests of
the Group and shareholders, for the purpose of replacing awards or potential foreseeable earnings which are forgone by the
individual on becoming an Executive Director. This includes the use of awards made under 9.4.2 of the Listing Rules. In considering
any such payments the Remuneration Committee would take account of the amount of remuneration forgone and the nature,
vesting dates and any performance requirements attached to the remuneration forgone. Shareholders will be informed of any such
payments and the rationale for these.
For an internal appointment, any deferred pay element awarded in respect of the prior role may be allowed to pay out according to
its terms, adjusted as relevant to take into account the appointment. In addition, ongoing remuneration obligations existing prior to
appointment may be permitted to continue where this is considered to be in the best interests of the Group and shareholders.
For external and internal appointments, the Group may meet certain relocation expenses as appropriate.
Service contracts and loss of office payments
Service contracts normally continue until the Executive Director’s agreed retirement date or such other date as the parties agree.
The service contracts contain provision for early termination.
In summary, the contractual provisions are:
Provision
Notice period
Termination payment in the event of
termination by the Company without due
notice
Change of control
68
Detailed terms
Six months
Total fixed pay in respect of the unexpired period of contractual notice, in addition to
any amounts to which they are statutorily entitled. In certain cases, the Committee
may also consider a discretionary award of annual variable pay, subject to
performance, in respect of the portion of any financial year that the individual has been
working with the Group, although not for the period of any payment in lieu of notice or
‘garden leave’.
Same terms as above on termination.
Brewin Dolphin
Annual Report 2017
The Group has power to enter into settlement agreements with executives and to pay compensation to settle potential legal claims.
Any outstanding share-based entitlements granted to an Executive Director under the Group’s LTIP or other share plans will be
determined based on the relevant plan rules. The default treatment is that any outstanding awards lapse on cessation of
employment. However, in certain prescribed circumstances, such as death, disability, redundancy, retirement or other
circumstances at the discretion of the Committee (taking into account the individual’s performance and the reasons for their
departure), ‘good leaver’ status can be applied. In such cases, the normal practice, unless there are exceptional circumstances,
is for any LTIP awards held to be pro-rated for the period of the performance period that has expired, and the performance
conditions would continue to apply. Share awards under the DPSP will vest in full on the original vesting schedule. An Executive
Director’s service contract may be terminated without notice and without any further payment or compensation, except for sums
accrued up to the date of termination, on the occurrence of certain events such as gross misconduct.
Legacy arrangements
For the avoidance of doubt, the Directors’ Remuneration Policy includes authority for the Group to honour any commitments
entered into with current or former Directors that have been disclosed to shareholders in previous Remuneration Reports. Details
of any payments to former Directors will be set out in the implementation section of this report as they arise.
Policy for the Chairman and other Non-Executive Directors
Element
Chairman fee
Purpose and link to strategy
To pay a market competitive
all-inclusive fee that takes account
of the role and responsibilities.
Non-Executive
Director fees
To pay a market competitive basic
fee, and supplements for
significant additional
responsibilities such as
Committee Chairmanships.
Maximum
The current maximum aggregate
fee for Non-Executive Directors is
£700,000 per annum. This is
subject to change periodically
though any increase in aggregate
fee would be subject to approval
by shareholders.
As above.
Operation
The Chairman is paid a single fee
for all his responsibilities. The level
of the fee is reviewed periodically
by the Committee, with reference
to market levels in comparably-
sized FTSE companies, without
the Chairman being present.
The Non-Executives are paid a
basic fee. There are also
supplements for Committee
Chairmanships and the Senior
Independent Director. The fee
levels are reviewed periodically by
the Chairman and Executive
Directors.
Non-Executive Directors are engaged under letters of appointment; they do not have contracts of service and are not entitled to
compensation on early termination of their appointment. The Group can reimburse NEDs’ reasonable business expenses (including
tax thereon if applicable).
Compliance with the FCA Remuneration Code
The Remuneration Committee regularly reviews its Remuneration Policy’s compliance with the principles of the Remuneration Code
of the UK financial services regulator, as applicable to the Group. The Remuneration Policy is designed to be consistent with the
prudent management of risk and the sustained, long-term performance of the Group.
Application of the Policy
The Policy took effect from 3 February 2017.
This Directors’ Remuneration Report, including both the Policy and Annual Remuneration Report, has been approved by the Board
of Directors.
Paul Wilson
Chairman of the Remuneration Committee
28 November 2017
Brewin Dolphin
www.brewin.co.uk
69
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Report
Index to principal Directors’ Report and Listing Rule disclosures
Relevant information required to be disclosed in the Directors’ Report and as set out in Listing Rule 9.8.4 R (information to be
included in the Annual Report and Accounts) may be found in the following sections:
Information
Business Review
Principal Risks and Uncertainties
Disclosure information to auditor
Directors in office during the year
Dividend recommendation for the year
Directors’ indemnities
Corporate responsibility
Greenhouse gas emissions
Financial instruments – risk management objectives
and policies
Future developments of the Company
Employment policies and employee involvement
Structure of share capital, including restrictions
on the transfer of securities, voting rights and
significant shareholders
Rules governing the appointment of Directors
Powers of Directors
Rules governing changes to the Articles of Association
Shareholder waiver of dividends
Section in Annual Report
Strategic Report
Strategic Report
Directors’ Report
Corporate Governance Report
Chairman’s Statement
Directors’ Report
Strategic Report
Directors’ Report
Notes to the Financial Statements
Strategic Report
Strategic Report
Directors’ Report
Corporate Governance Report
Corporate Governance Report
Directors’ Report
Note 24 to the Financial Statements
Pages
16-21, 24-25 & 30-37
26-29
74
42 & 46
14
70
38-41
72
122
16-23
38-41
70
46
45
71
120
The above information is incorporated by reference and together with the information on pages 70 to 73 forms the Directors’
Report in accordance with section 415 of the Companies Act 2006.
Strategic Report
The Strategic Report is set out on pages 1 to 41 and was approved by the Board on 28 November 2017. It is signed on behalf
of the Board by David Nicol, Chief Executive.
Cautionary statement
The review of the business and its future development in the Annual Report has been prepared solely to provide additional
information to shareholders to assess the Group’s strategies and the potential for these strategies to succeed. It should not
be relied on by any other party for any other purpose. The review contains forward looking statements which are made by the
Directors in good faith based on information available to them up to the time of the approval of these reports and should be
treated with caution due to inherent uncertainties associated with such statements. The Directors, in preparing the Strategic
Report, have complied with s417 of the Companies Act 2006.
Directors’ indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its Directors during the period and these
remain in force at the date of this report.
Share capital
Details of the Company’s authorised and issued share capital, together with details of the movements therein, are set out in note 24
to the Financial Statements. This includes the rights and obligations attaching to shares and restrictions on the transfer of shares.
The Company has one class of Ordinary Shares which carry no right to fixed income. There are no specific restrictions on the size
of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and
prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result
in restrictions on the transfer of securities or on voting rights.
70
Brewin Dolphin
Annual Report 2017
Employee share plans
Details of employee share plans are set out in note 29 to the Financial Statements. Under the rules of the Group’s Share Incentive
Plan (‘SIP’), shares are held in trust for participants by Equiniti Share Plan Trustees Limited (the ‘Trustee’). Voting rights are exercised
by the Trustee on receipt of the participant’s instructions; if no such instruction is received by the Trustee then no vote is registered.
No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
Articles of Association
The Articles of Association may be amended by special resolution of the shareholders.
Substantial shareholdings
As at 30 September 2017, the Company had received notifications in accordance with the FCA’s Disclosures and Transparency
Rule 5.1.2 of the following interests of 3% or more in the voting rights of the Company.
Shareholder
Royal London Asset Management
Henderson Group PLC
Aberforth Partners
FIL Investment International
BlackRock, Inc.
FIL Limited
Kames Capital
Aviva plc and its subsidiaries
Legal & General
Kabouter Management, LLC
Norges Bank
Number of voting rights
16,824,793
14,426,962
14,390,759
12,477,394
below 5%
14,092,698
13,730,787
11,318,428
8,563,901
8,661,021
8,577,245
% of voting rights
5.95
5.09
5.08
5.00
below 5
4.97
4.85
4.00
3.99
3.06
3.03
Annual General Meeting
The AGM will be held at 11.30am on 2 February 2018 at Haberdashers’ Hall, 18 West Smithfield, London EC1A 9HQ.
Purchase of own shares
At the AGM on 3 February 2017, shareholders approved a resolution for the Company to make purchases of its own shares to a
maximum of 10% of its issued Ordinary Shares. This resolution remains valid until the conclusion of the next AGM in 2018. As at
28 November 2017 the Directors had not used this authority.
Employees
The average number of persons, including Directors, employed by the Group and their remuneration are set out in note 7 to the
Financial Statements. Other information about the Group’s employee engagement, diversity and inclusion policies is set out in the
Corporate Responsibility report starting on page 38. The Group-wide gender diversity split as at 30 September 2017 was 44%
female and 56% male.
Internal control and risk management
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity. The Board considers that the information it receives
enables it to review the effectiveness of the Group’s internal controls in accordance with the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting. Areas where internal controls can be improved are identified and
appropriate actions agreed as part of our internal controls systems. Senior Management, the Board and the Audit Committee
regularly monitor progress towards completion of these actions. The Board considers that none of the identified areas for
improvement constitutes a significant failing or weakness.
Brewin Dolphin
www.brewin.co.uk
71
Strategic ReportGovernanceFinancial StatementsOther Information Directors’ Report continued
Greenhouse Gas Emissions (‘GHG’)
The Group recognises and and strives to minimise its impact on the environment. As a financial services provider, our main
environmental focus is on our network of offices and employee travel.
Global GHG emissions for the period ended 30 September 2017
Emissions from:
Combustion of fuel and operation of facilities
Electricity purchased for own use
Fugitive emissions – refrigerant losses
Mobile combustion – business travel from leased assets
Company’s chosen intensity measurement:
Emissions per full time employee
Tonnes of CO2e 2016/17
308
1,751
12.7
19.9
Tonnes of CO2e 2015/16
327
2,030
–
20.0
1.3
1.5
Methodology and additional information
The table above reports the Group’s annual GHG emissions from sources which fall within the consolidated financial statements.
Included are most of the emission sources that the Group has responsibility for but some emission sources have been omitted
based on a lack of data and materiality. Details of the emissions which have been omitted are given in the ‘Emission sources not
reported’ section below. The Scope 2 emissions calculations for purchased electricity follow the location-based methodology of
the GHG Protocol.
We have used SoFi software, from Think Step, to gather data on energy use (natural gas and electricity), hydrofluorocarbons and
upstream leased assets. For the Group’s international operations, Defra no longer includes the International Energy Agency’s (‘IEA’)
factors for international electricity consumption in their own dataset. Think Step negotiated an agreement with the IEA that allows
them to continue to include IEA factors in the SoFi Impact libraries. These factors are the most up-to-date IEA overseas emission
factors currently available which date back to country-specific physical consumption of electricity in 2014.
Regarding fugitive emissions, emissions from refrigerant losses occurred due to replacements of our Direct Expansion systems.
As in the previous reporting year, emissions from mobile combustion related to business travel and were estimated to be an
average of 30% of total mileage. This is our own conservative assumption.
Emission sources not reported
This section of the report details the emission sources that we have not reported on and provides the reasons behind our decisions.
Only a minority of the buildings we operate directly make use of gas and we have included this in our emissions from combustion
of fuel. We do not have distinct data on heat/steam for our other buildings as this is most likely embedded in the office service
charges that we pay. As a result, we have not currently reported on purchased heat or steam. In future we will devise a
methodology to estimate the emissions associated with heating requirements that we are responsible for.
Data quality for electricity and gas consumption
Our data for electricity as well as gas consumption comes from two main sources:
– consumption bills from suppliers/reports from property agents etc. (exact data); and
– our approximations based on exact data (estimated data).
We have used estimated data in some cases because we were unable to get complete data for all our buildings for the current
reporting period. The section below details the approach that we have taken to fill the gaps in consumption data.
We identified that there were some buildings that had incomplete electricity or gas consumption figures for certain months over the
current reporting period. In such situations, we chose a conservative approach to estimate the consumption data for the missing
months. We did this by identifying the month in the dataset with the highest electricity consumption, calculated the worst case daily
consumption figure and applied this daily figure to the months that had missing data as a worst case scenario.
72
Brewin Dolphin
Annual Report 2017
In some other cases, there were buildings that we had no electricity and/or gas consumption data for. In these situations,
we used either:
– last year’s data as an approximation; or
– average consumption intensity per square metre across buildings with complete and exact data for each month in the current
reporting period.
We then used these monthly average consumption per square metre intensities to estimate the monthly electricity/gas consumption
of the buildings with no electricity/gas consumption data, based on individual floor areas.
Auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
– so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
– the Director has taken all steps that he/she ought to have taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Deloitte LLP has expressed its willingness to continue in office as auditor and a resolution to reappoint them will be proposed at
the forthcoming AGM.
Approved for and on behalf of the Board.
Tiffany Brill
Company Secretary
Brewin Dolphin Holdings PLC
Company Number: 02685806
28 November 2017
Brewin Dolphin
www.brewin.co.uk
73
Strategic ReportGovernanceFinancial StatementsOther Information Statement of Director’s Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare such financial statements for each financial year. Under that law the Directors are
required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards ('IFRSs') as
adopted by the European Union and Article 4 of the IAS and have also chosen to prepare the parent company Financial Statements
under IFRSs adopted by the EU. Under company law the Directors must not approve the Financial Statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for
that period.
In preparing the parent company financial statements, the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgments and accounting estimates that are reasonable and prudent;
– prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:
– properly select and apply accounting policies;
– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
– provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
– make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may
differ from legislation in other jurisdictions.
Directors’ responsibility statement
We confirm that to the best of our knowledge:
– the Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as
a whole;
– the Strategic Report includes a fair review of the development and performance of the business and the position of the company
and the undertakings included in the consolidation taken as a whole, together with a description of the Principal Risks and
Uncertainties that they face; and
– the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 28 November 2017 and is signed on its behalf by
David Nicol
Chief Executive
Andrew Westenberger
Finance Director
74
Brewin Dolphin
Annual Report 2017
Independent Auditor’s Report
Report on the audit of the financial statements
Opinion
In our opinion:
– the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 30 September 2017 and of the group’s profit for the year then ended;
– the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
– the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and,
as regards the group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Brewin Dolphin Holdings PLC (the ‘parent company’) and its subsidiaries (the ‘group’)
which comprise:
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and parent company balance sheets;
– the consolidated and parent company statements of changes in equity;
– the consolidated and parent company cash flow statements; and,
– the related notes 1 to 34.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the
European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the Financial Reporting Council’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that non-audit
services prohibited by the Financial Reporting Council’s Ethical Standard were not provided to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
Materiality
Scoping
The key audit matters that we identified in the current year which are consistent with the
prior year were:
– Revenue recognition;
– Intangible assets: client relationships and goodwill; and
– Assumptions underlying the calculation of the pension scheme liability.
The materiality that we used in the current year was £2.880m which was determined on
the basis of 5% of profit before tax from continuing operations and is consistent with
our approach for the 2016 audit.
The scope of our audit covered substantially the entire group, with the following entities
in scope, in addition to the parent company:
– Brewin Dolphin Limited;
– Tilman Brewin Dolphin Limited; and
Significant changes in our approach
– Brewin Dolphin MP.
There have been no significant changes in our audit approach in 2017.
Brewin Dolphin
www.brewin.co.uk
75
Strategic ReportGovernanceFinancial StatementsOther Information Independent Auditor’s Report continued
Conclusions relating to principal risks, going concern and viability statement
We have reviewed the directors’ statement regarding the appropriateness of the going concern basis of
accounting contained within note 3 to the financial statements and the directors’ statement on the longer-
term viability of the group contained within the strategic report on page 1.
We are required to state whether we have anything material to add or draw attention to in relation to:
– the disclosures on pages 26-29 that describe the principal risks and explain how they are being managed
or mitigated;
– the directors’ confirmation on page 71 that they have carried out a robust assessment of the principal
risks facing the group, including those that would threaten its business model, future performance,
solvency or liquidity;
– the directors’ statement in note 3 to the financial statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them and their identification of any material
uncertainties to the group and the parent company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements;
– the directors’ explanation on page 37 as to how they have assessed the prospects of the group, over
what period they have done so and why they consider that period to be appropriate, and their statement
as to whether they have a reasonable expectation that the group will be able to continue in operation and
meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions; or
– whether the directors’ statements relating to going concern and the prospects of the parent company
required in accordance with Listing Rule 9.8.6R(3) are materially inconsistent with our knowledge
obtained in the audit.
We confirm that we
have nothing
material to add or
draw attention to in
respect of these
matters.
We agreed with the
directors’ adoption
of the going
concern basis of
accounting and we
did not identify any
related material
uncertainties.
However, because
not all future events
or conditions can
be predicted, this
statement is not a
guarantee as to the
group’s ability to
continue as a going
concern.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on our overall audit strategy, the allocation of
resources in the audit and directing the efforts of the audit team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Description
How the scope of our audit
responded
Key observations
76
As detailed in the summary of significant accounting policies on page 3, revenue comprises
investment management fees of £217.1m (2016: £190.5m), commissions of £66.0m (2016:
£71.0m) and other income of £21.4m (2016: £20.8m).
Investment management fees account for approximately 67% of total revenue and are based on a
percentage of individual clients’ funds under management. There is a risk that incorrect rates or
fund valuations are used to calculate management fees. This risk increases where manual
amendments are required to be made to system calculated fees. Therefore we have also identified
this as a higher fraud risk.
We evaluated the design and implementation and tested the operating effectiveness of controls over
system generated investment management fees, including associated IT controls. We also
evaluated the design and implementation of controls over fee amendments but we elected not to
test their operating effectiveness as enhanced controls were implemented part way through the year.
We selected a sample of quarterly investment management fee calculations for individual clients
and recalculated the system generated amount. We agreed a sample of the rates used to client
contracts and the value of funds under management to third party sources. Additionally, we tested
a sample of manual fee amendments to determine their validity in accordance with client
agreements and the group’s policy.
