30th Jul 2024 11:46
(Alliance News) - St James's Place PLC impressed analysts with a strong first half, as fund inflows smashed expectations.
Shares in the Cirencester, England-based wealth manager leapt 25% to 699.00 pence in London on Tuesday.
St James's Place is no longer in the FTSE 100, having been demoted in the June quarterly reshuffle after a difficult past year. The stock remains down 26% despite Tuesday's rally.
In the six months that end June 30, gross inflows were GBP8.53 billion, improved from GBP8.04 billion a year prior. Funds under management rose to GBP181.86 billion from GBP157.52 billion a year ago and from GBP168.2 billion at the end of 2023.
IFRS pretax profit rose 4.4% to GBP225.1 million from GBP215.7 million. IFRS earnings per share rose 1.7% to 30.1 pence from 29.6p.
The interim dividend was cut to 6.00 pence from 15.83p. Further, the company announced a share buyback of GBP32.9 million, worth around 6.00 pence per share. It is due to be completed in the third quarter of the year.
St James's Place said the market opportunity remains compelling given structural growth drivers and rising demand for advice. This provides a reinforced conviction that the firm "remains a strong business, with key and sustainable competitive advantages".
St James's Place said its ambition between now and the end of 2026 is to deliver a cost base reduction programme, which will reach GBP100 million or 15% per annum by 2027.
The firm anticipates cumulative net savings of around GBP500 million through to 2030.
The combination of cost savings, costs to achieve, and investing for growth, is expected to be broadly neutral to the cost base in 2024, 2025 and 2026 with benefits emerging thereafter.
Benefits are anticipated, before tax, of GBP30 million in 2027, GBP50 million in 2028, and GBP70 million from 2029 onwards.
This further underpins the company's ambition to double the underlying cash result from 2023 to 2030.
Chief Executive Officer Mark FitzPatrick said he was encouraged by a "robust" business performance in the first half.
"We have seen high levels of activity and engagement between our advisers and our clients, contributing to positive flows. Helped by strong investment returns for our clients, we have achieved record funds under management."
"It's evident that we remain in good shape," he added.
Bank of America said the update, "with new business, retention and profitability all comfortably beating expectations, reaffirms that its business model is intact".
Gross inflows of GBP8.53 billion beat expectations of GBP7.9 billion by 8%, BofA said.
"This was SJP's best ever [second quarter] for gross inflows despite challenging headlines," the bank noted.
Retention also impressed, the bank added, with GBP1.91 billion of net inflows beating the GBP1.2 billion consensus.
Underlying cash generation of GBP205.2 million was 5% ahead of consensus and 11% above BofA's forecast. Revenue was 1.6% lower than BofA expected but expenses were far lower.
BofA estimates the cost savings imply 6% to 10% increases to EPS forecasts over 2027 to 2029. "In the outer years, this should be well-received," in BofA's opinion.
The share buyback, although small, has come earlier than expected, BofA added.
Overall, BofA said the "blow-out" update "should lead to upgrades and could help SJP rebuild credibility after an annus horribilis left the stock out of favour".
In 2023, St James's Place came under pressure from UK regulators over its fee structure, promising in October to remove penalties for early withdrawals by customers starting from the second half of 2025.
BofA reiterated a 'buy' rating and price target of 650p.
By Jeremy Cutler, Alliance News reporter
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