Until this week, many market watchers – this magazine included – had their doubts about Charles Stanley’s (CAY) turnaround plan. With the publication of the wealth manager’s half-year results, the year-to-date decline in the share price has been reversed and a repricing strategy has been largely vindicated.
Earlier this year, convinced that the benchmarked pricing strategy established by previous management failed to reflect high levels of customer satisfaction, chief executive Paul Abberley and his team decided to lift fees and shift to higher-margin services.
Aklthough the effect won’t be compounded, the trick appears to have worked. Despite a meagre 2.1 per cent increase in funds under management in the six months to September, the revenue margin increased from 62.7 to 69.9 basis points, resulting in a 72 per cent leap in underlying pre-tax profits to £9.8m.
At the same time, the cost base remains a big focus. A three-year restructuring programme has so far concentrated on management changes, but has already yielded £0.8m in annualised savings at an initial outlay of £1.2m. Of the remaining £8.3m restructuring budget, Mr Abberley is keen to not simply chase a “headcount drop, which can be toxic”.
Analysts at Peel Hunt expect adjusted earnings per share of 15.3p for the year to March 2020, rising to 20.9p in FY2021.
| CHARLES STANLEY (CAY) | ||||
| ORD PRICE: | 296p | MARKET VALUE: | £157m | |
| TOUCH: | 296-300p | 12-MONTH HIGH: | 326p | LOW: 231p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 216p | NET CASH: | £67.9m* | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 77.7 | 5.09 | 8.31 | 2.75 |
| 2019 | 85.4 | 8.09 | 13.4 | 3.00 |
| % change | +10 | +59 | +61 | +9 |
| Ex-div: | 12 Dec | |||
| Payment: | 17 Jan | |||
| *Excluding lease liabilities of £13.7m | ||||
