Charles Stanley Group PLC (LON:CAY) lifted its 2019 dividend by 9.4% after reportiing better-than-expected profits as it unveiled the details of a previously announced transformation programme.
The wealth manager posted core business pre-tax profit of £11.6mln for the year to 31 March 2019, compared to profit of £10.9mln last year, as revenue rose to £155.2mln from £150.9mln. Analysts had expected pre-tax profit of £10.6mln.
READ: Charles Stanley hit by lower equity markets
The firm's pre-tax profit margin rose to 9.2% from 7.1% last year, but remained below the 15% medium-term target.
Funds under management and administration stood at £24.1bn at the end of the period, up 1.3% compared to a year ago, despite market volatility towards the latter part of the year, as new business intake offset outflows.
Growth was led by a 6.5% increase in discretionary funds to £13.1bn, offsetting a 16.7% drop in advisory managed funds to £1.5bn.
Postive start to 2020 but modest returns expected for rest of the year
Charles Stanley said it has seen positive returns in equities, bonds and commodities at the start of the new financial year after steep market declines in the fourth quarter of 2018.
“The recent revised guidance by the US Federal Reserve to hold interest rates has helped ease financial conditions and mitigate the potential downside risk to the economy,” the company said.
“Moreover, long-range inflation forecasts have come down again, so the emphasis has shifted back to a looser monetary policy which favours economic growth.”
However, the group said it expects “more modest returns” over the rest of the year as equities are likely to “pause for breath” until evidence of improved economic growth emerges.
The firm raised its full-year dividend to 8.75p per share from 8.0p.
Transformation plan details revealed
Charles Stanley also released the details of its transformation programme, which was announced earlier this month. It expects to spend £9.5mln on restructuring over the next three years and to achieve annualised savings in excess of £4.5mln from fiscal year 2022.
The group said the restructuring will involve improving IT systems, customer service and back and middle office performance.
“We see this as a positive step, given the objective to streamline processes and cut costs,” analysts at City broker Peel Hunt said in a note to clients, adding that they believe the restructuring should help bring Charles Stanley's pre-tax profit margin towards its target.
The analysts also noted that the firm's results beat expectations but “much still remains to be done” before that pre-tax profit target margin is achieved.
Peel Hunt maintained a ‘hold’ rating and target price of 280p on Charles Stanley shares, which in late morning trading were unchanged at 317p.
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