Flat is good at St James’s Place

The combined adviser, fund manager, life insurance business model pioneered by St James’s Place (STJ) makes accurate reading of the company’s balance sheet exceptionally difficult. That quirk also affects the reported IFRS profit, which was adversely affected by valuation changes related to its life business. Once this impact is stripped out, the company posted a decent pre-tax profit of £262mn, more than double last year. In short, a combination of customer loyalty and high fees is keeping St James’s Place in the game this year.

Retention rates are probably St James’s key selling point for investors. The company retained over 96.5 per cent of clients, year on year, and existing customers committed about £9bn in grossinvestment flows for the half, meaningnet inflows reached £5.5bn since thestart of the year. Total funds under management were £142bn, down from £154bn at the year end.

Another factor in its favour is that while there are inflationary cost pressures within the business, the company is still benefiting from a pandemic “underspend” which should keep controllable expenses, which were £131mn in these results, from overshooting its 5 per cent target. A lot of expenses were deferred to the second half of last year, which mean this year suffered from awkward comparisons, but the situation will normalise as the year progresses and cost phasing becomes easier.

Consensus figures put St James’s Place on a forward price/earnings ratio of 17 for 2022. That higher rating reflects its ability to charge high-end fees to static customers, but it also means it’s expensive compared with peers. Hold.

Last IC View: Hold, 1,376p, 25 Feb 2022