Brewin Dolphin results disappoint as transformation moves too slowly for analysts

27th May 2015 07:54

First-half results from Brewin Dolphin were largely in line with expectations, with funds under management expanding and profits following suit, but the dividend was short of some forecasts and several analysts took a dim view of prospects, sending the shares diving.The FTSE 250 investment and wealth management group's discretionary funds under management (FuM) of £26.2bn was up 9.2% over the six months to 31 March and 15.4% on the same point last year.On total income up 1.4% to £148.4m the group grew adjusted profit before tax 9% to £33.0m and adjusted diluted earnings per share (EPS) by 5% to 9.2p.Directors, who are three years into a business transformation plan, declared an interim dividend of 3.75p per share, up 3%.Chief executive David Nicol was happy with financial performance in light of the transformation plan, which helped further boost adjusted PBT margin to 22.3% and is designed to create "a stronger business model which can create further value through long term sustainable growth with manageable risks".He said the growth in FuM had been helped by the overall upward trend in investment markets over the half year, although periods of volatility did impact transaction volumes and therefore impeded income growth.Nicol said the increased efficiencies have delivered short term benefits in terms of enhanced shareholder returns and in the longer term will, along with the net £1m gain generated from 14 May sale of its Stocktrade execution only division, will enable re-investment in the business "which is critical to sustaining organic growth".But Panmure Gordon analyst Jeremy Grime said, with financial services distribution undergoing a sea change, with takeovers of wealth managers by private group a record level, Brewin's results underlined that the group was "still in a phase of consolidation and in our view it runs the risk of not benefitting from the changing distribution landscape".He issued a 'sell' on the shares, which he said had been inflated by bid potential and were "ahead of themselves".Furthermore, RBC Capital highlighted the depressed revenue margins in the business and cut its EPS forecasts by 2% for the full year and 7% in both the 2016 and 2017 financial years, with revenue margins now expected to be lower than previously anticipated for the longer-term."Despite Brewin's relatively positive outlook, the results highlight revenue margins below management guidance; we expect them to persist at these levels rather than rebound."RBC cut its price target by 6% to 335p while Panmure has set a price target of 300p.Shares in Brewin had recovered from an early 5%-plus plunge to be down 3.8% to 339.5p by 09:25 on Wednesday.