No issues were identified through our testing which indicate management fees were materially
misstated for the year ended 30 September 2017
Brewin Dolphin
Annual Report 2017
Intangible assets: client relationships and goodwill
Description
Historically, the group has expanded through acquisitions leading to the recognition of goodwill
and client relationships of £90.5m (2016: £71.4m). During the year, the group acquired BDDL
Limited (formerly Duncan Lawrie Asset Management Limited) which resulted in client relationships
of £25.5m being recognised.
As detailed in the summary of significant accounting policies in note 3, intangible assets are
reviewed for impairment at least annually. This is considered to be a key source of estimation
uncertainty for the group as described in note 4, based on the information contained in the
intangibles note 14.
Determining whether these intangible assets are impaired requires an estimation of the
recoverable amount for each of the group’s cash-generating units (“CGUs”) and where the
carrying amount exceeds the recoverable amount an impairment should be recorded. This
assessment is based on estimates of the fair value less costs to sell of CGUs based on a
percentage of funds under management. The percentages used are inherently judgemental.
Judgement has also been applied in calculating the fair value of client relationships in the
acquisition of BDDL Limited, including the determination that the difference between the fair value
of consideration and the fair value of net assets acquired relates entirely to client relationships and
no goodwill has arisen.
In assessing the intangible assets, we have reviewed the calculations prepared by management to
assess whether they meet the requirements of IAS 36 “Impairment of Assets” and that the
assumptions and judgements made are appropriate.
This included challenging the percentages management applied to market values of funds under
management to determine fair value, and validating these against percentages derived from
recent public acquisitions of fund management businesses.
We evaluated the design and implementation and tested the operating effectiveness of controls
over the production of funds under management data, designed to ensure its completeness and
accuracy.
We challenged the recognition and valuation of intangible client relationships recognised on
acquisition of BDDL Limited and management’s assessment that the fair value of intangible client
relationships was £25.5m and that no goodwill should be recognised by testing management’s
valuation and challenging both key assumptions and whether other identifiable assets should be
recognised.
No issues were identified through our testing which indicate client relationships and goodwill were
materially misstated for the year ended 30 September 2017.
How the scope of our
audit responded
Key observations
Assumptions underlying the calculation of the pension scheme liability
Description
The group has recognised a defined benefit pension surplus of £4.5m (2016: £7.0m deficit).
The net surplus comprises assets of £106.3m and liabilities of £101.9m.
How the scope of our audit
responded
Key observations
The calculation of the liability is sensitive to changes in underlying assumptions and is considered
to be a key source of estimation uncertainty for the group as detailed in note 4, and disclosed in
note 18.
The key assumptions are the discount rate, inflation rate and mortality rate where small changes
to these assumptions could result in a material change to the pension liability valuation.
In order to evaluate the appropriateness of the assumptions used by management, we have
assessed the design and implementation of controls over the review of assumptions and have
used our own actuarial experts to make direct enquiries of the group’s actuary and review the key
actuarial assumptions adopted in the IAS 19 (“Employee Benefits”) pension valuation. In particular
we compared the discount rate, inflation rate and mortality assumptions to our independently
determined benchmarks derived using market and other data.
No issues were identified through our testing which indicate a material misstatement in the
assumptions underlying the pension scheme liability for the year ended 30 September 2017.
Management’s assumptions were in a reasonable range when compared to our internal
benchmarks, with the group’s assumptions being marginally conservative in comparison.
Brewin Dolphin
www.brewin.co.uk
77
Strategic ReportGovernanceFinancial StatementsOther Information Independent Auditor’s Report continued
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
Basis for determining
materiality
Rationale for the benchmark
applied
£2.880m (2016: £2.485m)
5% of profit before tax from continuing operations which is consistent with our approach for the
prior year audit.
Profit before tax was used as the basis for determining materiality as this is the key metric used by
members of the parent company and other relevant stakeholders in assessing financial
performance.
We agreed with the audit committee that we would report to the committee all audit differences in excess of 5% of materiality,
£144,000 (2016: 2% of materiality £49,700), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. The change in the reporting threshold has been made to align with the thresholds typically used in listed
company audits. We also report to the audit committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls and
assessing the risks of material misstatement at the group level.
The group consists of the main trading subsidiary, Brewin Dolphin Limited along with Tilman Brewin Dolphin Limited, Brewin
Dolphin MP Limited, and BDDL Limited. We focused our group audit scope primarily on Brewin Dolphin Limited which was subject
to a full audit, and Tilman Brewin Dolphin Limited and Brewin Dolphin MP were subject to an audit of specified account balances.
At the year end all of the net assets of BDDL Limited had been transferred to Brewin Dolphin Limited and thus we did not scope in
this entity.
Our coverage of the group audit enabled us to test 98.0% (2016: 97.5%) of the group’s revenue and its profit before tax. Our audit
of Brewin Dolphin Limited used a component materiality of £2.875m (2016: £2.485m).
The majority of the operations of the group are based in the United Kingdom and are audited by Deloitte LLP. The only exception to
this is Tilman Brewin Dolphin Limited, an Irish company, which represents less than 2.5% (2016: 2.5%) of revenue and is audited by
another Deloitte member firm.
78
Brewin Dolphin
Annual Report 2017
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, strategic report and directors' report other than the financial statements and
our auditor’s report thereon.
We have nothing to
report in respect of
these matters.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
Fair, balanced and understandable – the statement given by the directors that they consider the annual
report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group’s performance, business model and strategy,
is materially inconsistent with our knowledge obtained in the audit; or
Audit committee reporting – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee; or
Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the parent company’s compliance with the UK
Corporate Governance Code containing provisions specified for review by the auditor in accordance with
Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are
required to state to them in an auditor’s 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 parent company and the parent company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Brewin Dolphin
www.brewin.co.uk
79
Strategic ReportGovernanceFinancial StatementsOther Information Independent Auditor’s Report continued
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
– the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
– the parent company financial statements are not in agreement with the accounting records and returns.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited
is not in agreement with the accounting records and returns.
We have nothing to
report in respect of
these matters.
We have nothing to
report in respect of
these matters.
Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Shareholders at the Annual General Meeting in
April 2002 to audit the financial statements for the year ended 30 September 2002 and subsequent financial periods. The period of
total uninterrupted engagement including previous renewals and reappointments of the firm is 15 years, covering the years ended
2002 to 2017.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
Robert Topley FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
28 November 2017
80
Brewin Dolphin
Annual Report 2017
Financial Statements
Contents
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Company Balance Sheet
Company Statement of Changes in Equity
Consolidated Cash Flow Statement
Company Cash Flow Statement
Notes to the Financial Statements
1. General information
2. Application of new and revised International
Financial Reporting Standards (‘IFRSs’)
and changes in accounting policies
Intangible assets
3. Significant accounting policies
4. Critical accounting judgements and key
sources of estimation uncertainty
Income
5.
6. Segmental information
7. Staff costs
8. Profit for the year
Finance income and finance costs
9.
10.
Income tax expense
11. Discontinued operations
12. Dividends
13. Earnings per share
14.
15. Property, plant and equipment
16.
Investment in subsidiaries
17. Trade and other receivables
18. Defined benefit pension scheme
19. Net deferred tax asset
20.
21. Cash and cash equivalents
22. Trade and other payables
23. Provisions
24. Share capital
25. Own shares
26. Other reserves
27. Business combinations
28. Financial instruments and risk management
29. Share-based payments
30. Operating lease arrangements
31. Contractual commitments
32. Notes to the Cash Flow Statement
33. Post balance sheet events
34. Related party transactions
Investments
82
83
84
85
86
87
88
89
90
90
90
92
98
100
101
101
102
102
103
104
104
105
107
108
109
110
111
116
116
117
117
118
119
120
121
121
122
129
130
130
131
131
132
Brewin Dolphin
www.brewin.co.uk
81
Strategic ReportGovernanceFinancial StatementsOther Information Consolidated Income Statement
Year ended 30 September 2017
Continuing operations
Revenue
Other operating income
Income
Staff costs
Redundancy costs
Onerous contracts
Amortisation of intangible assets – client relationships
One-off migration costs
Acquisition costs
Incentivisation awards
Other operating costs
Operating expenses
Operating profit
Finance income
Other gains and losses
Finance costs
Profit before tax
Tax
Profit for the year from continuing operations
Discontinued operations
Profit for the year from discontinued operations
Profit for the year
Attributable to:
Equity holders of the parent
Earnings per share
From continuing operations
Basic
Diluted
From continuing and discontinued operations
Basic
Diluted
Note
2017
£’000
2016
£’000
5
5
7
7
14
27
9
9
10
11
13
13
13
13
303,896
568
304,464
280,484
1,866
282,350
(162,689)
(742)
(1,969)
(6,650)
–
(1,683)
(1,297)
(71,766)
(246,796)
57,668
161
2
(188)
57,643
(12,490)
45,153
(152,175)
(2,780)
(311)
(6,287)
(1,596)
–
–
(69,458)
(232,607)
49,743
514
(3)
(192)
50,062
(11,095)
38,967
–
45,153
11,395
50,362
45,153
45,153
50,362
50,362
16.5p
16.0p
14.4p
13.9p
16.5p
16.0p
18.6p
17.9p
82
Brewin Dolphin
Annual Report 2017
Consolidated Statement of Comprehensive Income
Year ended 30 September 2017
Profit for the year
Items that will not be reclassified subsequently to profit and loss:
Actuarial gain/(loss) on defined benefit pension scheme
Deferred tax (charge)/credit on actuarial gain/(loss) on defined benefit pension scheme
Items that may be reclassified subsequently to profit and loss:
Revaluation of available-for-sale investments
Deferred tax credit on revaluation of available-for-sale investments
Exchange differences on translation of foreign operations
Other comprehensive income/(expense) for the year net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Note
18
19
20
19
2017
£’000
45,153
2016
£’000
50,362
8,558
(1,383)
7,175
(7,031)
1,109
(5,922)
(75)
14
92
31
7,206
52,359
(30)
6
559
535
(5,387)
44,975
52,359
52,359
44,975
44,975
Brewin Dolphin
www.brewin.co.uk
83
Strategic ReportGovernanceFinancial StatementsOther Information
Consolidated Balance Sheet
As at 30 September 2017
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Other receivables
Defined benefit pension scheme
Net deferred tax asset
Total non-current assets
Current assets
Available-for-sale investments
Trading investments
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Total current liabilities
Net current assets
Non-current liabilities
Defined benefit pension scheme
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Revaluation reserve
Merger reserve
Profit and loss account
Equity attributable to equity holders of the parent
Approved by the Board of Directors and authorised for issue on 28 November 2017.
Signed on its behalf by
David Nicol
Chief Executive
Andrew Westenberger
Finance Director
Note
2017
£’000
2016
£’000
14
15
17
18
19
20
20
17
21
22
23
18
23
24
24
25
26
26
95,791
3,840
200
4,487
6,743
111,061
736
36
243,144
169,995
413,911
524,972
245,309
4,993
3,755
254,057
159,854
–
8,339
8,339
262,396
262,576
81,053
4,822
307
–
7,799
93,981
833
1,093
218,118
170,766
390,810
484,791
221,945
3,388
3,097
228,430
162,380
6,952
6,600
13,552
241,982
242,809
2,833
152,320
(25,921)
(85)
70,553
62,876
262,576
2,830
151,836
(29,294)
(24)
70,553
46,908
242,809
84
Brewin Dolphin
Annual Report 2017
Consolidated Statement of Changes in Equity
Year ended 30 September 2017
Attributable to the equity holders of the parent
At 30 September 2015
Profit for the year
Other comprehensive income for the year
Deferred and current tax on other comprehensive
income
Actuarial loss on defined benefit pension scheme
Revaluation of available-for-sale investments
Exchange differences on translation of foreign
operations
Total comprehensive (expense)/income for the year
Dividends
Issue of share capital
Own shares acquired in the year
Own shares disposed of on exercise of options
Own shares disposed of
Share-based payments
Tax on share-based payments
At 30 September 2016
Profit for the year
Other comprehensive income for the year
Deferred and current tax on other comprehensive
income
Actuarial gain on defined benefit pension scheme
Revaluation of available-for-sale investments
Exchange differences on translation of foreign
operations
Total comprehensive (expense)/income for the year
Dividends
Issue of share capital
Own shares acquired in the year
Own shares disposed of on exercise of options
Share-based payments
Tax on share-based payments
At 30 September 2017
Share
capital
£’000
Share
premium
account
£’000
2,793 142,135
–
–
Own
shares
£’000
(28,153)
–
Revaluation
reserve
£’000
–
–
Merger
reserve
£’000
70,553
–
Profit
and loss
account
£’000
Total
£’000
31,823 219,151
50,362 50,362
–
–
–
–
–
–
–
–
–
6
–
(30)
–
–
–
1,109
(7,031)
–
1,115
(7,031)
(30)
–
–
–
37
–
–
–
–
–
–
–
–
9,701
–
–
–
–
–
2,830 151,836
–
–
–
–
–
–
(7,220)
5,853
226
–
–
(29,294)
–
–
(24)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(24) 70,553
–
–
559
44,999
(32,818)
–
–
(5,853)
84
8,387
286
559
44,975
(32,818)
9,738
(7,220)
–
310
8,387
286
46,908 242,809
45,153 45,153
–
–
–
–
–
–
–
–
–
14
–
(75)
–
–
–
(1,383)
8,558
–
(1,369)
8,558
(75)
–
–
–
3
–
–
–
–
–
–
–
484
–
–
–
–
2,833 152,320
–
–
–
–
(5,807)
9,180
–
–
(25,921)
–
(61)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(85) 70,553
92
52,420
(36,614)
–
–
(9,180)
8,052
1,290
92
52,359
(36,614)
487
(5,807)
–
8,052
1,290
62,876 262,576
Brewin Dolphin
www.brewin.co.uk
85
Strategic ReportGovernanceFinancial StatementsOther Information
Company Balance Sheet
As at 30 September 2017
Assets
Non-current assets
Investment in subsidiaries
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total current liabilities
Net current assets
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Merger reserve
Profit and loss account
Equity attributable to equity holders
Approved by the Board of Directors and authorised for issue on 28 November 2017.
Signed on its behalf by
David Nicol
Chief Executive
Andrew Westenberger
Finance Director
Brewin Dolphin Holdings PLC
Company Number: 02685806
Note
2017
£’000
2016
£’000
16
17
17
21
22
24
24
25
26
26
192,020
–
192,020
191,429
50
191,479
53,802
433
54,235
246,255
46,151
686
46,837
238,316
10,700
10,700
43,535
12,313
12,313
34,524
10,700
235,555
12,313
226,003
2,833
152,320
(25,921)
70,838
35,485
235,555
2,830
151,836
(29,294)
70,838
29,793
226,003
86
Brewin Dolphin
Annual Report 2017
Company Statement of Changes in Equity
Year ended 30 September 2017
At 30 September 2015
Profit for the year
Total comprehensive income for the year
Dividends
Issue of share capital
Own shares acquired in the year
Own shares disposed of on exercise of options
Own shares disposed of
Share-based payments
At 30 September 2016
Profit for the year
Total comprehensive income for the year
Dividends
Issue of share capital
Own shares acquired in the year
Own shares disposed of on exercise of options
Share-based payments
At 30 September 2017
Attributable to the equity holders of the Company
Share capital
£'000
2,793
–
–
–
37
–
–
–
–
2,830
–
–
–
3
–
–
–
2,833
Share premium
account
£'000
142,135
–
–
–
9,701
–
–
–
–
151,836
–
–
–
484
–
–
–
152,320
Own shares
£'000
(28,153)
–
–
–
–
(7,220)
5,853
226
–
(29,294)
–
–
–
–
(5,807)
9,180
–
(25,921)
Merger reserve
£'000
70,838
–
–
–
–
–
–
–
–
70,838
–
–
–
–
–
–
–
70,838
Profit and loss
account
£'000
30,109
29,884
29,884
(32,818)
–
–
(5,853)
84
8,387
29,793
43,434
43,434
(36,614)
–
–
(9,180)
8,052
35,485
Total
£'000
217,722
29,884
29,884
(32,818)
9,738
(7,220)
–
310
8,387
226,003
43,434
43,434
(36,614)
487
(5,807)
–
8,052
235,555
Brewin Dolphin
www.brewin.co.uk
87
Strategic ReportGovernanceFinancial StatementsOther Information Consolidated Cash Flow Statement
Year ended 30 September 2017
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of intangible assets – software
Purchases of property, plant and equipment
Purchase of available-for-sale investments
Acquisition of subsidiary
Proceeds on disposal of discontinued operation
Proceeds on disposal of trading investments
Proceeds on disposal of available-for-sale investments
Net cash (used in)/from investing activities
Cash flows from financing activities
Dividends paid to equity shareholders
Purchase of own shares
Disposal of own shares
Proceeds on issue of shares
Net cash used in financing activities
Note
32
2017
£'000
67,463
2016
£'000
52,033
27
11
12
25
(1,437)
(589)
(18)
(25,500)
–
1,149
42
(26,353)
(36,614)
(5,807)
–
487
(41,934)
(5,238)
(373)
(770)
–
14,000
–
47
7,666
(32,818)
(7,220)
310
433
(39,295)
Net (decrease)/increase in cash and cash equivalents
(824)
20,404
Cash and cash equivalents at 1 October
Effect of foreign exchange rates
Cash and cash equivalents at 30 September
170,766
53
169,995
149,823
539
170,766
21
88
Brewin Dolphin
Annual Report 2017
Company Cash Flow Statement
Year ended 30 September 2017
Net cash inflow from operating activities
Cash flows from financing activities
Dividends paid to equity shareholders
Disposal of own shares
Proceeds on issue of shares
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 October
Cash and cash equivalents at 30 September
Note
32
12
21
2017
£'000
35,874
2016
£'000
32,502
(36,614)
–
487
(36,127)
(32,818)
310
433
(32,075)
(253)
686
433
427
259
686
Brewin Dolphin
www.brewin.co.uk
89
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements
1. General information
The consolidated financial statements of Brewin Dolphin Holdings PLC (the ‘Company’) and its subsidiaries (collectively, the
‘Group’) for the year ended 30 September 2017 were authorised for issue by the Directors on 28 November 2017.
