While wealth managers often thrive on complexity, regulatory change also comes with an increased compliance burden. Charles Stanley (CAY) expects the introduction of changes, including Mifid II next year, to cost it around £0.9m in IT-related expenditure during the second half of this year. Management says it underestimated the amount the new software would cost. This, along with a reduction in commission income, means the wealth manager will need to generate higher income elsewhere to meet full-year market expectations.
The trend towards discretionary asset management continued during the first half, with funds up 14 per cent to £12.1bn. That meant more clients switched to a fee-only charging structure, which offset the decline in commission income. Revenue at the core investment management business increased 8 per cent to £64.6m.
The smaller asset management business posted an increase of around a quarter in revenue, driven by a 6 per cent uptick in funds under management to £1.3bn. It launched its personal portfolio service, a range of risk-rated multi-asset funds, in April. The funds had around £34m invested in them at the end of September and are expected to become profitable once they reach critical mass at £100m.
Analysts at Peel Hunt expect adjusted pre-tax profit of £12.5m during the 12 months to the end of March 2018, giving EPS of 19.1p (from £9.9m and 14.6p in 2017).
| CHARLES STANLEY (CAY) | ||||
| ORD PRICE: | 365p | MARKET VALUE: | £185m | |
| TOUCH: | 350-375p | 12-MONTH HIGH: | 434p | LOW: 225p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 183p* | NET CASH: | £57m | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 (restated) | 68.8 | 4.50 | 6.3 | 1.5 |
| 2017 | 74.6 | 6.85 | 10.9 | 2.5 |
| % change | +8 | +52 | +73 | +67 |
| Ex-div: | 14 Dec | |||
| Payment: | 19 Jan | |||
| *Includes intangible assets of £20m, or 40p a share | ||||
