UK wealth manager Brewin Dolphin is expecting to take a pretax impairment charge of about £32 million in the second-half of the year following its plans to cease the implementation of the Figaro software package across its wealth management business.
The company assured that this will be a non-cash item and will not have an impact on its regulatory capital position or adjusted profit figure.
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In spite of the charge, Brewin Dolphin said there will be no changes to its existing target of achieving a 25% operating margin run rate by the end of 2016 neither there will be any increase in the group’s forecast capital expenditure for 2014 to 2016.
Brewin Dolphin has implemented the first stage of the FIGARO software, a product of JHC Systems, into Stocktrade.
However, the company added that the process has revealed a number of issues with the functionality and robustness of the software, which are taking additional time and resource to resolve.
Additionally, Brewin Dolphin is in talks to vary and settle the contracts of around £15m over the next ten years related to the software.
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By GlobalDataBrewin Dolphin had begun to implement FIGARO in 2011 in a move to increase the firm’s operating margin to 20% from 15%.
Brewin Dolphin said: "The board believes the decision to cease the roll out of Figaro is in the best commercial interests of the group. Moreover, it remains confident that the 2016 operating margin target will be achieved through on-going business improvements.
"Following the Stocktrade implementation, the board does not believe that the roll out of Figaro into the discretionary wealth management business would be in shareholder and clients’ best interests; furthermore it would not help drive future efficiency gains.
"The board believes that existing software deployed in the wealth management business can be upgraded to current versions commercially available, and that with appropriate enhancements will better support the strategy of seeking further efficiencies. Further, the board believes this can be achieved without additional capital expenditure beyond that already budgeted and with lower risk to the group," Brewin Dolphin added.