The Company is incorporated in the United Kingdom under the Companies Act 2006. The nature of the Group’s operations and its
principal activities are set out in the Strategic Report.
The Company is registered in England and Wales. The address of the registered office is 12 Smithfield Street, London EC1A 9BD.
The separate financial statements of the Company are also reported.
Note 16 identifies the subsidiaries that have taken advantage under s479A of the Companies Act 2006, of the exemption from audit.
The significant accounting policies have been disclosed below. The accounting policies for the Group and the Company are
consistent unless otherwise stated.
2.
Application of new and revised International Financial Reporting
Standards (‘IFRSs’) and changes in accounting policies
a. New standards, amendments and interpretations adopted
In the current year, there have been no new standards, amendments or interpretations adopted that have had a material impact
on the disclosures or amounts reported in these financial statements.
b. Changes in accounting policies
There have been no changes to accounting policies in the year.
c. New standards, amendments and interpretations issued but not effective
The table below sets out changes to accounting standards which will be effective for periods beginning on or after:
IAS 71
IAS 121
IFRS 21
IFRS 41
IFRS 9 (2014)
IFRS 15
IFRS 151
IFRIC 221
IAS 401
IFRS 161
IFRIC 231
IFRS 171
Annual
Improvements
to IFRS1
Amendments to Disclosure Initiative
Amendments to Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to Classification and Measurement of Share-based Payment Transactions
Amendments to Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts'
Financial Instruments
Revenue from Contracts with Customers
Clarifications to Revenue from Contracts with Customers
Foreign Currency Transactions and Advance Consideration
Amendments to Transfers of Investment Property
Leases
Uncertainty over Income Tax Treatments
Insurance Contracts
2014–2016 Cycle: Makes amendments to the following standards: IFRS 1, IFRS 12
and IAS 28.
Effective for period
beginning on or after
1 January
2017
2017
2018
2018
2018
2018
2018
2018
2018
2019
2019
2021
2018 (IFRS 1 and
IAS 28) and 2017
(IFRS 12)
1. These amendments have not yet been endorsed by the EU.
The Directors are reviewing the impact of these new standards, amendments and interpretations and do not intend to adopt the
standards early. It is not currently expected that these will have a material impact except for IFRS 16 ‘Leases’.
IFRS 16 ‘Leases’
IFRS 16 was issued in January 2016 and is effective for periods beginning on or after 1 January 2019 (the standard is yet to be
endorsed by the EU). The Group does not intend to adopt the standard early. Therefore, it will first be applicable to the Group’s
accounting period ending 30 September 2020.
The standard represents a significant change in the accounting and reporting of leases for lessees as it provides a single lessee
accounting model that replaces the current model where leases are either recognised as a finance or operating lease.
Under the single lessee model, a right of use asset and corresponding lease liability will be recognised which represent future lease payables,
with movements through the Income Statement representing depreciation, additions or releases on the liability and unwinding of the discount
for all leases unless the underlying asset has a low value or the remaining lease term is less than twelve months at the date of transition.
90
Brewin Dolphin
Annual Report 2017
Accounting requirements for lessors are substantially unchanged from IAS 17 ‘Leases’.
Transition
On transition to IFRS 16, the Group can choose to apply one of two transition methods;
– the full retrospective transition method, whereby IFRS 16 is applied to all its contracts as if it had always applied; or
– the modified retrospective approach with optional practical expedients.
A practical expedient exists that allows an entity not to reassess whether a contract is, or contains, a lease at the date of initial
application of the standard.
Impact
The Group is primarily a lessee and is also a sub-lessor for a small number of property leases that have been identified as onerous.
On adoption, lease agreements will give rise to both a right of use asset and a lease liability for future lease payables. The right
of use asset will be depreciated over the shorter of the expected life of the asset and the lease term on a straight-line basis and
recognised in the Income Statement. The lease liability will be reduced by lease payments, offset by the unwinding of the liability
over the lease term. Interest recognised on the lease liability will be charged to the Income Statement.
The depreciation and interest charges will replace the lease costs currently charged to the Income Statement on a straight line
basis. This will result in a change to the profile of the charge taken to the Income Statement over the life of the lease; higher
expenses are recognised in earlier years of the lease, with a reduction in the annual expenses in the later years of the lease
owing to the application of the actuarial method of accounting for the lease liability.
An assessment of the impact of the new standard is currently being undertaken and work being performed includes an assessment
of the accounting impacts of the change, the process of collecting the required data, identification of leases within the Group which
fall within the scope of the standard and the necessary changes to systems and processes.
It is not yet practicable to provide a reliable estimate of the financial impact on the Group’s consolidated results. However,
from the assessment to date, the Directors expect implementation of the new standard will have a material impact on the
consolidated results of the Group. The Group has non-cancellable operating lease commitments of £58.7 million, see note 30.
It is likely that the Group will adopt the modified retrospective transition approach and take advantage of the practical expedient
as detailed above.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 is effective for periods commencing on or after 1 January 2018. The standard was endorsed by the EU during 2016
and supersedes existing revenue recognition standards, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13
Customer Loyalty Programmes. The Group does not intend to adopt the standard early; therefore, it will first be applicable to the
Group’s accounting period ending 30 September 2019.
The new standard establishes a principle based five step model to be applied to all contracts with customers, except for insurance
contracts, financial instruments and lease contracts.
The Group will be required to identify all contracts it has with customers in order to determine whether, how much and when
revenue is recognised. The Group is in the process of quantifying the potential impact of adopting the standard, based on its
existing revenue streams.
The Group has conducted a preliminary assessment of the potential impact of the new standard; it is not currently expected to
have a material financial impact on the amount and timing of revenue recognised under IFRS 15 in the Group financial statements,
however it may result in changes to presentation and disclosure.
IFRS 9 ‘Financial Instruments’
IFRS 9 is effective for periods commencing on or after 1 January 2018. The standard was endorsed by the EU during 2016.
The Group does not intend to adopt this standard early, therefore, it will first be applicable to the Group’s accounting period
ending 30 September 2019.
IFRS 9 changes the classification and measurement of financial instruments, the timing and extent of credit provisioning,
new hedge accounting requirements and enhanced disclosures in the financial statements. The Group does not use hedge
accounting and so this element of the new standard is not applicable.
The Group has conducted a preliminary assessment of the potential impact of the new standard; it is not currently expected to
have a material financial impact on the Group financial statements. However, the adoption of the standard will result in both the
reclassification of certain financial assets and changes to disclosure.
Brewin Dolphin
www.brewin.co.uk
91
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
3. Significant accounting policies
a. Statement of compliance
The consolidated financial statements for both the Group and the Company have been prepared in accordance with
International Financial Reporting Standards (‘IFRSs’) adopted by the European Union, Article 4 of the EU IAS Regulation
and Companies Act 2006.
b. Basis of preparation
The consolidated financial statements are presented in pounds sterling, the functional currency of the Company, rounded to the
nearest thousand pounds (£’000) except where otherwise indicated.
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial
instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the goods and services.
c. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries).
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the
consolidated Income Statement from the date the Company gains control until the date when the Company ceases to control
the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with
those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
In accordance with Section 408 of the Companies Act 2006 Brewin Dolphin Holdings PLC has taken advantage of the legal
dispensation not to present its own Statement of Comprehensive Income or Income Statement. The amount of the profit for the
financial period dealt with in the financial statements of the Company is disclosed in the Company Statement of Changes in Equity.
d. Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements. Further detail is contained in the going concern statement and
the Viability Statement included in the Strategic Report on page 37.
e. Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition
is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the Income
Statement as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the
acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the
identifiable assets acquired and liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred the excess is recognised immediately in
the Income Statement as a bargain purchase gain.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of
acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent
consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of
contingent consideration classified as equity are not recognised.
f. Transaction date accounting
All securities transactions entered into on behalf of clients are recorded in the accounts on the date of the transaction.
The underlying investments are not shown in the financial statements of the Group.
92
Brewin Dolphin
Annual Report 2017
g. Foreign currencies
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are
not retranslated.
Exchange differences are recognised in the Income Statement in the period in which they arise.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
h. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents investment management fees,
investment management commissions, financial planning income and other income, excluding VAT, receivable in the period.
Investment management and financial planning income
Investment management fees and financial planning income are recognised in the period in which the related service is provided
and commissions are recognised when the transaction is performed.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s
net carrying amount.
Dividend income
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
Dividends received and receivable are credited to the Income Statement to the extent that they represent a realised profit and loss
for the Company.
i. Other operating income
Interest receivable and payable on client money balances is netted to calculate the Group’s share of interest receivable and included
under the heading ‘Other operating income’.
j. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and bank overdrafts.
k. Leases
Rentals on operating leases are charged to the Income Statement on a straight-line basis over the lease term. Benefits received
and receivable as an incentive to enter into an operating lease are recognised as a liability. The aggregate benefit of incentives is
spread on a straight-line basis over the lease term.
l. Share-based payments
Equity-settled share-based payments to employees are measured at fair value of the equity instruments at the date of grant.
The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of
equity–settled share-based transactions are set out in note 29.
Fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has been adjusted,
based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group’s estimate of shares that will eventually vest. At each balance sheet date, the Group revises
its estimate of the number of equity instruments expected to vest as a result of the effect of non-market based vesting conditions.
The impact of the revision of the original estimates, if any, is recognised in the Income Statement such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to equity reserves.
Brewin Dolphin
www.brewin.co.uk
93
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
3. Significant accounting policies (continued)
m. Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income
Statement because it excludes items of income or expenses that are taxable or deductible in other years and items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the balance
sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised
based on tax laws and rates that have been substantively enacted at the balance sheet date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which
the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited in
other comprehensive income, in which case the current and deferred tax is also dealt with in other comprehensive income.
n. Investments in subsidiaries
In the Company’s financial statements investments in subsidiary undertakings are stated at cost less any provision for impairment.
o. Intangible assets
i) Goodwill
Goodwill is initially measured at cost, being the excess of the sum of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net of the
identifiable assets and liabilities at the date of acquisition.
Goodwill is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is
reviewed for impairment at least annually. Any impairment is recognised immediately in the Income Statement and is not reversed
in a subsequent period (see note 3(u) for the Impairment accounting policy).
When the consideration transferred by the Group is deferred or contingent, this is valued at its acquisition date fair value, and is
included in the consideration transferred in a business combination. Changes in the deferred or contingent consideration, which
occur in the measurement period, are adjusted retrospectively, with corresponding adjustments to goodwill. Subsequent to the
measurement period, the deferred and contingent considerations are revised annually at the balance sheet date and any
corresponding adjustments are posted to the Income Statement.
94
Brewin Dolphin
Annual Report 2017
ii) Client relationships
Intangible assets classified as ‘client relationships’ are recognised when acquired as part of a business combination or when
separate payments are made to acquire funds by adding teams of investment managers. Client relationships acquired separately
are initially recognised at cost. If acquired as part of a business combination the initial cost of client relationships is the fair value at
the acquisition date. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any
accumulated impairment losses.
When separate payments are made to acquire funds by adding teams of investment managers, elements of the total consideration
may be deferred or contingent. In such cases the cost of the recognised client relationships includes the Company’s best estimate
of the future consideration likely to be made, discounted to present value using a pre-tax discount rate that reflects current market
assessments of the time value of money, and is revised at each balance sheet date.
Client relationships are amortised over seven to fifteen years, dependent upon the assessment of the estimated useful life of the
client relationships.
iii) Computer software
Computer software which is not an integral part of the related hardware is classified as an intangible asset. Costs of acquiring
computer software are treated as an intangible asset and amortised over three to ten years, dependent upon the assessment of
the expected useful life of the software, on a straight-line basis from the date the software is operating as management intended.
The assessment of the expected useful life of computer software is based on the contractual terms or where appropriate past
experience of the life of similar assets.
p. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment. Depreciation has
been provided on the basis of equal annual instalments to write off the cost less estimated residual values of tangible fixed assets
over their estimated useful lives as follows:
Computer equipment
Office equipment
3 to 4 years
4 to 10 years
Leasehold improvements
to the earlier of the first break clause of the lease or 10 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the Income Statement.
q. Fair value measurement
The Group measures financial instruments and certain non-financial assets at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of
IAS 17, and measurements that have some similarities to fair value but are not fair value, such as value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
– Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
– Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
– Level 3 inputs are unobservable inputs for the asset or liability.
Brewin Dolphin
www.brewin.co.uk
95
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
3. Significant accounting policies (continued)
r. Financial instruments
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of
the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through
profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in the Income Statement.
i) Financial assets
Financial assets are classified into the following specified categories:
– financial assets at fair value through profit or loss (‘FVTPL’);
– available-for-sale financial assets; and
– loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL
Financial assets are classified as FVTPL where the financial asset is held-for-trading. A financial asset is classified as held-for-trading
if it has been acquired principally for the purpose of selling in the near future.
Financial assets classified as FVTPL are stated at fair value, with any resultant gain or loss on remeasurement recognised in the
Income Statement. The net gain or loss recognised in the Income Statement incorporates any dividends or interest earned on the
financial asset and is included in the Income Statement. Their value is determined in the manner described in note 3(q).
Available-for-sale financial assets (‘AFS’)
Certain assets held by the Group are classified as being available-for-sale and are stated at fair value. Unlisted shares that are not
traded in an active market are stated at fair value where the directors consider that fair value can be reliably measured. Fair value is
determined in the manner described in note 3(q). Gains and losses are recognised directly in other comprehensive income and
accumulated in the revaluation reserve with the exception of permanent impairment losses which are recognised directly in the
Income Statement. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously
recognised in the revaluation reserve is reclassified to the Income Statement.
Dividends on AFS equity instruments are recognised in the Income Statement when the Group’s right to receive payment
is established.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments and are not quoted in an active market
are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets
are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been affected. The carrying amount of the financial asset is
reduced by the impairment loss directly for all financial assets.
For listed and unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below
its cost is considered to be objective evidence of the impairment.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive
income are reclassified to the Income Statement in the period. In subsequent periods if the amount of impaired loss decreases, in
respect of AFS equity securities, impairment losses previously recognised in the Income Statement are not reversed through the
Income Statement. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.
96
Brewin Dolphin
Annual Report 2017
ii) Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial liabilities at FVTPL
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’. Financial liabilities are classified as
FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the Income
Statement. The net gain or loss recognised in the Income Statement incorporates any interest paid on the financial liability and is
included in the ‘other gains and losses’ line item in the Income Statement. Fair value is determined in the manner described in
note 3(q).
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities
are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective
yield basis.
s. Netting of balances
Amounts due to and from counterparties due to settle on balance are shown net where there is a currently enforceable legal right
to set off the recognised amounts and an operational intention to settle net. Amounts due to and from counterparties due to settle
against delivery of stock are shown gross.
t. Post-retirement benefits
i) Costs
Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered services
entitling them to the contributions.
For defined benefit retirement benefit schemes, the cost of providing benefits is determined using the Projected Unit Method,
with actuarial valuations being carried out at each balance sheet date. Remeasurements comprising actuarial gains and losses
and the return on scheme assets (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit to
the Statement of Other Comprehensive Income in the period in which they occur. Remeasurement recorded in the Statement of
Other Comprehensive Income is not recycled.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset and net-interest expense or income
is recognised within finance costs (see note 9).
ii) Defined benefit pension scheme asset/liability
The defined benefit pension scheme asset/liability recognised in the Balance Sheet represents the present value of the defined
benefit pension scheme obligation as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited
to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
Any asset recognised is only recognised to the extent that the Group is able, without condition or restriction placed on it by the
trustees, to run the Scheme until the last member dies, without benefits being augmented; wind up the Scheme at that point;
and reclaim any remaining monies.
u. Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss (if any).
Goodwill is tested for impairment at least annually and whenever there is an indication that it may be impaired. Where the asset
does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-
generating unit (‘CGU’) to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Brewin Dolphin
www.brewin.co.uk
97
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
3. Significant accounting policies (continued)
For the purposes of impairment testing, client relationships and goodwill are allocated to each of the Group’s cash-generating units.
Fair value is established by valuing clients’ funds in each of the cash-generating units at the period end; the percentages of funds
being used depend on values attributed in recent public transactions for the purchase of advisory and discretionary funds. If the
carrying amount relating to any cash-generating unit exceeds the calculated fair value less costs to sell, a value in use is calculated
using a discounted cash flow method. If the recoverable amount of the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
If the recoverable amount of any asset other than client relationships or goodwill is estimated to be less than its carrying amount,
the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
v. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the
effect of the time value of money is material).
Where some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that the reimbursement will be received and the amount receivable
can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered
to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it.
w. Discontinued operations
A discontinued operation is a component of the Group’s business that either has been disposed of or is classified as held for sale.
Components of the Group are classified as held for sale if their carrying amount will be recovered or settled principally through a
sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly probable
and the component is available for immediate sale in its present condition.
x. Employee share ownership trusts
Brewin Dolphin Limited is the sponsoring employer of the Brewin Dolphin Share Incentive Plan Trust and the Brewin Dolphin
Holdings PLC Employee Share Ownership Trust. The assets and liabilities of the trusts are recognised as those of Brewin Dolphin
Holdings PLC and obligations of the trusts are regarded as obligations of Brewin Dolphin Holdings PLC. Shares of Brewin Dolphin
Holdings PLC held by the trusts are treated as own shares held and shown as a deduction in equity.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the
revision affects both current and future years.
98
Brewin Dolphin
Annual Report 2017
a. Critical judgements in applying the Group’s accounting policies
i. Business combinations
The Group applies judgement in determining whether a transaction is a business combination, which includes consideration
as to whether the Group has acquired a business or a group of assets.
In making this judgement, the Group assesses the assets, liabilities, operations and processes that were the subject of the
transaction against the definition of a business in IFRS 3.
On 10 May 2017, the Group’s principal operating subsidiary (Brewin Dolphin Limited) acquired 100% of the ordinary share capital of
Duncan Lawrie Asset Management Limited (‘DLAM’). It has been judged that the acquisition should be accounted for as a business
combination given control of a separate legal entity was acquired and all of the value of the business was transferred.
