■ Total new business up 8 per cent to £165.6m
■ Funds under management up 6 per cent to £32.8bn
■ Client retention rate strong at 95 per cent
St James's Place (STJ) delivered a strong third-quarter performance, and the shares rose nearly 5 per cent as the wealth management group indicated that significant growth in new business levels has continued into the fourth quarter. Total single investments rose 5 per cent to £1.33bn, while new business on an annual premium equivalent (APE) basis grew by 8 per cent to £165m. Accordingly, funds under management increased by 6 per cent over the quarter and by 15 per cent since the start of the year to a record £32.8bn. Importantly, client retention remained high at 95 per cent.
New regular premiums on long-term savings rose 18 per cent to £32.5m in the third quarter, and while new single investment premiums declined 5 per cent to £473m this was more than offset by a 17 per cent rise in new single pension premiums to £556m. The overall growth in new business was a respectable 8 per cent in July and August but this accelerated to 14 per cent in September. And to help maintain this momentum the range of investment funds available for clients has been increased with the introduction of two new equity fund managers - Magellan in Sydney and EdgePoint in Toronto.
Investec says...
Buy. St James's Place has overcome significant headwinds, including volatile investment markets and a drag on resources as sales people take their regulatory exams, to deliver above-consensus growth. And with significant growth signposted in October, the final quarter will also be strong. The outlook for next year is encouraging - the recruitment of new sales people is going better than expected and previous guidance on growth rates has been upgraded from a range of 3-4 per cent to 7-8 per cent. Expect operating profit this year of £130.7m, rising to £156m next year, and embedded value this year of 375.9p per share, rising to 408.2p next year.
Bank of America Merrill Lynch says..
Neutral. Indications point toward a strong fourth quarter, albeit against some weak comparatives. With net inflows of £2.3bn in the first nine months of the year - a 10.6 per cent rise on an annualised basis - this bodes well for profits, cash flow and dividends, and we are maintaining our full-year embedded value estimate of 437p a share. However, the shares are trading on nearly 15 times 2013 EPS and offer a relatively modest 2.8 per cent dividend yield, which leaves insufficient valuation headroom for a buy rating.
