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Ch-ch-changes at Charles Stanley

The wealth manager is working hard to improve its profitability
November 26, 2015

The market warmly welcomed half-year numbers from Charles Stanley (CAY) that revealed progress in reforming the business. It will come as no surprise that the core wealth management unit powered the group's return to profitability, with the division's operating profit almost quadrupling to £4m. Meanwhile, in-house fund management, financial planning and the Charles Stanley Direct stock-broking platform all reduced their losses, and the company completed the sale of its corporate finance division to Panmure Gordon.

IC TIP: Hold at 338.5p

All in all, an increase in discretionary funds - where a portfolio is managed on a client’s behalf - helped keep total funds under management reasonably flat at £20bn, despite market movements. Another area of growth was the online trading hub, which added more than 5,000 investors over the period to reach 25,042 accounts in total. A review of the division also reduced costs by more than a quarter, pushing it much closer to breaking even.

Although the company has made progress in unifying its fund management services under one division, and has completed a regulation-driven client suitability exercise, there remain challenges. It is repricing its wealth management services, while tweaking the remuneration of its managers to align them more closely to group profit. The latter change will lead to a one-off charge in the current financial year of between £3.5m and £4m.

Due to the turbulent market conditions, Peel Hunt reduced its adjusted pre-tax profit and EPS estimates for the financial year to March 2016 to £6m and 9.3p (FY2015: £2.6m and 4.9p).

CHARLES STANLEY (CAY)
ORD PRICE:339pMARKET VALUE:£171m
TOUCH:335-342p12-MONTH HIGH:396pLOW: 292p
DIVIDEND YIELD:1.0%PE RATIO:na
NET ASSET VALUE:172pNET CASH:£40m

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201469.9-2.61-7.903.0
201572.11.563.041.5
% change+3---50

Ex-div: 3 Dec

Payment: 20 Jan