See note 27 for additional information.
b. Key sources of estimation uncertainty
i. Business combinations
As part of any business combination the Group recognises all assets acquired and liabilities assumed at their acquisition date fair
values, including any separately identifiable intangibles assets such as the client relationship intangibles recognised as part of the
DLAM acquisition (as set out in note 4.a.i. above).
The value attributed to the client relationships affects the amount of goodwill recognised, this value together with the assessment
of useful economic lives determines future amortisation charges.
The valuation of the client relationship intangible asset gives rise to estimation uncertainty. Certain assumptions regarding the
amount, timing and discounting of future cash flows have been adopted in order to determine these fair values.
The Group has recognised client relationship intangibles of £25,500,000 (see note 14 and 27), arising from the DLAM business'
relationship with its clients.
If the fair value of the assets acquired moved by 10% then the value of the client relationship intangibles acquired would decrease/
increase by £2,500,000 resulting in the recognition of either goodwill or a gain on bargain purchase.
ii. Goodwill and client relationships
Amortisation of client relationships
The useful economic life over which client relationships are amortised is determined by the expected duration of the client
relationships which are determined with reference to past experience of account closures, in particular the average life of those
relationships, and future expectations. During the year, client relationships were amortised over a 7 to 15 year period.
The amortisation for the year was £6,650,000 (2016: £6,287,000). A reduction in the average amortisation period by one year
would increase the amortisation expense for the year by £2,154,000 (2016: £2,144,000).
Impairment of goodwill and client relationships
Impairment exists when the carrying value of an asset or cash-generating unit ('CGU') exceeds its recoverable amount.
The recoverable amount is the higher of its fair value less costs of disposal and its value in use.
For the purposes of impairment testing, the Group values the recoverable amount of goodwill and client relationships at the fair
value less costs of disposal. The calculation of the fair value less costs of disposal is based on the valuation of the funds, which
make up the relevant intangible asset. A percentage is applied to funds (3% for discretionary funds and 1% for advisory funds) to
determine the fair value. These percentages have been based on recent public transactions.
Therefore, the recoverable amount is sensitive to movements in the valuation of funds. The key assumptions used to determine the
recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in note 14.
Note 3.u explains the accounting policy with respect to the impairment of intangible assets.
Brewin Dolphin
www.brewin.co.uk
99
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
4. Critical accounting judgements and key sources of estimation uncertainty
(continued)
iii. Defined benefit pension scheme
The calculation of the present value of the defined benefit pension scheme is determined by using actuarial valuations. Management
make key assumptions in determining the inputs into the actuarial valuations, which may differ from actual developments in the future.
These assumptions are governed by IAS 19 Employee Benefits, and include the determination of the discount rate, life expectancies,
inflation rates and future salary increases. Due to the complexities in the valuation, the defined benefit pension scheme obligation is
highly sensitive to changes in these assumptions. The detailed assumptions, including a sensitivity analysis, are set out in note 18.
During the year, the defined benefit pension scheme has moved from a deficit of £6,952,000 to a surplus of £4,487,000.
See note 18 page 112 ‘Defined benefit pension scheme asset recognition basis’ for further detail.
iv. Share-based payments
Long Term Incentive Plan (‘LTIP’)
The Group grants awards under the LTIP. The scheme includes performance based vesting conditions, which impacts the amount
of benefit paid. The Group has made assumptions on the likelihood of meeting the performance conditions in determining the
expense in the year. The LTIP charge for the year was £795,000 (2016: £337,000).
If all of the performance conditions were assumed to be met; the charge for the year would increase by £637,000 (2016: £1,692,000);
an absolute increase of 10% in the vesting assumptions would increase the charge for the year by £225,000 (2016: £300,000).
Further information on the scheme is disclosed in note 29.
v. Provisions
Onerous leases
The Group recognises a provision for several onerous property leases of £5,367,000 (2016: £4,135,000). The valuation of an
onerous lease is based on the best estimate of the likely future costs discounted to present value. Where the provision is in relation
to 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. The ultimate amount of the provision is dependent on the timing of any sublet and the associated terms of the sublet
achieved.
If the assumptions regarding unconfirmed sublet income are removed, the provision would increase by £7,958,000 (2016: £6,355,000)
to £12,094,000 (2016: £10,490,000). A delay of one year to the assumed sublets would increase the onerous lease provision and
Income Statement expense for the year by £973,000. Further information is disclosed in note 23.
Income
5.
Group
Continuing operations
Investment management fee income
Investment management commission income
Financial planning income
Trail income
Revenue
Other operating income
Income from continuing operations
Discontinued operations (note 11)
Commission income
Trail income
Fee income
Revenue
Other operating income
Income from discontinued operations
Income from continuing and discontinued operations
100
2017
£'000
2016
£'000
217,138
65,969
20,789
–
303,896
568
304,464
190,533
70,999
17,483
1,469
280,484
1,866
282,350
–
–
–
–
–
–
2,946
93
310
3,349
30
3,379
304,464
285,729
Brewin Dolphin
Annual Report 2017
6. Segmental information
Group
For management reporting purposes the Group currently has a single operating segment: the Investment Management division.
This forms the reportable segment of the Group for the year. Please refer to the Consolidated Income Statement on page 82
and the Consolidated Balance Sheet on page 84 for numerical information.
The Group’s operations are carried out in the United Kingdom, Channel Islands and the Republic of Ireland. The operations in the
Channel Islands and the Republic of Ireland are not material and accordingly geographical segmental disclosures are not included.
All segmental income related to external clients.
The accounting policies of the operating segment are the same as those of the Group.
7. Staff costs
Group
The average monthly number of employees (including Executive Directors) by category was:
Client-facing
Business support
2017
No.
882
812
1,694
2016
No.
892
851
1,743
The aggregate remuneration (including Executive
Directors) comprised:
Wages and salaries
Social security costs
Share-based payments
Apprenticeship levy
Termination benefits – redundancy costs
Defined contribution scheme and death in service
contributions
Staff costs
Redundancy costs
Continuing
operations
Discontinued
operations
Total
2017
£'000
2016
£'000
2017
£'000
2016
£'000
2017
£'000
2016
£'000
126,763
15,971
8,052
417
1,662
120,085
13,927
8,387
–
2,780
10,566
163,431
9,776
154,955
162,689
742
163,431
152,175
2,780
154,955
–
–
–
–
–
–
–
–
–
–
171
14
–
–
–
18
203
203
–
203
126,763
15,971
8,052
417
1,662
120,256
13,941
8,387
–
2,780
10,566
163,431
9,794
155,158
162,689
742
163,431
152,378
2,780
155,158
Company
The Company does not have any employees (2016: none).
Brewin Dolphin
www.brewin.co.uk
101
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
8. Profit for the year
Group
Profit for the year has been arrived at after charging/(crediting):
Net foreign exchange losses/(gains)
Depreciation of property, plant and equipment
(note 15)
Amortisation of intangible assets – client relationships
(note 14)
Amortisation of intangible assets – software (note 14)
Impairment of property, plant and equipment
(note 11 and 15)
Impairment of intangible assets – software (note 11
and 14)
Impairment/(reversal of impairment) of trade receivables
(note 17)
Auditor's remuneration (see analysis below)
Analysis of auditor’s remuneration:
Continuing
operations
Discontinued
operations
2017
£'000
66
2016
£'000
(65)
2017
£'000
–
1,917
2,773
6,650
5,200
6,287
3,741
–
–
16
762
–
–
(58)
534
–
–
–
–
–
–
–
2016
£'000
–
732
–
700
335
345
–
–
Audit services
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company's auditor and their associates for other services to the Group: the audit of
the Company’s subsidiaries pursuant to legislation
Fees payable to the Company’s auditor for audit scope changes
Regulatory assurance work
Additional fees for regulatory assurance work
Other services
AAF 01/06 – controls assurance report
Interim review
Other assurance services
Total
2017
£'000
66
2016
£'000
(65)
1,917
3,505
6,650
5,200
6,287
4,441
–
–
16
762
335
345
(58)
534
2017
£'000
2016
£'000
64
277
50
158
50
599
71
52
40
762
64
245
–
106
–
415
69
50
–
534
Details of the Group’s policy on the use of the auditor for non-audit services are set out in the Audit Committee Report on page 54.
9. Finance income and finance costs
Group
Continuing
operations
Finance income
Interest on bank deposits
Finance costs
Interest expense on defined benefit pension scheme
Unwind of discounts on provisions
Interest on bank overdrafts
2017
£'000
161
161
119
58
11
188
2016
£'000
514
514
52
75
65
192
102
Discontinued
operations
2017
£'000
2016
£'000
–
–
–
–
–
–
–
–
–
134
–
134
Total
2016
£'000
514
514
52
209
65
326
2017
£'000
161
161
119
58
11
188
Brewin Dolphin
Annual Report 2017
10. Income tax expense
Group
Current tax
United Kingdom:
Charge for the year
Adjustments in respect of prior years
Overseas:
Charge/(credit) for the year
Adjustments in respect of prior years
Total current tax
Deferred tax
United Kingdom:
Continuing
operations
Discontinued
operations
Total
2017
£'000
2016
£'000
2017
£'000
2016
£'000
2017
£'000
2016
£'000
11,594
(157)
309
(8)
11,738
8,806
237
(8)
35
9,070
–
–
–
–
–
–
–
–
–
1,355
(395)
11,594
(157)
10,161
(158)
–
–
960
309
(8)
11,738
(8)
35
10,030
1,675
–
1,675
705
47
752
3,985
(285)
3,700
2,635
12,490
13,730
Charge for the year
Adjustments in respect of prior years
Total deferred tax (see note 19)
705
47
752
2,310
(285)
2,025
Tax charged to the Income Statement
12,490
11,095
United Kingdom corporation tax is calculated at 19.5% (2016: 20%) of the estimated taxable profit for the year. The Finance Act
2015 applied a 20% rate up to 31 March 2017 and Finance (No.2) Act 2015 reduced the rate applicable thereafter to 19%.
The Finance Act 2016 reduces the rate still further from 1 April 2020 to 17%.
Taxation for other jurisdictions is calculated at the relevant prevailing rates in the respective jurisdictions.
The charge for the year can be reconciled to the profit per the Income Statement as follows:
Profit before tax on continuing operations
Tax at the UK corporation tax rate of 19.5% (2016: 20%)
Tax effect of:
Expenses that are not deductible in determining taxable profit
Impact of defined benefit scheme contributions
Leasehold property
Share-based payments
Over provision for tax in previous years
Lower rates in subsidiaries
Impact of deferred tax rate change
Tax expense for the year
Effective tax rate for the year
2017
£'000
57,643
11,240
1,419
(23)
197
(162)
(118)
(154)
91
12,490
21.7%
2016
£'000
50,062
10,012
521
(99)
251
241
(13)
32
150
11,095
22.2%
There are no material uncertainties within the calculation of corporation tax. The tax provisions are based on tax legislations in the
relevant jurisdictions and have not required any judgements or material estimates.
Brewin Dolphin
www.brewin.co.uk
103
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
11. Discontinued operations
Group
The results of the discontinued operation included in the Group's Consolidated Income Statement, were as follows:
Revenue
Expenses
Operating profit
Costs of separation
Profit before tax
Attributable tax expense
Loss after tax
Profit on disposal of discontinued operations
Attributable tax expense
Net profit attributable to discontinued operations
Costs of separation consist of the following items:
Impairment
Intangible asset – see note 14
Tangible asset – see note 15
Onerous contract release
Other
Total costs of separation
2017
£'000
–
–
–
–
–
–
–
–
–
–
2017
£'000
–
–
–
–
–
2016
£'000
3,379
(3,339)
40
(10)
30
(43)
(13)
14,000
(2,592)
11,395
2016
£'000
(345)
(335)
680
(10)
(10)
The discontinued operation contributed the following cash flows included within the Consolidated Cash Flow Statement:
Net cash outflows from operating activities
Net cash inflows from investing activities
Net (decrease)/increase in cash and cash equivalents
12. Dividends
Group and Company
Amounts recognised as distributions to equity shareholders in the year:
2015/2016 Final dividend paid 10 March 2017, 9.15p per share (2016: 8.25p per share)
2016/2017 Interim dividend paid 16 June 2017, 4.25p per share (2016: 3.85p per share)
2017
£'000
(172)
–
(172)
2016
£'000
(8,206)
14,000
5,794
2017
£'000
2016
£'000
24,996
11,618
36,614
22,374
10,444
32,818
Proposed final dividend for the year ended 30 September 2017 of 10.75p (2016: 9.15p) per share based
on shares in issue at 23 November 2017 (2016: 24 November 2016)
29,430
24,865
The proposed final dividend for the year ended 30 September 2017 of 10.75p per share is subject to approval by shareholders at
the Annual General Meeting and has not been included as a liability in these financial statements.
Under an arrangement dated 1 April 2011, Computershare Trustees (Jersey) Limited (the ‘Trustee’), holds 9,817,002 Ordinary
Shares representing 3.5% of the Company's called up share capital in relation to employee share schemes, has agreed to waive
all dividends due to the Trustee.
104
Brewin Dolphin
Annual Report 2017
13. Earnings per share
Group
The calculation of the basic and diluted earnings per share is based on the following data:
Number of shares
Basic
Weighted average number of shares in issue in the year
Diluted
Effect of weighted average number of options outstanding for the year
Diluted weighted average number of options and shares for the year
Adjusted1 diluted
Effect of full dilution of employee share options which are contingently issuable
or have future attributable service costs
Adjusted1 diluted weighted average number of options and shares for the year
a) Continuing operations
Earnings attributable to ordinary shareholders
Basic and diluted profit for the year
Redundancy costs
Onerous contracts
Amortisation of intangible assets – client relationships
Acquisition costs
Incentivisation awards
One-off migration costs
Disposal of available-for-sale investments
less tax effect of above
Adjusted basic and diluted profit for the year and attributable earnings
Earnings per share
Basic
Diluted
Adjusted2 earnings per share
Basic
Adjusted1 diluted
2017
'000
2016
'000
272,840
271,072
10,162
283,002
9,984
281,056
2,406
285,408
4,637
285,693
2017
£'000
2016
£'000
45,153
742
1,969
6,650
1,683
1,297
–
(2)
(1,481)
56,011
38,967
2,780
311
6,287
–
–
1,596
3
(2,042)
47,902
2017
2016
16.5p
16.0p
14.4p
13.9p
20.5p
19.6p
17.7p
16.8p
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, amortisation of client relationships, acquisition costs, incentivisation awards, one-off migration costs and disposal of
available-for-sale investments.
Brewin Dolphin
www.brewin.co.uk
105
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
13. Earnings per share (continued)
b) Continuing and discontinued operations
Earnings attributable to ordinary shareholders
Basic and diluted profit for the year
Redundancy costs
Onerous contracts
Amortisation of intangible assets – client relationships
Acquisition costs
Incentivisation awards
One-off migration costs
Disposal of available-for-sale investments
less tax effect of above
Adjusted basic and diluted profit for the year and attributable earnings
Earnings per share
Basic
Diluted
Adjusted2 earnings per share
Basic
Adjusted1 diluted
2017
£'000
2016
£'000
45,153
742
1,969
6,650
1,683
1,297
–
(2)
(1,481)
56,011
50,362
2,780
311
6,287
–
–
1,596
3
(2,042)
59,297
2017
2016
16.5p
16.0p
18.6p
17.9p
20.5p
19.6p
21.9p
20.8p
c) Discontinued operations
The denominators used are the same as those detailed above for both basic and diluted earnings from continuing operations.
Earnings per share
Basic
Diluted
Adjusted2 earnings per share
Basic
Adjusted1 diluted
2017
2016
–
–
–
–
4.2p
4.0p
4.2p
4.0p
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 cost, onerous contracts, amortisation of client relationships, acquisition costs, incentivisation awards, one-off migration costs and disposal of
available-for-sale investments.
106
Brewin Dolphin
Annual Report 2017
14. Intangible assets
Group
Cost
At 30 September 2015
Additions
Disposals
Exchange differences
At 30 September 2016
Additions
Exchange differences
At 30 September 2017
Accumulated amortisation and impairment losses
At 30 September 2015
Amortisation charge for the year
Eliminated on disposal
Exchange differences
Impairment losses for the year (see note 11)
At 30 September 2016
Amortisation charge for the year
Exchange differences
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
Goodwill
£'000
Client
relationships
£'000
Software
costs
£'000
Total
£'000
48,637
–
–
–
48,637
–
–
48,637
107,941
(65)
–
26
107,902
25,708
3
133,613
–
–
–
–
–
–
–
–
–
78,805
6,287
–
13
–
85,105
6,650
2
91,757
55,825
5,189
(42,808)
–
18,206
879
–
19,085
46,609
4,441
(42,808)
–
345
8,587
5,200
–
13,787
212,403
5,124
(42,808)
26
174,745
26,587
3
201,335
125,414
10,728
(42,808)
13
345
93,692
11,850
2
105,544
48,637
48,637
48,637
41,856
22,797
29,136
5,298
9,619
9,216
95,791
81,053
86,989
Client relationship additions are made up as follows:
Cash paid for client relationships acquired in current year
Shares issued in year
Other additions for client relationships acquired in prior years
Utilisation of provisions for deferred purchase liability and shares to be issued
Total additions
2017
£'000
25,500
–
208
–
25,708
2016
£'000
–
9,305
(66)
(9,304)
(65)
The cash paid for client relationships acquired in the year relates to the acquisition of Duncan Lawrie Asset Management Limited
which is detailed in note 27.
The following table splits out the significant client relationship assets:
Carrying amount at year end
Tilman Brewin Dolphin Limited1
South East investment management team 22
Other investment management teams3
£'000
14,305
24,093
3,458
41,856
1. Amortisation period remaining 8 years 10 months.
2. Amortisation period remaining 6 years 7 months, relating to client relationships acquired in the year (see note 27).
3. None of the constituent parts of the goodwill or client relationships relating to the other investment management teams is individually significant in comparison to the
total value of goodwill or client relationships respectively.
Brewin Dolphin
www.brewin.co.uk
107
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
14. Intangible assets (continued)
Goodwill impairment testing
The table below shows the goodwill allocated to groups of cash-generating units (‘CGUs’):
Carrying amount at year end
Midland Branch 1
Midland Branch 2
Northern Branch 1
South East Branch 1
Other Branches
Groups of
CGUs
No.
