26th Oct 2020 10:41
(Alliance News) - St James's Place PLC on Monday said it will engage with shareholder PrimeStone Capital LLP after it received a letter from the investor calling for an overhaul of the company's cost base.
The FTSE 100-listed wealth manager said it looks forward to commencing a discussion with the 1.2% stakeholder after London-based PrimeStone stated it believes St James has failed to deliver meaningful value over the last five years despite a doubling of assets.
PrimeStone stated that following an in-depth analysis carried out over the past year, it has concluded that St James' share price does not reflect the full value of the strength of its business model, its leadership position, or its long-term growth potential. It added that it has found that the underperformance is mostly due to the "suboptimal management" of SJP's cost base.
The investor noted that despite funds under management growing 18% a year since 2015, the share price has fallen 7% and total shareholder returns were 2% annualised and below that of the FTSE 100.
It highlighted that SJP's shares have significantly underperformed those of most of its publicly listed peers, stating that peers with similar asset growth and retention rates trade on earnings multiples that are 50% to 150% higher than that of St James's. It also said it believes the company has been held back by a bloated organisational structure, excessive hiring, excessive pay, and weak performance at its Asia unit.
In the way of solutions, PrimeStone Capital suggested that St James conduct an in-depth cost review and a zero-based budgeting exercise, set ambitious cost-reduction objectives and an appropriate timeline for their implementation, regularly report on achievements of these objectives, and improve financial communication to shareholders by more clearly reporting on revenues, costs, margins and important key performance indicators.
In response, St James said: "SJP proactively engages with shareholders with regards to group strategy and structure and looks forward to commencing a dialogue with PrimeStone in regard to the views outlined in its letter. SJP will provide an update on the group's third-quarter new business performance and funds under management on October 27."
In the strategy statement on its website, PrimeStone said it invests in companies that have "a solid core business", trade "at a significant discount to their potential value", and have management that are "open-minded and willing to engage in a constructive dialogue to create long term value".
Shares in St James Place were trading 0.3% higher at 939.40 pence each on Monday morning in London.
By Ife Taiwo; [email protected]
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