St James's Place swings to loss as it sets aside £426m for client refunds

28th Feb 2024 07:37

(Sharecast News) - Wealth manager St James's Place tumbled on Wednesday after saying it swung to a full-year loss and slashing its dividend, as it set aside £426m for potential client refunds.

In the year to the end of December 2023, the company swung to an IFRS loss after tax of £9.9m from a profit of £407.2m the year before.

The firm posted a post-tax cash result of £68.7m, down from £410.1m a year earlier, as it took a significant hit from a one-off ongoing service evidence provision of £426m "for potential client refunds linked to the historic evidencing and delivery of ongoing servicing".

STJ declared a final dividend of 8p a share, down from 37.19p in 2022, giving a full-year dividend of 23.83p a share, versus 52.78p a year earlier.

It also changed its future dividend guidance, saying that going forward, it will pay 50% of the full-year underlying cash result.

Net inflows for the year came in at £5.12bn and funds under management rose to £168.2bn from £148.3bn at the end of 2022.

Chief executive Mark FitzPatrick said the company had undertaken an assessment into the evidencing and delivery of historic ongoing servicing following a significant increase in client complaints, particularly in the latter part of 2023.

"The assessment revealed that our evidence of ongoing client servicing was less complete in the years preceding investment into our Salesforce CRM system in 2021, and we have therefore made a provision for potential client refunds to address this. Looking forward, the investment we've made into Salesforce means we are confident this is a historic issue," he said.

"While our financial results have been significantly impacted by this legacy matter, the board recognises the importance of returns to shareholders and is confident that sufficient capital and liquidity is available to deal with the financial impact of the provision."

He added: "Once our new charging structure is fully embedded, we anticipate that the business will be on an improving earnings trajectory during 2027 and beyond."

At 0925 GMT, the shares were down 32% at 423.20p.

Deutsche Numis put its rating for the shares under review from 'buy' after the results.

"Clearly, this means we once again need to go back to the drawing board in assessing the investment case for SJP. It is disappointing to see another piecemeal warning / major adverse development to the investment story in our view, rather than seeing these issues dealt with comprehensively on one occasion," it said.

"Our long term view on the industry structural asset growth opportunity, driven principally by the DC pension opportunity, clearly does not change. However, we increasingly have to question how well will SJP monetise that opportunity. We place our recommendation and forecasts under review, whilst we establish what this means for the investment case."