I thought you were dead: St James’s Place shocks analysts
A scandal forced St James's Place to set aside a staggering £426m to pay out refunds to customers, leading many analysts to question whether the firm could survive the crisis. But today that narrative completely flipped.
St James’s Place, the largest wealth manager in the UK, has been beaten and battered by the market, with its share price falling more than two thirds since the start of 2022.
It has also been embroiled in controversy after thousands of clients claimed they were not provided an annual review of their finances despite paying for one. This scandal forced St James’s Place to set aside a staggering £426m to pay out refunds to customers, leading many analysts to question whether the firm could survive the crisis.
But today that narrative completely flipped.
St James’s Place revealed a £500m cost-cutting programme this morning, which, along with a stellar set of results, sent its stock price up 21 per cent.
“The market has been looking at SJP as a glass half empty and indeed emptying,” said Rae Maile, analyst at Panmure Liberum. Now, it seems, “it would be rash to bet against it”.
The standout figure from today’s half-year results was £1.9bn in new client money over the last six months, way above the £1.3bn expected by analysts.
While the £1.9bn of inflows were “not the stuff of history”, said Maile, and still a decline from last year, it showed that St James’s Place had far more staying power than anyone could have expected.
With the entire market declaring the death of the wealth manager, “clients did not seem to share the same concerns as many analysts,” he added.
Bank of America titled its latest note on the wealth manager: “St James’s Place: Reports of my death have been greatly exaggerated”.
On a quarter by quarter basis, St James’s Place’s net flows increased by 69 per cent, compared to a peer average of a 17 per cent decline, RBC analysts Ben Bathurst and Jude Neanor noted.
The figures “should help to reassure the market on the SJP asset gathering engine, following major reductions in flows forecasts” over the last year, they added.
Meanwhile, a promise to slash the costs that have plagued the firm has been widely welcomed, with £100m in cuts planned over the next two years and £500m by 2030.
Some 50 per cent of the cut in costs are set to be reinvested back into the business, and it hoped that it would double underlying cash profits by 2030 to £392m.
However, an eight per cent expected growth in cash result in 2027 suggests “accentuation to the profit rebound that was already expected,” added Bathurst and Neanor.
Plans to modernise St James’s Place in other ways were also fully on track, with changes to the charging structure and ongoing service review work progressing as expected.
If this quarter was the success that the company’s old and ‘inferior’ business model was able to achieve, Maile argued that “it is hardly a huge leap of faith to suggest that ‘new and improved’ will do at least as well”.
Additionally, there was no change to the amount of money it expected to spend on advice linked to the charging scandal – a big win for the firm.
“The miscellaneous cost reduction in the first half of 2024 vs the second half of 2023 suggests to us that the number of complaints received has reduced,” Bathurst and Neanor added.
Advisers for the group grew from 4,834 to 4,852 over the last six months, which Bathurst and Neanor said demonstrated that SJP “has still been able to grow the number of advisers, but at a more modest rate than was the case historically, making this an area to watch going forwards”.