Goodwill
£'000
1
1
1
1
14
18
5,149
5,284
6,432
12,800
18,972
48,637
In accordance with IFRS, the Group performs impairment testing for goodwill on an annual basis or more frequently when there are
indications of impairment. Client relationships are reviewed for indicators of impairment at each reporting date.
The recoverable amount for each of the CGUs is the fair value less costs of disposal. The fair value is determined by applying
percentages to the funds for each CGU. The percentages applied are a Level 2 input based on recent observable market transactions.
Discretionary funds are valued at 3% and advisory funds are valued at 1% of assets under management.
Sensitivity analysis of the key assumptions
All of the CGUs within the Group have sufficient headroom (i.e. where the recoverable amount of the CGU is in excess of the
carrying value), such that they are insensitive to all reasonable possible changes to the value of funds used for the purpose of
goodwill impairment testing.
15. Property, plant and equipment
Group
Cost
At 30 September 2015
Additions
Exchange differences
Disposals
At 30 September 2016
Additions
Exchange differences
Disposals
At 30 September 2017
Accumulated depreciation and impairment losses
At 30 September 2015
Charge for the year
Exchange differences
Impairment of assets (see note 11)
Eliminated on disposal
At 30 September 2016
Charge for the year
Exchange differences
Eliminated on disposal
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
108
Leasehold
improvements
£'000
Office
equipment
£'000
Computer
equipment
£'000
13,003
198
31
(42)
13,190
690
4
(178)
13,706
8,685
1,267
30
–
(42)
9,940
1,026
4
(138)
10,832
13,150
138
91
(87)
13,292
98
12
(8)
13,394
11,988
642
78
–
(87)
12,621
388
10
(8)
13,011
43,666
127
–
(9,680)
34,113
185
–
–
34,298
40,961
1,596
–
335
(9,680)
33,212
503
–
–
33,715
Total
£'000
69,819
463
122
(9,809)
60,595
973
16
(186)
61,398
61,634
3,505
108
335
(9,809)
55,773
1,917
14
(146)
57,558
2,874
3,250
4,318
383
671
1,162
583
901
2,705
3,840
4,822
8,185
Brewin Dolphin
Annual Report 2017
16. Investment in subsidiaries
Group
The following are the Group’s subsidiary undertakings, all of which are owned 100% directly or indirectly by the Company and are
included in the consolidated financial statements:
Country of registration
England & Wales
England & Wales
Class of share capital
Ordinary
Ordinary
Activity
Dormant Nominee
Dormant Nominee
Jersey
England & Wales
England & Wales
Jersey
Investment Manager England & Wales
England & Wales
Client Nominee
Scotland
Dormant Nominee
Scotland
Dormant
Scotland
Dormant Nominee
Scotland
Dormant Nominee
England & Wales
Dormant
Name of subsidiary
ABDA Nominees Limited
B.L.Nominees Limited
BDDL Limited (formerly Duncan Lawrie
Asset Management Limited)
BDS Nominees Limited
Bell Lawrie Nominees Limited
Bell Lawrie White & Co. Limited
BL PEP Nominees Limited
BLM Nominees Limited
Brewin (1762) Limited
Brewin 1762 Nominees (Channel Islands)
Limited
Brewin 1762 Nominees Limited
Brewin Broking Limited*
Brewin Dolphin (Channel Islands) Limited
Brewin Dolphin Limited*
Brewin Dolphin MP
Brewin Dolphin Securities Limited
Brewin Nominees (Channel Islands) Limited Client Nominee
Client Nominee
Brewin Nominees Limited
Dormant Nominee
Cosmitt Nominees Limited
Dormant Nominee
DDY Nominees Limited
Dormant Nominee
Dunlaw Nominees Limited
Dormant Nominee
Erskine Nominees Limited
Client Nominee
Four Yards Nominees Limited
Client Nominee
Giltspur Nominees Limited
Dormant Nominee
Hill Osborne Nominees Limited
Dormant Nominee
Hilstock PEP (Client) Nominees Limited
Dormant Nominee
Hilstock SCP (Client) Nominees Limited
Dormant Nominee
New Town (Nominees) Limited
Client Nominee
North Castle Street (Nominees) Limited
Dormant Nominee
Northgate Nominees Limited
Dormant Nominee
Pilgrim Nominees Limited
Dormant
Robert White & Co. Limited*
Dormant
Shareline (Yorkshire) Limited
Firm Nominee
Smittco Nominees Limited
Dormant Nominee
Stable (Nominees) Limited
Investment Manager
Tilman Brewin Dolphin Limited*
Client Nominee
Tilman Brewin Dolphin Nominees Limited
Trustee
Webrich Limited*
Dormant Nominee
WIS ICS Nominees Limited
Dormant Nominee
Wise Nominees Limited
Dormant Nominee
Client Nominee
Dormant
Dormant
Investment Manager England & Wales
Investment Manager England & Wales
England & Wales
Dormant
Jersey
England & Wales
England & Wales
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Scotland
Scotland
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
United Kingdom
Ireland
Ireland
England & Wales
England & Wales
England & Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
A Ordinary / B Ordinary
Ordinary
Ordinary
A Ordinary / B Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary / A Shares
Ordinary
Ordinary
Ordinary
Ordinary A Voting /
Ordinary B Voting /
Ordinary C
Ordinary
Aggregate
nominal value
£1
£1
£1
£1
£1
£0.01
£1
£1
£1
£1
£1
£1
£1
£1
£0.01
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
£1
€1.50/ €0.01
€1
£1
£1
£1
£1
109
Wise Speke Financial Services Limited
Dormant
England & Wales
*
Indicates subsidiaries held directly.
All of the subsidiaries listed above are entitled to the exemption from audit under s479A of the Companies Act 2006, with the
exception of BDDL Limited, Brewin Dolphin Limited, Brewin Dolphin MP and Tilman Brewin Dolphin Limited.
Brewin Dolphin
www.brewin.co.uk
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
16. Investment in subsidiaries (continued)
Company
At 1 October
Change in investment in Brewin Dolphin Limited
Capital contribution to Brewin Dolphin Limited in respect of share-based payments
At 30 September
17. Trade and other receivables
Group
Non-current assets
Loans1
Total other receivables
Current assets
Trade debtors
Loans1
Other debtors
Accrued income
Prepayments
Total trade and other receivables
2017
£'000
191,429
–
591
192,020
2016
£'000
194,305
(1)
(2,875)
191,429
2017
£'000
200
200
2016
£'000
307
307
173,240
303
5,530
56,433
7,638
243,144
157,279
347
2,056
49,846
8,590
218,118
1. All loans are to staff and the Directors believe that the balances are fully recoverable.
Trade debtors relate to either market or client transactions and are considered to be past due once the date for settlement has
passed. The date for settlement is determined when the trade is booked. It is expected that some transactions may become past
due in the normal course of business. Fees owed by clients are considered to be past due when they remain unpaid after 30 days
after the relevant billing date. Trade debtors that are older than 90 days are provided for unless collateral is held. The maximum
exposure to credit risk is the carrying value as above (see note 28 for details of the Group's credit risk).
Ageing of past due but not impaired trade debtors
Not past due
Up to 15 days past due
16 to 30 days past due
31 to 45 days past due
More than 45 days past due
Individually impaired trade debtors
Individually impaired trade debtors
Provision for doubtful debts
Trade debtors
110
2017
£'000
171,993
710
44
115
188
173,050
2016
£'000
154,590
2,348
43
64
184
157,229
2017
£'000
228
(38)
190
2016
£'000
83
(33)
50
173,240
157,279
Brewin Dolphin
Annual Report 2017
Movements in provision for doubtful debts
At 1 October
Net charge/(release) to the Income Statement
Doubtful debts written off
At 30 September
No other financial assets of the Group or the Company, other than doubtful debts, are impaired.
Company
Non-current assets
Loans1
Total other receivables
Current assets
Amounts due from subsidiary undertakings
Total trade and other receivables
1. All loans are to staff and the Directors believe that the balances are fully recoverable.
2017
£'000
33
16
(11)
38
2016
£'000
108
(58)
(17)
33
2017
£'000
2016
£'000
–
–
50
50
53,802
53,802
46,151
46,151
18. Defined benefit pension scheme
Group
The Group operates a registered Defined Contribution Scheme (the ‘Brewin Dolphin Senior Staff Pension Fund’) and a registered
Defined Benefit Scheme (the ‘Brewin Dolphin Limited RBS’) in the UK which both offer pensions in retirement and death benefits to
members. The disclosures provided are in respect of the Defined Benefit Scheme only (the ‘Scheme’).
Pension benefits are related to the members' final salary at retirement and their length of service. The pension is payable for life and
has elements increasing in payment in line with inflation up to a maximum of 5% p.a. Since 1 April 2003 the Scheme has been
closed to new members. Members under age 55 at 1 April 2004 ceased to accrue further service in the Scheme from that date.
Contributions to the Scheme for the year beginning 1 October 2017 are expected to be £3.0 million.
The Scheme is an HMRC registered pension scheme and is subject to standard UK pensions and tax law. This means that the
payment of contributions and benefits are subject to the appropriate tax treatments and restrictions and the Scheme is subject to
the Scheme funding requirements outlined in Section 224 of the Pensions Act 2004.
The Scheme was established under trust and is governed by the Scheme’s Trust Deed and Rules. In accordance with UK trust and
pensions law, the Scheme has appointed Trustees. Although the Group bears the financial cost of the Scheme, the responsibility
for the management and governance of the Scheme lies with the Trustees, who have a duty to act in the best interest of members
at all times.
Brewin Dolphin
www.brewin.co.uk
111
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
18. Defined benefit pension scheme (continued)
Valuation for funding purposes
The valuation as at 31 December 2014:
Value of scheme assets
Actuarial value of scheme liabilities in respect of:
In-service members
Deferred pensioners
Current pensioners and dependants
Value of scheme liabilities
Scheme deficit
Funding level
£'000
81,609
(17,598)
(31,459)
(43,926)
(92,983)
(11,374)
88%
The Scheme is valued for funding purposes at intervals of not more than three years by an independent qualified actuary. The latest
valuation for funding purposes was as at 31 December 2014. The actuarial valuation deficit is used to assess the money the Group
need to put into the pension scheme.
The Group and the Scheme’s Trustees agreed a deficit reduction plan following the 2014 valuation and it was agreed that
Brewin Dolphin Limited would pay contributions of £250,000 per month from 1 January 2015 with a view to eliminate the deficit
by 28 February 2019.
The next actuarial valuation of the Scheme is due as at 31 December 2017 and a revised deficit reduction plan will be considered
as part of this exercise. The administration costs of the Scheme, including investment management fees and Scheme levy
payments, are currently paid by Brewin Dolphin Limited as they fall due.
Summary of amounts recognised in the financial statements under IAS 19
In the consolidated financial statements, the Group accounts for pension costs, other post-retirement benefits and related
redundancy provisions in accordance with IAS 19 – ‘Employee Benefits’. Under the standard, the difference between the market
values of Scheme assets and the present value of Scheme liabilities is reported as a surplus (asset) (to the extent a surplus may
be seen) or deficit (liability) in the Balance Sheet. The accounting value shown on the balance sheet will always be different from
the result obtained using the funding basis.
The pension valuation under IAS 19 as at 30 September 2017 was carried out by a qualified independent actuary.
In the preparation of the valuations under IAS 19 referred to in this note, the actuary has used the assumptions indicated below,
which the Group has directed for the purposes of accounting and disclosure under IAS 19.
Explanation of the variance between funding valuation and IAS 19 valuation
The accounts show the Scheme has a surplus compared to the deficit revealed by the last funding valuation. The main reasons for
this are the difference between the experience of the Scheme over the period from 1 January 2015 to 30 September 2017 and that
assumed for the purposes of the funding valuation as at 31 December 2014, and the differences in the assumptions used to value
the liabilities in the accounting and funding valuations for the Scheme.
Defined benefit pension scheme asset recognition basis
Under IAS 19 the net defined benefit pension scheme asset that can be recognised is the lower of the surplus and the asset ceiling
(i.e. the economic benefits available in the form of refunds or reductions in future contributions or a combination of both, in
accordance with IFRIC 14 ‘IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’).
Under the Scheme’s Trust Deeds and Rules the Group is able, without condition or restriction placed on it by the Trustees, to run
the Scheme until the last member dies, without benefits being augmented; wind up the Scheme at that point; and reclaim any
remaining monies. Consequently, the Group recognises the full surplus calculated in accordance with IAS 19.
112
Brewin Dolphin
Annual Report 2017
Risks
The main risks to which the Group is exposed in relation to the pension scheme are:
Mortality risk – the assumptions adopted by the Group make allowance for future improvements in life expectancy. However,
if life expectancy improves at a faster rate than assumed, this would result in greater payments from the Scheme and consequently
increases in the Scheme’s liabilities. The Group and the Scheme’s Trustees review the mortality assumption on a regular basis to
minimise this risk.
Investment risk – the Scheme invests its assets in a diversified portfolio of assets. There are risks that the assets underperform
relative to increases in the value of the Scheme’s liabilities, thus increasing the cost to the Group of the benefit provision. There is a
risk that the assets invested in do not sufficiently match the characteristics of the Scheme’s liabilities and so a fall in asset values is
not similarly matched by a fall in the value of the liabilities. While certain assets are chosen that match the characteristics of the
Scheme’s liabilities and membership profile, the Scheme currently invests in a high proportion of equities and assets that are not
expected to closely match the majority of the Scheme’s liabilities. The Scheme’s Trustees review the performance of the assets
and structure of the portfolio on a regular basis to ensure the risks being taken under investment are commensurate with normal
Trustee principles and the ability of the Group to mitigate adverse investment experience.
Price inflation risk – some of the Scheme’s benefits increase in line with price inflation and so if inflation is greater than expected,
the costs of providing these benefits will increase. The Scheme holds government bonds with payments also linked to inflation to
assist in mitigating this risk.
Financial derivatives risk – the Scheme directly holds derivatives in the form of interest rate swaps, inflation swaps and total return
swaps with the aim of enhancing how the Trustees' matching assets match changes in the Scheme's liabilities on the funding
basis. These are managed by the investment manager as well as all other assets and the Scheme Trustees determine the level of
overall liability hedging that is employed. Other than these derivatives used for liability matching and reducing risks, the Scheme
does not directly hold any financial derivatives, but these may be held by some of the investment funds that the Scheme invests in.
The main risks associated with financial derivatives include: losses may exceed the initial margin; counterparty risk where the other
party defaults on the contract; and liquidity risk where it may be difficult to close out a contract prior to expiry. These risks are
managed indirectly by the investment managers of the Scheme who will review the Scheme's return seeking assets and the level of
investment risk taking to ensure it remains appropriate taking account of the Trustees' investment objectives.
The surplus recognised on the accounting basis is exposed to the risks that increases or decreases in the assets do not match
those of the liabilities measured on the accounting basis. The asset liability matching is based on the Scheme's funding basis and
so to the extent that the Company's measure for the liabilities in line with IAS 19 requirements changes relative to the measure of
the liabilities on the funding basis which the assets are hedging, this could impact on the accounting surplus. The funding position
on the funding basis is protected to some degree by the level of hedging that is adopted and the Trustees' plans to de-risk in future
years as the funding position improves.
Scheme investment strategy and level of matching
The Scheme’s investment strategy is to invest broadly 80% in higher return seeking assets (e.g. equities, high yielding bonds etc.)
and 20% in matching assets (e.g. fixed interest gilts and index-linked gilts). The objective is to target an investment return of 2.5%
per annum (net of fees) in excess of a portfolio of gilts that closely matches the behaviour of the Scheme’s funding liabilities.
This return objective will fall over time, as the proportion of matching assets are increased as the scheme matures, to 0.6% per
annum (net of fees) once all the members have retired. The Scheme also has liability matching swaps in place so that, along with
the matching assets, the majority of the movement in the Scheme’s funding liabilities should be matched by similar movements in
the assets. This strategy reflects the Scheme’s liability profile and the Trustees’ and Brewin Dolphin Limited’s attitude to risk. The
asset allocations as at 30 September 2017 and 30 September 2016 are provided below, disaggregated between assets that are
believed to have a quoted market price in an active market and those that are unquoted.
The aim of the Scheme is hedge around 85% of interest rate risk and inflation risk as at 30 September 2017 to reduce financial
risks to the Scheme and the risks of additional contribution requirement for the Group. The current longer-term objective is to aim to
continue to hedge around 100% of both the interest rate risk and inflation risk of the liabilities; this will help to further reduce funding
level volatility.
None of the assets of the pension schemes are invested in the Group’s own financial instruments and none of the assets are
properties or other assets used by the Group.
