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Charles Stanley delivers on turnaround

The wealth manager swung back into the black last year, after executing on its restructuring plans
June 14, 2017

Charles Stanley (CAY) is starting to reap the rewards of its restructuring. The revised remuneration policy for its investment managers is now in place, all non-core assets have been sold and its City offices rationalised into one. Swinging back into profitability gave management the confidence to boost the full-year dividend for the first time in three years.

IC TIP: Hold at 361p

Overall assets under management and administration were up 17 per cent to £24bn, mostly due to market movements. The core investment management division continued to increase the proportion of funds managed on a discretionary basis, which were up more than a fifth to £11.4bn. The higher proportion of discretionary assets boosted the operating margin from 6.7 per cent to 11.3 per cent. The next priority is increasing average discretionary funds handled by its investment managers - while this grew last year, it is still below industry standards.

Strong inflows into its Inheritance Tax Portfolio and pension and institutional businesses pushed up assets in the fund management business by £300m to £1.3bn. The division reduced its overall costs by more than a fifth after rationalising its products, increasing operating margins. Following the loss of a white-label deal with Fidelity, revenue at Charles Stanley Direct dropped slightly to £4.3m.

Analysts at Peel Hunt expect adjusted pre-tax profit of £12.5m during the 12 months to March 2018, giving EPS of 19p (from £9.8m and 5.3p in FY2017).

CHARLES STANLEY (CAY)

ORD PRICE:362pMARKET VALUE:£183m
TOUCH:355-361p12-MONTH HIGH:362pLOW: 242p
DIVIDEND YIELD:1.7%PE RATIO:29
NET ASSET VALUE:176p*NET CASH:£52m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131289.114.911.75
20141383.610.512.25
2015144-4.9-10.65.00
2016139-0.7-1.35.00
20171428.812.46
% change+2--+20

Ex-div: 29 Jun

Payment: 31 Jul

*Includes intangible assets of £21m, or 42p a share