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Charles Stanley not yet recovering

The wealth manager has struggled of late, as full-year results show. Can a restructuring plan turn things around?
May 31, 2019

“Although we’re not delivering the shareholder returns, we’ve certainly got it right with clients,” Charles Stanley (CAY) chief executive Paul Abberley suggested to us this week. Candour is always welcome. But in the year to March, strong customer relationships could not stop fund outflows from the core investment management services.

IC TIP: Sell at 303p

Rocky equity markets were blamed for the drop. That is fair enough. Expectations for “much more modest returns” this year offer little reassurance that targeted growth in funds under management is guaranteed in FY2020.

Some sources of hope remain. Higher-margin discretionary mandates were the one fund segment to rise in the period, and helped to push up fee income by 6.4 per cent to £110m. However, this was almost entirely offset by a £6.5m drop in commission income, meaning a surge in interest turn was the main reason for a rising top-line.

As such, it is still not clear how the group will double its pre-tax profit margin to 15 per cent. A recently-announced transformation programme is now expected to save at least £4.5m a year by 2022, at a cost of £9.5m over the next three years.

Analysts at Peel Hunt expect adjusted pre-tax profits of £10.1m and earnings of 15.2p per share for the 12 months to March 2020, from £10m and 15.2p in the prior year. 

CHARLES STANLEY (CAY)  
ORD PRICE:303pMARKET VALUE:£154m
TOUCH:302-320p12-MONTH HIGH:388pLOW: 40p
DIVIDEND YIELD:2.9%PE RATIO:17
NET ASSET VALUE:210pNET CASH:£71.2m
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015144-4.9-10.65
2016139-0.7-1.35
20171428.812.46
201815111.417.28
201915511.017.78.75
% change+3-4+3+9
Ex-div:13 Jun   
Payment:17 Jul