Brewin Dolphin
www.brewin.co.uk
113
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
18. Defined benefit pension scheme (continued)
Assumptions
The major assumptions used by the actuary were (in nominal terms) as follows:
Discount rate
RPI inflation assumption
CPI inflation assumption
Rate of increase in salaries
LPI pension increases
Average assumed life expectancies for members on retirement at age 65:
Retiring today:
Males
Females
Retiring in 20 years:
Males
Females
Scheme assets and liabilities
The assets in the Scheme were:
Equities and property (quoted)
Fixed interest bonds (quoted)
Index linked bonds (quoted)
Liability hedging (quoted)
Currency hedging (quoted)
Alternatives (quoted)
Cash and cash equivalents
Fair value of scheme assets
Net assets/(liabilities) recognised on the Balance Sheet:
Present value of funded obligations
Fair value of scheme assets
Surplus/(deficit) in funded scheme and net asset/(liability) on the Balance Sheet
As at
30 September
2017
2.60%
3.30%
2.30%
3.30%
3.20%
As at
30 September
2016
2.20%
3.10%
2.10%
3.10%
3.00%
88.6 years 88.7 years
89.6 years 89.9 years
89.9 years 90.4 years
91.1 years 91.7 years
2017
£'000
47,890
21,786
15,868
(235)
939
17,134
2,958
106,340
2016
£'000
31,444
24,813
13,165
9,364
6
13,401
13,240
105,433
2017
£'000
(101,853)
106,340
4,487
2016
£'000
(112,385)
105,433
(6,952)
Reconciliation of opening and closing balances of the present value of the defined benefit pension scheme obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Contributions by scheme participants
Net remeasurement (gains)/losses – demographic
Net remeasurement (gains)/losses – financial
Net remeasurement (gains) – experience
Benefits paid
Benefit obligation at end of year
114
2017
£'000
112,385
–
2,433
–
(2,036)
(5,555)
(1,850)
(3,524)
101,853
2016
£'000
84,780
–
3,168
–
358
29,011
(2,105)
(2,827)
112,385
Brewin Dolphin
Annual Report 2017
Reconciliation of opening and closing balances of the fair value of plan assets
Fair value of plan assets at beginning of year
Interest income on scheme assets
Return on assets, excluding interest income
Contributions by employers
Contributions by scheme participants
Benefits paid
Fair value of scheme assets at end of year
The amounts recognised in the Income Statement are:
Service cost
Net interest on the net defined benefit asset/liability
Settlements and curtailments
Total expense
Remeasurements of the net defined benefit asset/liability included in Other Comprehensive Income ('OCI')
Net remeasurement – demographic
Net remeasurement – financial
Net remeasurement – experience
Return on assets, excluding interest income
Changes in the effect of the asset ceiling excluding interest income
Total remeasurement of the net defined benefit asset/(liability) included in OCI
2017
£'000
105,433
2,314
(883)
3,000
–
(3,524)
106,340
2016
£'000
81,911
3,116
20,233
3,000
–
(2,827)
105,433
2017
£'000
–
119
–
119
2017
£'000
2,036
5,555
1,850
(883)
–
8,558
2016
£'000
–
52
–
52
2016
£'000
(358)
(29,011)
2,105
20,233
–
(7,031)
Amount, timing and uncertainty of future Scheme cash flows
The liabilities of the Scheme are based on the current value of expected benefit payment cash flows to members of the Scheme
over the next sixty years or so. The weighted average duration of the liabilities is approximately twenty years.
Sensitivity analysis
A sensitivity analysis of the principal assumptions used to measure the Scheme's defined benefit pension scheme obligation as at
30 September 2017 is set out below. The sensitivities cover the key assumptions disclosed above. The inflation assumption
sensitivity factors in the impact of changes to RPI inflation which will impact on future expectations of increases in final pensionable
salary (which are capped at RPI increases), and pension increases and CPI inflation. It should be noted that the methodology and
assumptions prescribed for the purposes of IAS 19 mean that the disclosures will be inherently volatile, varying greatly according to
investment market conditions at each accounting date.
Assumption
Discount rate
Rate of inflation (RPI, CPI and salary increases)
Assumed life expectancy
Change in assumption
Decrease by 0.25%
Increase by 0.25%
Members live 1 year longer
Impact on scheme liabilities
Increase by £5.2m
Increase by £3.8m
Increase by £4.3m
The sensitivity figures have been calculated using the same method used for the calculation of the disclosed liabilities as at
30 September 2017. There are no material limitations of the method used to calculate the sensitivities relative to the
disclosed liabilities.
Brewin Dolphin
www.brewin.co.uk
115
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
19. Net deferred tax asset
Group
In addition to the amount debited to the Income Statement, deferred tax relating to the actuarial gain in the defined benefit pension
scheme amounting to £1,383,000 has been debited to other comprehensive income (2016: £1,109,000 credited to other
comprehensive income relating to the actuarial loss). Deferred tax on share-based payments of £1,065,000 has been credited to
profit and loss reserves (2016: £221,000 debited to profit and loss reserves).
The following are the major deferred tax assets/(liabilities) recognised by the Group and movements thereon during the current and
prior reporting year:
At 30 September 2015
Credit/(charge) in the year to the Income
Statement
Credit in the year to the Statement of
Comprehensive Income
Charge in the year to the Statement of
Changes in Equity
At 30 September 2016
Credit/(charge) in the year to the Income
Statement
Credit/(charge) in the year to the
Statement of Comprehensive Income
Credit in the year to the Statement of
Changes in Equity
At 30 September 2017
Capital
allowances
£'000
1,936
Revaluation
£'000
–
Other
short-term
timing
differences
£'000
1,908
Defined
pension
benefit
scheme
£'000
574
Share-
based
payments
£'000
5,117
Capital
losses
£'000
1,537
Intangible
asset
amortisation
£'000
(467)
Total
£'000
10,605
(210)
–
–
1,726
(157)
–
–
1,569
–
6
–
6
–
14
–
20
(665)
(501)
396
(1,537)
(1,183)
(3,700)
–
1,109
–
–
1,243
–
1,182
(221)
5,292
(342)
(562)
(204)
–
(1,383)
–
–
901
–
(763)
1,065
6,153
–
–
–
–
–
–
–
–
1,115
–
(1,650)
(221)
7,799
513
(752)
–
(1,369)
–
(1,137)
1,065
6,743
Deferred income taxes are calculated using rates of UK corporate tax expected to be in force at the time assets are realised
as follows:
Between 1 April 2017 and 31 March 2020
After 1 April 2020
19%
17%
The enacted rate applicable for the year ended 30 September 2016 was 20%.
20. Investments
Group
Available-for-sale investments
At 30 September 2015
Additions
Net loss from changes in fair value recognised in equity
Disposals
At 30 September 2016
Additions
Net loss from changes in fair value recognised in equity
Disposals
At 30 September 2017
116
Unlisted
investments
£'000
140
770
(30)
(47)
833
18
(75)
(40)
736
Brewin Dolphin
Annual Report 2017
Current assets
Available-for-sale investments
– Equity
– Asset-backed security
Total available-for-sale investments
2017
£'000
2016
£'000
95
641
736
128
705
833
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. Further information is disclosed in note 28.
Trading investments
Listed investments
Total trading investments
2017
£'000
36
36
2016
£'000
1,093
1,093
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. During the year most of the listed trading
investments held at fair value through the profit and loss were sold.
21. Cash and cash equivalents
Group
Cash and cash equivalents
Company
Cash and cash equivalents
2017
£'000
169,995
169,995
2016
£'000
170,766
170,766
2017
£'000
433
433
2016
£'000
686
686
Cash and cash equivalents comprises cash at banks. The carrying amount of these assets is approximately equal to their fair value.
22. Trade and other payables
Group
Trade creditors
Other creditors
Other taxes and social security
Accruals
Deferred income
Company
Accruals
Deferred income
Amounts payable to subsidiary undertakings
2017
£'000
173,657
2,931
9,973
58,566
182
245,309
2017
£'000
63
3,303
7,334
10,700
2016
£'000
154,147
4,529
8,488
54,479
302
221,945
2016
£'000
22
4,957
7,334
12,313
Trade creditors relate to either market or client transactions; the date for settlement is determined when the trade is booked.
Other payable balances principally comprise amounts outstanding for ongoing costs.
Brewin Dolphin
www.brewin.co.uk
117
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
23. Provisions
Group
At 1 October 2016
Additions
Utilisation of provision
Unwinding of discount
Unused amounts reversed during the year
At 30 September 2017
Sundry claims
and associated
costs
£'000
1,022
365
(171)
–
(629)
587
Onerous
contracts
£'000
4,308
2,047
(996)
30
(22)
5,367
Social security
and levies on
share options
£'000
2,431
1,826
(743)
–
(40)
3,474
Incentivisation
awards
£'000
–
613
–
9
–
622
Leasehold
dilapidations
£'000
1,936
153
(31)
19
(33)
2,044
Total
£'000
9,697
5,004
(1,941)
58
(724)
12,094
Included in current liabilities
Included in non-current liabilities
At 30 September 2017
587
–
587
904
4,463
5,367
1,589
1,885
3,474
622
–
622
53
1,991
2,044
3,755
8,339
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 30 September 2017 is solely in respect of surplus office space (30 September 2016: included a
provision for £0.2 million in relation to onerous contracts resulting from discontinued operations). 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.
The onerous lease charge for the year was £2.0 million (2016: £0.3 million) of which £0.6 million related to changes in both
assumptions of sublets and inputs used to calculate the provision. In addition, following a review of office space utilisation of one of
our properties, surplus office space was identified as onerous, resulting in an increase in the provision of £1.3 million.
Provision of £5.4 million (30 September 2016: £4.1 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 £13.4 million as at 30 September 2017 (30 September 2016:
£11.3 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 15.5 years remaining and accounts for £3.7 million of the provision.
The Group has made a provision of £2.0 million (30 September 2016: £1.9 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 15.5 years.
The social security and levies on share options provision is in respect of Employer's National Insurance on options outstanding at
the end of the year. The provision is based on the Group’s share price, the amount of time passed and likelihood of the share
options vesting and represents the best estimate of the expected future cost.
The provision recognised for the incentivisation awards of £0.6 million (30 September 2016: £nil), which is based on the best
estimate of the likely future obligation discounted for the time value of money, is payable to employees in relation to the retention
and acquisition of funds.
See note 4b.v for key sources of estimation uncertainty impacting the provisions.
118
Brewin Dolphin
Annual Report 2017
24. Share capital
Company
Authorised:
Ordinary shares of 1p each
Ordinary shares of 1p each
Allotted, issued and fully paid
During the year the following shares were issued:
2017
No.
2016
No.
2017
£'000
2016
£'000
500,000,000
500,000,000
5,000
5,000
283,331,882
283,026,606
2,833
2,830
At 30 September 2016
Issue of options
At 30 September 2017
Date
Various
No. of shares
283,026,606
305,276
283,331,882
Exercise/issue price
(pence)
103.5p – 175.25p
Share
capital
£'000
2,830
3
2,833
Share
premium
account
£'000
151,836
484
152,320
The following options and awards have been granted and remain outstanding:
Scheme
2004 Approved Share Option Scheme:
Grant date
Exercise
price
2017
No.
Deferred Profit Share Plan1:
Equity Award Plan1:
Long Term Incentive Plan:
November 2006
November 2007
November 2008
December 2009
December 2010
December 2011
175.25p
168p
103.5p
165.7p
148p
131.3p
December 2010
December 2011
December 2012
December 2013
December 2014
December 2015
December 2016
December 2013
December 2014
January 2015
December 2015
February 2017
August 2017
February 2014
December 2014
December 2015
December 2016
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
–
53,976
33,500
112,148
64,557
20,250
284,431
–
326,874
400,913
147,889
2,028,385
2,171,003
1,977,021
7,052,085
–
2,135,691
28,070
240,901
47,908
29,802
2,482,372
–
1,349,835
1,069,468
1,156,915
3,576,218
Total
£'000
154,666
487
155,153
2016
No.
128,676
85,726
50,000
158,998
107,307
61,500
592,207
208,378
563,497
471,383
1,639,527
2,057,563
2,226,832
–
7,167,180
1,666,635
2,321,378
28,070
240,901
–
–
4,256,984
878,653
1,496,791
1,213,519
–
3,588,963
Total options and awards outstanding as at 30 September
13,395,106
15,605,334
1. These options do not count towards dilution limits because the shares have been purchased in the market by the Brewin Dolphin Holdings PLC Employee Share
Ownership Trust.
Brewin Dolphin
www.brewin.co.uk
119
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
24. Share capital (continued)
The rights and obligations attached to the ordinary shares of 1 penny each in the Company are as follows:
– In terms of voting, every member who is present in person or by proxy at a general meeting of the Company shall have one vote
on a show of hands and one vote for every share held on a poll.
– As regards dividends, all shares in issue at the year end rank pari passu for dividends. Shareholders shall be entitled to receive
dividends following declaration by the Company. Dividends are not payable in respect of any nil paid shares that may be held by
the Trustees in Brewin Dolphin Holdings PLC Employee Share Ownership Trust (the ‘Trust’).
– The Trustees of the Brewin Dolphin Holdings PLC Employee Share Ownerships Trust have agreed to waive all dividends due on
the shares held in the Trust, 9,817,002 ordinary shares as at 30 September 2017 (2016: 11,460,043).
– There are no special rights for the ordinary shares in relation to control of the Company.
On a change of control, the following criteria will apply:
– 2004 Approved Share Option Schemes: Options can be exercised within 30 days of control being obtained. The options will
lapse after six months.
– Long Term Incentive Plan: Awards will automatically vest upon change of control and options will become exercisable from the
date of change of control and will remain exercisable for one month, after which the options will lapse.
– Deferred Profit Share Plan: A replacement award could be made over shares in the acquiring company, otherwise the shares will
vest in full and can be exercised within six months of control being obtained.
– Share Incentive Plan: No Matching Shares shall be forfeited as a consequence of a change of control.
– Equity Award Plan: Awards will automatically vest upon change of control and options will become exercisable from the date of
change of control and will remain exercisable for one month, after which the options will lapse.
25. Own shares
Company
The own shares reserve represents the matching shares purchased in the market and held by the Brewin Dolphin Share Incentive
Plan and shares purchased by the Brewin Dolphin Holdings PLC Employee Share Ownership Trust (‘ESOT’).
Balance at 30 September 2015
Acquired in the year
Own shares disposed of on exercise of options
Own shares disposed of
Balance at 30 September 2016
Acquired in the year
Own shares disposed of on exercise of options
Balance at 30 September 2017
Shares held by:
Brewin Dolphin Holdings PLC ESOT
Brewin Dolphin Share Incentive Plan
Balance at 30 September
No. of shares
11,673,927
2,514,334
(2,456,282)
(108,505)
11,623,474
2,080,118
(3,726,126)
9,977,466
2017
No.
£'000
28,153
7,220
(5,853)
(226)
29,294
5,807
(9,180)
25,921
2016
No.
9,817,002 11,460,043
163,431
11,623,474
160,464
9,977,466
120
Brewin Dolphin
Annual Report 2017
26. Other reserves
Merger reserve
The merger reserve is used where more than 90% of the share capital in a subsidiary is acquired and the consideration includes the
issue of new shares by the Company, thereby attracting merger relief under Section 612 of the Companies Act 2006.
Group
Balance at 30 September 2016
Balance at 30 September 2017
Company
Balance at 30 September 2016
Balance at 30 September 2017
£'000
70,553
70,553
£'000
70,838
70,838
£38.4 million of the merger reserve arose on a placing of the Company’s shares and forms part of the distributable reserves.
Profit and loss account
Company
Balance at 30 September 2016
Balance at 30 September 2017
The profit and loss reserve forms part of distributable reserves, subject to the profits being realised.
Revaluation reserve
Group
Balance at 30 September 2016
Balance at 30 September 2017
£'000
29,793
35,485
£'000
(24)
(85)
The revaluation reserve represents the cumulative fair value movements on available-for-sale financial assets recognised in other
comprehensive income and does not form part of distributable reserves.
27. Business combinations
Group
On 10 May 2017, the Group’s principal operating subsidiary Brewin Dolphin Limited acquired 100% of the ordinary share capital of
BDDL Limited (‘BDDL’) formerly named Duncan Lawrie Asset Management Limited (the ‘Acquisition’) and its dormant subsidiary
undertakings DDY Nominees Limited and Dunlaw Nominees Limited.
BDDL and its subsidiaries were acquired to expand the Group’s wealth management activities and contribute to the delivery of the
Group’s strategic objective of revenue growth.
Consideration transferred
The fair value of the total cash consideration transferred was £27,968,000.
Acquisition-related costs amounting to £1,683,000 have been recognised as an expense in the Income Statement in the
current year.
Fair value of the assets acquired and liabilities recognised at the date of acquisition:
Current assets
Cash and cash equivalents
Non-current assets
Intangible assets
Brewin Dolphin
www.brewin.co.uk
£'000
2,468
25,500
27,968
121
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
27. Business combinations (continued)
Net cash outflow arising on acquisition:
Consideration paid in cash
Less: cash and cash equivalent balances acquired
£'000
27,968
(2,468)
25,500
The Acquisition contributed £2,481,000 revenue and £1,476,000 to the Group's profit after tax for the period between the date of
acquisition and the balance sheet date excluding acquisition costs.
It is not practicable to estimate the revenue and profit or loss of the combined entity for the current reporting year as though the
acquisition date for BDDL had been as of the beginning of the annual reporting period.
BDDL transferred the rights to the income streams to Duncan Lawrie Limited (‘DLL’), the former parent company, as part of a group
reorganisation in December 2013. From this date to the date of acquisition by the Group, any revenues and profit or loss
associated with the client agreements were recognised in DLL’s financial statements. There is no way of identifying revenue and
profit specific to BDDL recognised in the financial statements of DLL for the period from 1 October 2016 to the acquisition date.
In the opinion of the Directors’ disclosing an estimate of the BDDL’s revenue and profit or loss for this year would be misleading and
would not present a true and fair view of BDDL’s performance.
28. Financial instruments and risk management
Group and Company
Overview
This note presents information about the Group’s exposure to each of the financial instrument key risks (market risk, credit risk
and liquidity risk), the Group’s policy and procedures for measuring and managing risk and the Group’s management of capital.
Risk management
The Board of Directors has overall responsibility for establishing and overseeing the Group’s Risk Management Framework and
risk appetite.
The Board has established a clear relationship between the Group’s strategic objectives and its willingness to take risk through a
Risk Appetite Statement. The Risk Appetite Statement is an expression of limits (qualitative and/or quantitative) giving clear
guidance on the nature and quantum of risk that the Board wishes the Group to bear (its ‘risk appetite’) in order to achieve its
strategic objectives whilst remaining within all regulatory constraints and its own defined levels of capital and liquidity. The Board
reviews the statement and related qualitative and quantitative measures on at least an annual basis to ensure the document
continues to reflect the Board’s appetite for risk within the context of the environment in which the Group operates.
The Group’s Risk Committee provides oversight of the adequacy of the Group’s Risk Management Framework based on the risks
to which the Group is exposed. It monitors how management complies with the Group’s risk management policies and procedures.
It is assisted in the discharge of this duty by the Group’s Risk & Compliance Department which has responsibility for monitoring the
overall risk environment of the Group. The Risk Committee also regularly monitors exposure against the Group’s risk appetite.
