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Charles Stanley profits up 5% as it unveils further restructure plans

Charles Stanley profits up 5% as it unveils further restructure plans

Charles Stanley Direct has moved into profit and the company has unveiled broader plans to improve margins as the overhaul of the business continues.

The news comes as Charles Stanley reported pre-tax profit from core business of £5.7 million over the six months to the end of September, up from £5.4 million year-on-year.

Revenue rose 5% to £77.7 million as funds under management and administration also increased by 5% to £25 billion, while costs fell slightly from £73 million to £72.4 million. Discretionary funds were up from £12.1 billion to £13.2 billion.

Organic growth was flat though, with net inflows of £0.6 billion from new clients being offset by outflows of £0.4 billion from existing clients and £0.3 billion from lost clients. The £1.2 billion net increase in assets under management and administration of £1.2 billion mirrored the positive market moves of £1.3 billion.

This rise in profit prompted the board to raise the interim dividend by 10% to 2.75p per share.

Charles Stanley chief executive Paul Abberley (pictured) described the results as ‘solid’, but admitted that improving the company’s profit margin –which edged up to 9.3% from 8.4% year-on-year- is taking longer than planned.

‘Whilst the progression of our revenues and profit margin has been pleasing, we are fully focused on increasing the rate of improvement. In tandem with the efforts to improve the rate of top line growth by building higher margin assets and implementing revised pricing structures, we are also sharpening our investment capabilities in marketing and sales,’ he said.

‘To drive revenues, in September we successfully implemented a new charging structure in Charles Stanley Direct and expect to complete the three-year repricing exercise of our investment management services division by 31 March 2019.’

He added: ‘A central initiative for remuneration has been launched alongside this, to ensure we are capturing the operational gearing that should flow from this enhanced sales capability. We expect the continuing shift away from advisory managed and dealing services to discretionary services also to drive revenues by improving the mix.’

The firm is also to continue expanding its intermediary sales team and is to announce the hire of a group head of distribution to oversee this sales pus.

Abberley added: ‘In tandem with the efforts to drive the rate of top-line growth, we have also identified a number of core programmes to improve operating efficiency in both front and back offices. These include a restructuring and cleansing of our data to exploit fully our technology, delivering a streamlined standard work flow to our front and middle offices and developing more granular business plans for each business unit, which have previously only been formulated at a divisional level.

‘Whilst there are likely to be one-off costs to affect some of the changes in contemplation, the implementation should not only proportionately reduce ongoing cost and risk, but also give our front office teams more time to focus their attention on both existing and potential new clients.’

All four of the company’s divisions reported increased turnover, with its smallest units, Charles Stanley Direct and financial planning seeing rises of 20.7% and 34.6%, respectively.

The company said it plans to reinvest around half of the incremental revenue generated by Charles Stanley Direct into the digital proposition to continue improving the service. The platform delivered a maiden profit of £200,000, compared to a £700,000 loss in the same period last year.

Charles Stanley Direct now houses 12% of the group’s assets, with £.6 billion administered through the online platform and £0.4 billion through its telephone execution service.

 

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