St James’s Place announced higher profits and received more money from its customers than expected during the first half of the year as it laid out plans to cut costs. Shares in the UK’s biggest wealth manager rose by 20 percent.
Mark FitzPatrick, chief executive of SJP, said that the company would cut £100mn per year by 2027. This would generate savings of approximately £500mn up until 2030. Half of these savings would be reinvested into SJP.
FitzPatrick stated that the plan would increase SJP’s annual management by “mid to high single digits”.
The company’s shares rose more than 20% in the early hours of trading on Tuesday, after it beat analysts expectations in several areas, including cash profit and net customer flows.
Rae Maile is an analyst at Panmure Liberum. “The company believes it can double its cash profit by 2030.” It would be foolish to bet against the company.
Analysts at JPMorgan Cazenove stated that the results were “very good” and would “materially reduce investor’s uncertainty”, leading to “a substantial revaluation of the share price”. The stock price has fallen by approximately 28 per cent over the last 12 months.
New cost targets were set as the company reported net inflows in the first six months of £1.9bn, a decrease from £3.4bn at the same point last year but still above analyst expectations. SJP has increased its total assets under management to £181.9bn. This is up from £157.5bn one year ago. The group posted a cash gain of £205.2mn which was higher than analyst expectations.
FitzPatrick stated that the review aimed to “take a step forward to assess the growth of our market, hold a reflection up to our company and ensure we’re setting out on a clearly defined path for the future”.
He said he wanted to increase the number of SJP high-net-worth clients, who currently make up about 9 percent of its assets under management.
FitzPatrick said that the high-net-worth segment of the market will likely grow in a relatively significant way.
“I believe we need a stronger offer around alternatives.” We do not have an extensive cash type offering at this time, so we would like to offer something to those who wish to hold some cash.”
SJP had a difficult year, with its shares plummeting. This led to its ejection form the FTSE 100.
The wealth manager reduced its fees in July last year due to new regulations that aim to give customers a fair deal. Just a few months later, the company made even more radical changes in its charging structure. These will be implemented next year.
SJP has also set aside £426mn in anticipation of potential refunds to clients this year, following an increase in complaints by customers who claimed they did not receive adequate advice.
FitzPatrick stated that plans for the implementation of the new charges are “on track” and will be implemented next year. He also noted that the management is “comfortable with” the provision they have set aside.
Bank of America analysts also stated that SJP will buy back £32.9mn of its shares in the next few weeks. This was “earlier” than expected. The reports that SJP was “dead” were also “greatly exaggerated”.
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