The Group’s Audit Committee is responsible for overseeing the financial statements and working closely with the Risk Committee,
for both review and oversight of internal controls. The Audit Committee is assisted in the discharge of its obligations by Internal
Audit, who undertake periodic and ad-hoc reviews on the effectiveness of controls and compliance with risk management policies.
The Group’s risk management policies are intended to ensure that risks are identified, evaluated and subject to ongoing monitoring
and mitigation (where appropriate). The risk management policies also serve to set the appropriate control framework. The aim is to
promote a robust risk culture with employees across the Group understanding their role and obligations under the framework.
Capital structure and capital management
The capital structure of the Group and Company consists of issued share capital, reserves and retained earnings as disclosed in
the Consolidated and Company Statement of Changes in Equity.
Capital generated from the business is both reinvested in the business to generate future growth and returned to shareholders,
principally in the form of dividends. Capital adequacy is given a high level of focus to ensure not only that regulatory capital
122
Brewin Dolphin
Annual Report 2017
requirements are met, but that the Group is sufficiently capitalised against the risks to which it is currently exposed, as well as to
withstand a range of potential stress events.
There were no changes in the Group’s approach to capital management during the year.
Regulatory capital requirements
The Group conducts an Internal Capital Adequacy Assessment Process (‘ICAAP’), as required by the Financial Conduct Authority
(‘FCA’) to assess the appropriate amount of regulatory capital to be held by the Group. There are two active regulated entities in the
Group: Brewin Dolphin Limited (‘BDL’) regulated by the FCA and Tilman Brewin Dolphin Limited regulated by the Central Bank of
Ireland. The Jersey branch of BDL is regulated by the Jersey Financial Services Commission.
The Pillar II capital assessment of the ICAAP is the Board of Directors’ opinion of the level of capital the Group should hold against
the risks to which the Group is exposed. The ICAAP is kept updated throughout the year to take account of changes to the profile
of the risks facing the Group and for any material changes to strategy or business plans. The ICAAP is discussed and approved at
a Brewin Dolphin Holdings PLC Board meeting at least annually.
Regulatory capital adequacy is monitored by management. The Group uses the standardised approach to credit risk to calculate
Pillar I requirements. The Group complied with the FCA’s regulatory capital requirements throughout the year.
The regulatory capital resources of the Group were as follows:
Share capital
Share premium account
Own shares
Revaluation reserve
Merger reserve
Profit and loss account
Regulatory capital resources before deductions
Deduction – Intangible assets (net of deferred tax liability)
Deduction – Defined benefit pension scheme asset (net of deferred tax liability)
Deduction – Free deliveries
Total regulatory capital resources after deductions at 30 September
2017
£'000
2,833
152,320
(25,921)
(85)
70,553
62,876
262,576
(93,519)
(3,724)
(107)
165,226
2016
£'000
2,830
151,836
(29,294)
(24)
70,553
46,908
242,809
(78,746)
–
(82)
163,981
Information disclosure under Pillar III of the Capital Requirements Directive will be published on the Group’s website before
31 December 2017 at www.brewin.co.uk.
Significant accounting policies
Details of the significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of each financial asset and financial liability, are disclosed in note 3(r) to the
financial statements.
Categories of financial instruments
Group
Financial assets
Available-for-sale investments
Fair value through profit and loss – held for trading
Non-current loans and receivables
Current loans and receivables
Cash and cash equivalents
At 30 September
Financial liabilities
Amortised cost
At 30 September
Brewin Dolphin
www.brewin.co.uk
Carrying value
2017
£'000
2016
£'000
736
36
200
235,506
169,995
406,473
833
1,093
307
209,528
170,766
382,527
225,865
225,865
203,791
203,791
123
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
28. Financial instruments and risk management (continued)
Company
Financial assets
Non-current loans and receivables
Current loans and receivables
Cash and cash equivalents
At 30 September
Financial liabilities
Amortised cost
At 30 September
Carrying value
2017
£'000
2016
£'000
–
53,802
433
54,235
50
46,151
686
46,887
7,397
7,397
7,356
7,356
The carrying value approximates to the fair value of the financial assets and liabilities held.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the
Group’s income or the value of its holdings of financial instruments. The objective of the Group’s market risk management is to both
control and manage exposure within the Group’s risk appetite whilst accepting the inherent risk of market fluctuations.
The Group undertakes trades on an agency basis on behalf of its clients. The Group holds financial instruments as principal,
but does not trade as principal. All trades are matched in the market (see note 17).
The Group transacts foreign currency deals in order to fulfil our client obligations and any non-sterling costs to our business.
Foreign currency exposure is matched intra-day and at the end of each day.
The total net foreign exchange exposure resulting from income yet to be converted to sterling at the year end was a debtor of
£497,000 (2016: £537,000).
The Group is exposed to translation risk in respect of the foreign currency value of the net assets of Tilman Brewin Dolphin Limited
(‘TBD’). At the year end TBD had net assets of £4.3 million (2016: £3.6 million) denominated in its local currency (Euros).
The Group does not hold any derivatives (2016: none).
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk
during the year.
Equity price risk
The Group is exposed to equity price risk arising from both available-for-sale and held-for-trading investments.
Equity price sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity price risk at the reporting date.
If equity prices had been 5% higher/lower:
– Pre-tax profit for the year ended 30 September 2017 would have been £1,800 higher/lower (2016: £52,000 higher/lower) due to
changes in the value of held-for-trading investment; and
– Other equity reserves as at 30 September 2017 would increase/decrease by £4,800 (2016: increase/decrease by £6,400)
pre-tax for the Group as a result of the changes in fair value of available-for-sale investments.
The Group’s sensitivity to equity prices has not changed significantly from the prior year.
Interest rate risk
The Group is exposed to interest rate risk in respect of the Group’s cash and in respect of client deposits. The Group holds client
deposits on demand and in 30 day notice accounts (variable interest rates). During the year a 1% increase in base rate would have
increased pre-tax profitability by £1,044,000 (2016: £1,068,000).
Credit risk
Credit risk refers to the risk that a client or other counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group’s exposure to credit risk arises principally from the settlement of client and market transactions
(‘settlement risk’) and cash deposited at banks.
124
Brewin Dolphin
Annual Report 2017
Settlement risk
Exposures to settlement risk are spread across a large number of counterparties and clients. A delivery versus payment (‘DVP’)
settlement method is also used for the majority of transactions, ensuring that securities and cash are exchanged within a short
period of time. Consequently, no residual maturity analysis is presented. The Group also holds collateral in the form of cash, as well
as equity and bonds which are quoted on recognised exchanges. This collateral is held, principally, in Group nominee accounts.
Concentration of credit risk
The Group has no significant concentration of credit risk with the exception of cash where the majority is spread across three major
banking groups.
Maximum exposure
The maximum exposure to credit risk at the end of the reporting year is equal to the balance sheet figure.
Credit exposure
Credit exposure in relation to settlement risk is monitored daily. The Group’s exposure to large trades is limited with an average
bargain size in the current year of £15,702 (2016: £15,765).
Impaired assets
The total gross amount of individually impaired assets in relation to trade receivables at the year end was £228,000
(2016: £83,000). Collateral valued at fair value by the Group in relation to these impaired assets was £190,000 (2016: £50,000).
This collateral is stock held in the clients’ account which per our client terms and conditions can be sold to meet any unpaid
liabilities falling due. The net difference has been provided as a doubtful debt (see note 17). Note 17 details amounts past due but
not impaired.
Non-impaired assets
Financial assets that are neither past due nor impaired in respect of trade receivables relate mainly to bonds and equity trades
quoted on a recognised exchange, are matched in the market, and are either traded on a DVP basis or against a client’s portfolio in
respect of which any one trade would normally be a small percentage of the client’s collateral held in the Group nominee. At the
year end no financial assets that would otherwise be past due or impaired had been renegotiated (2016: none).
Loans to employees are repayable over 5 to 10 years (see note 17).
The credit risk on liquid funds, cash and cash equivalents is limited as deposits are diversified across a panel of major banks.
This ensures that the Group is not excessively exposed to an individual counterparty. The Group’s policy requires cash deposits to
be placed with banks with a minimum short-term credit rating of A-2 (S&P) / P-2 (Moody’s) / F-2 (Fitch), excluding Tilman Brewin
Dolphin Limited. Requirements and limits are reviewed on a regular basis. The Group’s allocation of cash and cash equivalents to
S&P rating grades has been outlined in the below table:
Cash and cash equivalents
A-1+
0.0%
A-1
59.4%
A-2
38.1%
Below A-2
2.5%
The Group maintains a set of Credit Risk policies which are regularly reviewed by the Board. A due diligence review is also
performed on all counterparties on an annual basis, at a minimum. The investment of cash is managed by the Treasury Department.
There has been no material change to the Group’s exposure to credit risk during the year.
Liquidity risk
Liquidity risk refers to the risk that the Group will be unable to meet its financial obligations as they fall due. The Group maintains
adequate cash resources to meet its financial obligations at all times. When investing cash belonging to the Group or its clients,
the focus is on security of principal and the maintenance of liquidity. Client money is held in segregated client bank accounts with
strict limits on deposit tenors, in accordance within regulatory guidelines designed to minimise liquidity risk.
The Group has a Liquidity Policy which is reviewed by the Board regularly. The Group’s intention, at all times is to operate with an
amount of liquid resources which provides significant headroom above that required to meet its obligations. Group cash resources
are monitored on a daily basis through position reports and liquidity requirements are analysed over a variety of forecast horizons.
Liquidity stress tests are regularly conducted to ensure ongoing liquidity adequacy, and a Contingency Funding Plan is also
maintained to provide backup liquidity in the unlikely event of a severe liquidity stress event.
At 30 September 2017, the Group had access to an unsecured overdraft facility of £10 million (2016: £10 million).
There has been no change to the Group’s exposure to liquidity risk or the manner in which it manages and measures the risk during
the year.
Brewin Dolphin
www.brewin.co.uk
125
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
28. Financial instruments and risk management (continued)
Group
The following are the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required
to pay.
As at 30 September 2017
Financial liabilities
Amortised cost
As at 30 September 2016
Financial liabilities
Amortised cost
Up to
1 month
£'000
1 month to
3 months
£'000
3 months
to 1 year
£'000
1 to 5 years
£'000
Over 5 years
£'000
Total
£'000
179,711
179,711
29,885
29,885
15,612
15,612
657
657
–
–
225,865
225,865
Up to
1 month
£'000
1 month to
3 months
£'000
3 months
to 1 year
£'000
1 to 5 years
£'000
Over 5 years
£'000
Total
£'000
164,097
164,097
25,554
25,554
13,078
13,078
1,062
1,062
–
–
203,791
203,791
Company
The following are the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be
required to pay.
As at 30 September 2017
Financial liabilities
Amortised cost
As at 30 September 2016
Financial liabilities
Amortised cost
Up to
1 month
£'000
1 month to
3 months
£'000
3 months
to 1 year
£'000
1 to 5 years
£'000
Over 5 years
£'000
Total
£'000
7,397
7,397
–
–
–
–
–
–
–
–
7,397
7,397
Up to
1 month
£'000
1 month to
3 months
£'000
3 months
to 1 year
£'000
1 to 5 years
£'000
Over 5 years
£'000
Total
£'000
7,356
7,356
–
–
–
–
–
–
–
–
7,356
7,356
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).
126
Brewin Dolphin
Annual Report 2017
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 year. The following table
gives information about how the fair values of these financial assets and liabilities are determined.
Fair value as at
30 September
2017
£'000
Fair value as at
30 September
2016
£'000
Valuation
technique(s) and
key input(s)
Significant
unobservable
input(s)
Relationship
of unobservable
inputs to fair value
Level 1
Trading investments
Level 3
Available-for-sale
investments – Equity
Available-for-sale
investments – Equity
Available-for-sale
investments – Asset-
backed securities
36
63
32
1,093 Quoted bid prices in an
active market
n/a
n/a
Marketability
discount up to
30%.
Marketability
discount ranging
between 30-50%.
As the marketability
discount increases
the valuation
decreases.
As the marketability
discount increases
the valuation
decreases.
105 The valuation is based on
published monthly NAVs.
23 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.
641
705 The valuation is based on
the fair value of the loan
notes as presented in the
most recent audited financial
statements of the
designated company.
A marketability discount is
applied as this investment is
highly illiquid.
Marketability
discount ranging
between 30-50%.
As the marketability
discount increases
the valuation
decreases.
Sensitivity analysis
A sensitivity analysis of the significant unobservable inputs used in valuing the Level 3 financial instruments is set out below:
Financial asset
Current assets – Available-for-sale
investments – Equity
Current assets – Available-for-sale
investments – Asset-backed securities Marketability discount
Marketability discount
Assumption
Change in assumption
Impact on valuation
Increase by 5%
Decrease by £5,600
Increase by 5%
Decrease by £49,000
Brewin Dolphin
www.brewin.co.uk
127
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
28. Financial instruments and risk management (continued)
Fair value hierarchy
As at 30 September 2017
Held for trading
Equities
Available-for-sale financial assets
Equities
Asset-backed securities
Total
As at 30 September 2016
Held for trading
Equities
Available-for-sale financial assets
Equities
Asset-backed securities
Total
Reconciliation of Level 3 fair value measurement of financial assets
Available-for-sale financial assets
Balance at 30 September 2015
Disposals
Net loss from changes in fair value recognised in equity
Additions
Balance at 30 September 2016
Disposals
Net loss from changes in fair value recognised in equity
Additions
Balance at 30 September 2017
Level 1
£'000
Level 2
£'000
Level 3
£'000
Total
£'000
36
–
–
36
–
–
–
–
–
95
641
736
36
95
641
772
Level 1
£'000
Level 2
£'000
Level 3
£'000
Total
£'000
1,093
–
–
1,093
–
–
–
–
–
1,093
128
705
833
128
705
1,926
Total
£'000
140
(47)
(30)
770
833
(40)
(75)
18
736
128
Brewin Dolphin
Annual Report 2017
29. Share-based payments
Group
The Group recognised total expenses in the year of £8,052,000 (2016: £8,387,000) related to equity-settled share-based payment
transactions. For a summary of all options and awards outstanding at the year end see note 24.
Equity-settled share option schemes
The Group has one plan, the 2004 Approved Option Scheme (‘the Scheme’), for the granting of non-transferable options to
employees. All options granted have fully vested and the services received from employees entitled to options under the Scheme
have been fully expensed.
Other equity settled share-based payment plans
Long Term Incentive Plan (‘LTIP’)
The LTIP is a conditional arrangement under which contingent share awards can be made to selected senior management,
including the Executive Directors. Details regarding the awards to the Executive Directors are set out in the Remuneration Report.
The award will vest in one tranche, no earlier than three years from the grant date. Vesting will be subject to performance conditions
which are set prior to each grant by the Remuneration Committee. The performance conditions will be related to the financial
performance of the Group.
During 2017, the Group granted 1,226,504 LTIP awards which have an aggregate fair value of £2,968,000 at the date of grant.
The Black-Scholes model is used to fair value the LTIP at the date of grant. The inputs into the Black-Scholes model used for the
purposes of determining fair value were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life (yrs)
Risk free rate
Expected dividend yield
287.4p
0.0p
35.00%
3
0.76%
5.70%
Share Incentive Plan (‘SIP’)
Employees may use funds from their gross salary up to a maximum of 10% of their gross salary in monthly payments (being not
less than £10 and not greater than £150) to acquire ordinary shares in the Company (‘Partnership Shares’). Partnership Shares are
acquired monthly with an annual opportunity to top up contributions to the maximum annual limit of £1,800 (or 10% of salary if
lower). For every Partnership Share purchased, the employee receives one matching share up to a total value of £20 per month.
All shares to date awarded under this scheme have been purchased in the market monthly; it is the intention of the Directors to
continue this policy in the year to September 2018.
Deferred Profit Share Plan (‘DPSP’)
The DPSP provides for eligible employees to defer part of their annual profit share entitlement into an award over ordinary shares
(an ‘Award’). Current policy is that employees receiving annual profit share in excess of £50,000 are required to defer 33% of any
profit share in excess of this amount for a period of three years. Additional deferral requirements apply to Executive Directors which
are set out in the Directors’ Remuneration Report. Awards are generally in the form of nil cost options to acquire ordinary shares,
although at the discretion of the Committee they may also take the form of a conditional right to receive ordinary shares. Awards in
the form of mandatory deferrals made to the employees who leave the Group at any time prior to vesting lapse unless the
employee leaves as a result of good leaver provisions. It is the intention of the Board to recommend our Trustees to purchase the
shares in the market to satisfy options awarded under this scheme in order to avoid dilution in the year to September 2018.
During 2017, the Group granted 2,031,053 DPSP options which have an aggregate fair value of £5,837,000 at the date of grant.
Equity Award Plan (‘EAP’)
The EAP is a discretionary arrangement under which contingent share awards can be made to selected employees within the
Group below Board level, for example to reward exceptional performance on behalf of the Group or in certain circumstances to aid
key staff retention. Awards are generally in the form of conditional share awards, although at the discretion of the Committee they
may also take the form of share options. Awards will normally vest three years after grant subject to continued service provisions.
Awards will only be capable of being satisfied with existing shares sourced via the Company’s employee benefit trust. No newly
issued shares and/or treasury shares can be used under the EAP. Only non-director employees are eligible for selection to
participate in the plan.
During 2017, the Group granted 77,710 EAP awards which have an aggregate fair value of £254,000 at the date of grant.
Brewin Dolphin
www.brewin.co.uk
129
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements continued
30. Operating lease arrangements
Group
The Group recognised operating leases payments as an expense in the year as follows:
Lease payments
2017
2016
Land and
buildings
£'000
6,700
6,700
Hire of
equipment
£'000
273
273
Land and
buildings
£'000
5,921
5,921
Hire of
equipment
£'000
247
247
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Amounts payable under operating leases:
Within one year
In the second to fifth years inclusive
After five years
2017
2016
Land and
buildings
£'000
Hire of
equipment
£'000
Land and
buildings
£'000
Hire of
equipment
£'000
7,143
25,279
17,968
50,390
233
–
–
233
7,144
25,367
22,377
54,888
233
233
–
466
The Group has significant operating lease arrangements with respect to the premises it occupies. Hire of equipment is in relation to
multifunctional printers.
The calculation of the future operating lease commitments has certain assumptions based on whether or not the Group expects to
exercise break options. If these assumptions are removed and it is assumed that the Group will remain in all properties until the
lease end date, the total commitment is £58.7 million (2016: £64.1 million).
As at 30 September 2017, there was £3.6 million (2016: £4.0 million) of future minimum sublease payments expected to be
received under non-cancellable subleases. These expected future sublease receipts have been deducted in arriving at the onerous
contracts provision (see note 23).
31. Contractual commitments
Group
Capital expenditure authorised and contracted for at 30 September 2017 but not provided in the financial statements amounted to
£3.8 million (2016: £nil).
130
Brewin Dolphin
Annual Report 2017
32. Notes to the Cash Flow Statement
Group
Operating profit from continuing operations
Profit from discontinued operations
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets – client relationships
Amortisation of intangible assets – software
Impairment of intangible assets and tangible assets
Profit on disposal of discontinued operation
Loss on disposal of fixed assets
Defined benefit pension scheme
Share-based payment expense
Translation adjustments
Interest income
Interest expense
Operating cash flows before movements in working capital
Increase/(decrease) in payables and provisions
(Increase)/decrease in receivables and trading investments
Cash generated by operating activities
Tax paid
Net cash inflow from operating activities
Company
Operating profit
Operating cash flows before movements in working capital
Increase/(decrease) in payables
(Increase)/decrease in receivables and trading investments
Cash generated by operating activities
Tax paid
Net cash inflow from operating activities
33. Post balance sheet events
Group and Company
There have been no post balance sheet events.
2017
£'000
57,668
–
1,917
6,650
5,200
–
–
40
(3,000)
8,052
40
161
(11)
76,717
25,662
(25,011)
77,368
(9,905)
67,463
2017
£'000
43,434
43,434
41
(7,601)
35,874
–
35,874
2016
£'000
49,743
14,030
3,505
6,287
4,441
680
(14,000)
–
(3,000)
8,387
(8)
514
(65)
70,514
(45,478)
35,910
60,946
(8,913)
52,033
2016
£'000
29,885
29,885
(14)
3,156
33,027
(525)
32,502
Brewin Dolphin
www.brewin.co.uk
131
Strategic ReportGovernanceFinancial StatementsOther Information Notes to the Financial Statements continued
34. Related party transactions
Group
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
The primary statements of the Company include amounts attributable to subsidiaries. These amounts have been disclosed in
aggregate in the relevant notes to the financial statements of the Company and in detail in the following table:
Bell Lawrie White & Co. Limited
Brewin Dolphin Limited
Brewin Broking Limited
Amounts owed
by related parties
Amounts owed
to related parties
2017
£’000
–
53,802
–
53,802
2016
£’000
–
46,151
–
46,151
2017
£’000
2,434
–
4,900
7,334
2016
£’000
2,434
–
4,900
7,334
All amounts owed by related parties are interest free and repayable on demand.
The only effect of related party transactions on the profit and loss of the Company was in respect of dividends. The Company
received dividends of £42,500,000 (2016: £30,000,000) from Brewin Dolphin Limited and £976,800 (2016: £nil) from Tilman Brewin
Dolphin Limited.
The Group companies did not enter into any transactions with related parties who are not members of the Group during the year,
save as disclosed elsewhere in these financial statements.
All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received.
No provisions have been made for doubtful debts in respect of the amounts owed by related parties.
Remuneration of key management personnel ('KMP')
Key management personnel are responsible for planning, directing and controlling the activities of the Group. Key management
personnel for the Group have been determined to be the Directors and members of the Executive Committee.
The remuneration expense for key management personnel is as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments:
Lapses where KMP have left the Group
Continuing KMP
2017
£’000
4,999
37
–
(331)
1,254
5,969
20161
£’000
4,877
10
162
(54)
974
5,969
1. The members of the Executive Committee were considered to be key management personnel from January 2016.
The remuneration of individual Directors is set out in the Directors’ Remuneration Report on page 58 in addition to the
disclosure above.
A number of the Group’s key management personnel and their close family members make use of the services provided by
companies within the Group. Charges for such services are made at various staff rates.
Directors’ transactions
There are no contracts, loans to Directors or other related party transactions with Directors.
132
Brewin Dolphin
Annual Report 2017
Five Year Record – continuing operations (unaudited)
Revenue
Other operating income
Income
Staff costs
Other operating costs
Exceptional items
FSCS levy
Redundancy costs
Onerous contracts
Impairment of intangible assets
Licence provision
One-off migration costs
Acquisition costs
Incentivisation awards
Amortisation of intangible assets – client relationships
Operating expenses
2017
£'000
303,896
568
304,464
2016
£'000
280,484
1,866
282,350
2015
£'000
280,196
3,495
283,691
2014
£'000
275,316
5,443
280,759
2013
£'000
271,954
11,724
283,678
(162,689)
(71,766)
(152,175)
(69,458)
(152,982)
(68,975)
(147,345)
(76,066)
(148,974)
(83,418)
–
(742)
(1,969)
–
–
–
(1,683)
(1,297)
(6,650)
(246,796)
–
(2,780)
(311)
–
–
(1,596)
–
–
(6,287)
(232,607)
1,160
(2,432)
(433)
–
–
–
–
–
(9,219)
(232,881)
–
(2,269)
(2,005)
(31,693)
(2,034)
–
–
–
(13,592)
(275,004)
(1,107)
(4,795)
(6,232)
–
–
–
–
–
(12,520)
(257,046)
Operating profit
Net finance (expense)/income and other gains and losses
Profit before tax
Tax
Profit attributable to equity shareholders of the parent from
continuing operations (except 2013)
57,668
(25)
57,643
(12,490)
49,743
319
50,062
(11,095)
50,810
10,190
61,000
(12,729)
5,755
1,003
6,758
(1,362)
26,632
1,768
28,400
(7,257)
45,153
38,967
48,271
5,396
21,143
Dividend per share
15.0p
13.0p
12.0p
9.9p
8.6p
Adjusted1 earnings per share
From continuing operations before exceptional items listed above.
Basic
Adjusted1 diluted
1. See note 13 to the Financial Statements.
20.5p
19.6p
17.7p
16.8p
18.0p
17.1p
17.0p
16.0p
15.7p
14.8p
Brewin Dolphin
www.brewin.co.uk
133
Strategic ReportGovernanceFinancial StatementsOther Information
Appendix – calculation of KPIs
Revenue growth
1. Discretionary funds inflows are calculated from the Group’s
client database. The growth in net inflows is derived from the
total new client accounts opened, closed or transferred
between services categories during the year. Net inflows of
£2.3 billion over the opening discretionary funds value of
£28.8 billion show an increase of 8.0%.
2. Discretionary service yield is calculated as total
discretionary commission and fee income over the average
funds for the year. Total discretionary income in 2017 of
£258.8 million (2016: £234.5 million) from average
discretionary funds of £32.0 billion (2016: £26.8 billion) results
in a 81 bps (2016: 88 bps) yield.
Improved efficiency
3. Adjusted1 PBT margin is calculated by taking the adjusted1
profit before tax of £70.0 million in 2017 (2016: £61.0 million)
over the total income of £304.5 million (2016: £282.4 million)
resulting in an adjusted1 PBT margin of 23.0% (2016: 21.6%).
4. Discretionary funds per CF30 of £75 million
(2016: £64 million) is based on the total of discretionary funds
excluding MPS over the total number of registered CF30s
(Investment Managers and Financial Planners) for the Group
of 418 (2016: 427)
5. Average client portfolio size is calculated by dividing the
total discretionary and managed advisory funds by the
number of clients.
Capital sufficiency
6. Capital adequacy ratio is calculated by dividing regulatory
capital resources over the assessment of regulatory capital
requirements see note 28 to the Financial Statements.
Dividend growth
7. Adjusted1 earnings per share growth rate of 17%
(2016: -2%) shows the change in diluted earnings per share
from 16.8p in 2016 to 19.6p in 2017.
8. Dividend growth, the total dividend paid by the Group
in 2017 is 15.0p (2016: 13.0p), a growth rate of 15.4%
(2016: 8.3%).
1. Excluding redundancy cost, onerous contracts, amortisation of client
relationships, acquisition costs, incentivisation awards, one-off migration costs
and disposal of available-for-sale investments.
134
Brewin Dolphin
Annual Report 2017
Shareholder Information
Investor information
Visit our website, www.brewin.co.uk for investor information
and Company news. In addition to accessing financial data,
you can view and download Annual and Half Year Reports,
analyst presentations and access the best of our research and
investment views, plus lifestyle news and interviews.
You can also subscribe to an email news alert service to
automatically receive an email when significant announcements
are made.
Shareholding information
Please contact our registrars, Equiniti, directly for all enquiries
about your shareholding. Visit their Investor Centre website
www.shareview.co.uk for online information about your
shareholding (you will need your shareholder reference number
which can be found on your share certificate or dividend tax
voucher), or telephone the registrars direct: 0371 384 2237 or
+ 44 (0) 121 415 7047.
Dividend mandate
Shareholders can arrange to have their dividends paid directly
into their bank or building society account by completing a bank
mandate form. The advantages to using this service are: the
payment is more secure than sending a cheque through the
post; it avoids the inconvenience of paying in a cheque; and
there is no risk of lost, stolen or out-of-date cheques.
A mandate form can be obtained from Equiniti or you will find one
on the reverse of the tax voucher of your last dividend payment.
Electronic communications
Shareholders have previously passed a resolution enabling
Brewin Dolphin to take advantage of provisions in the
Companies Act 2006 that allow us to supply documents such
as the Annual Report and Accounts to our shareholders via our
website www.brewin.co.uk. This helps to reduce the cost and
environmental impact of producing and distributing printed
documents. Shareholders that wish to continue to receive
shareholder documents in hard copy can request this by
writing to the registrar, Equiniti.
All shareholder communications, including the Company’s
Annual Report and Accounts, are made available to
shareholders on the Brewin Dolphin website and you may opt
to receive email notification that documents and information are
available to view and download. If you would like to sign up for
this service, visit Equiniti’s website. You may change the way
you receive communications at any time by contacting Equiniti.
Annual General Meeting
The 2018 Annual General Meeting of Brewin Dolphin Holdings
PLC will be held in the Haberdashers' Hall, 18 West Smithfield,
London EC1A 9HQ on Friday 2 February 2018 at 11.30 am.
Contacts and advisers
Director of Marketing
and Communications
Gregory Thorpe
12 Smithfield Street
London
EC1A 9BD
+44 (0) 20 7248 4400
Corporate Lawyer
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Registered Office
12 Smithfield Street
London
EC1A 9BD
Company Registration
Number: 02685806
Auditor
Deloitte LLP
Hill House
1 Little New Street
London
EC4A 3TR
Joint Corporate Broker
Liberum Capital Limited
25 Ropemaker Street
London
EC2Y 9LY
Joint Financial Adviser
Rothschild
New Court
St. Swithin’s Lane
London
EC4N 8AL
Company Secretary
Tiffany Brill
12 Smithfield Street
London
EC1A 9BD
+44 (0) 20 7248 4400
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA
+44 (0) 121 415 7047
Corporate Broker and
Joint Financial Adviser
Royal Bank of Canada
Europe Limited
Thames Court
One Queenhithe
London
EC4V 4DE
Brewin Dolphin
www.brewin.co.uk
Principal Banker
Bank of Scotland
Corporate Specialist &
Deposit Services
Pentland House (2nd Floor)
8 Lochside Avenue
Edinburgh
EH12 9DJ
135
Strategic ReportGovernanceFinancial StatementsOther Information
Glossary
AGM
ARC
AML
Annual General Meeting
Asset Risk Consultants
Anti-Money Laundering
ASOP
Approved Share Options Plan
BDF
BDH
BDL
Brewin Dolphin Foundation
Brewin Dolphin Holdings PLC/Brewin Dolphin
Brewin Dolphin Limited
BDMP
Brewin Dolphin MP
Internal Auditor
Basis points
Brewin Portfolio Service
Companies Act 2006
Charities Aid Foundation
Client Money & Assets
BDO
BPS
BPS
CA
CAF
CASS
CF30
CGU
CMA
CR
L&D
LSE
LTIP
MAR
MiFID
MPS
MTP
NED
PBT
Learning and Development
London Stock Exchange
The Company’s long term incentive plan, the
‘Long Term Performance Plan’
Market Abuse Regulation
Markets in Financial Instruments Directive
Managed Portfolio Service
Medium Term Plan
Non-Executive Director
Profit Before Tax
PDMR
Persons Discharging Managerial Responsibility
RMF
SID
SIP
Risk Management Framework
Senior Independent Director
Share Incentive Plan
Client facing professional Investment Manager
and Financial Planner
SMCR
Senior Manager Certificate Regime
TBD
Tilman Brewin Dolphin Limited
Cash Generating Unit
The Code
UK Corporate Governance Code
Competition and Markets Authority
Corporate Responsibility
Deloitte
External Auditor
DLAM
DPSP
DRR
EAP
EBITDA
Duncan Lawrie Asset Management
Deferred Profit Share Plan
Directors Remuneration Report
Equity Award Plan
Earnings before interest, tax, depreciation
and amortisation
EPS
Earnings per Share
Equiniti
The Company's Registrar
FCA
FRC
FSCS
GDPR
GHG
Group
Financial Conduct Authority
Financial Reporting Council
Financial Services Compensation Scheme
General Data Protection Regulation
Greenhouse Gas Emissions
Brewin Dolphin Holdings PLC (the ‘Company’)
and its subsidiaries
IAS
International Accounting Standards
ICAAP
Internal Capital Adequacy Assessment Process
Investment Governance Committee
Key Performance Indicators
IGC
KPIs
136
TOR
TSR
XO
Terms of Reference
Total Shareholder Return
Execution Only
Brewin Dolphin
Annual Report 2017
Branch Address List
Aberdeen
23 Rubislaw Terrace
Aberdeen
AB10 1XE
Telephone: 0122 426 7900
Belfast
6th Floor
Waterfront Plaza
8 Laganbank Road
Belfast
BT1 3LY
Telephone: 0289 044 6000
Birmingham
9 Colmore Row
Birmingham
B3 2BJ
Telephone: 0121 710 3500
Bournemouth
Waverley House
115–119 Holdenhurst Road
Bournemouth
BH8 8PW
Telephone: 0120 231 2500
Bristol
The Paragon
Counterslip
Bristol
BS1 6BX
Telephone: 0117 968 9500
Cambridge
Wellington House,
East Road,
Cambridge
CB1 1BH
Telephone: 0203 201 3050
Cardiff
2nd Floor
5 Callaghan Square
Cardiff
CF10 5BT
Telephone: 0292 034 0100
Cheltenham
2nd Floor
St. James’ House
St. James’ Square
Cheltenham
GL50 3PR
Telephone: 0124 257 7677
Dublin
Tilman Brewin Dolphin
3 Richview Office Park
Clonskeagh
Dublin 14
Telephone:+353(0) 126 00080
Web: www.tilmanbrewin.ie
Dundee
31–32 City Quay
Camperdown Street
Dundee
DD1 3JA
Telephone: 0138 231 7200
Edinburgh
6th Floor
Atria One
144 Morrison Street
Edinburgh
EH3 8BR
Telephone: 0131 225 2566
Exeter
Vantage Point
Woodwater Park
Pynes Hill
Exeter
Devon
EX2 5FD
Telephone: 0139 244 0450
Glasgow
48 St. Vincent Street
Glasgow
G2 5TS
Telephone: 0141 221 7733
Ipswich
Fraser House
23 Museum Street
Ipswich
Suffolk
IP1 1HN
Telephone: 0147 326 7200
Jersey
2nd Floor
Kingsgate House
55 The Esplanade
St Helier
Jersey
JE2 3QB
Telephone: 0153 470 3000
Leeds
10 Wellington Place
Leeds
LS1 4AN
Telephone: 0113 245 9341
Leicester
Two Colton Square
Leicester
LE1 1QF
Telephone: 0116 242 0700
Lincoln
Olympic House
Doddington Road
Lincoln
LN6 3SE
Telephone: 0152 250 3000
London
12 Smithfield Street
London
EC1A 9BD
Telephone: 0203 201 3900
Manchester
1 The Avenue
Spinningfields Square
Manchester
M3 3AP
Telephone: 0161 839 4222
Marlborough
Woodstock Court
Blenheim Road
Marlborough
Wiltshire
SN8 4AN
Telephone: 0167 251 9600
Newcastle
Time Central
Gallowgate
Newcastle upon Tyne
NE1 4SR
Telephone: 0191 279 7300
Nottingham
1st Floor
Waterfront House
Waterfront Plaza
35 Station Street
Nottingham
NG2 3DQ
Telephone: 0115 852 5580
Oxford
7th Floor
Seacourt Tower
West Way
Oxford
OX2 0JJ
Telephone: 0186 525 5750
Penrith
1 Mason Court
Gillan Way
Penrith 40 Business Park
Penrith
Cumbria
CA11 9GR
Telephone: 0176 886 1710
Plymouth
Ashleigh Court
Ashleigh Way
Langage Business Park
Plymouth
PL7 5JX
Telephone: 0175 233 4650
Reigate
45 London Road
Reigate
Surrey
RH2 9PY
Telephone: 0173 722 3722
Shrewsbury
Mutual House
Sitka Drive
Shrewsbury Business Park
Shrewsbury
Shropshire
SY2 6LG
Telephone: 0174 339 9000
Truro
24 Lemon Street
Truro
TR1 2LS
Telephone: 0175 233 4650
See page 8 for a map of the locations of the branches
Brewin Dolphin
www.brewin.co.uk
137
Strategic ReportGovernanceFinancial StatementsOther Information Brewin Dolphin Holdings PLC
12 Smithfield Street
London EC1A 9BD
T 020 7248 4400
W brewin.co.uk
E info@brewin.co.uk
B
r
e
w
i
n
D
o
l
p
h
i
n
H
o
l
d
i
n
g
s
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
7
This document is printed on Horizon Offset, a paper containing
fibre sourced from well managed, responsible, FSC® certified
forests. The pulp used in this product is bleached using an
elemental chlorine free (ECF) process.
Printed by Park Communications