St. James’s Place PLC (SJP) is a financial service holding company based in the United Kingdom. It was founded in the year 1992 by Sir Mark Weinberg with late Mike Wilson and Lord Rothschild. It has since grown rapidly to establish itself as the UK’s leading wealth managers, with around £95.6 billion AUM as on 31st December 2018. It was made a constituent of FTSE 100 in 2014. It has started its operations in Asia as well with offices in Hong Kong, China and Singapore, and is now one of the largest wealth management companies serving the expatriate community in Asia. Andrew Croft joined the company in 1993 and appointed to the Board in September 2004. He was subsequently appointed as the Chief Executive Officer in January 2018.
The company provides financial and wealth management advice and related services to businesses and individuals across the United Kingdom. It also has business interests in life insurance and unit trust management. The group’s products include pensions, offshore products, mortgage advisory services, and banking services through St. James's Place Bank. The groups business is divided into four segments: Life business, Unit Trust business, Distribution business and Other. The company’s funds under management are divided into North American Equities, UK Equities, Fixed Interest, European Equities, Asia & Pacific Equities, Cash, Property, Alternative Investments and Other. The biggest segment is North American Equities, which is closely followed by UK Equities.
Key Financial Highlights (2018, in £m)
(Source: Annual Result, Company Website)
- In FY18, EEV new business profits surged by 9.3 per cent to £852.7 million against £779.8 million reported last year due to the increase in new business together with operational economies of scale achieved.
- Reported EEV operating profit rose by 9.1 per cent to £1,002.0 million over the previous year from £918.5 million, due to strong growth in EEV new business contribution.
- IFRS profit before shareholder tax rose to £211.9 million, up by 13.9 per cent as compared to the last year reported data.
- Underlying cash result (post-tax) grew by 9.9 per cent to £309.0 million, up from £281.2 million a year ago, due to the strong new business performance reflected in the financial performance.
- Underlying cash basic EPS increased by 9.5 per cent at 58.7p, from 53.6p a year ago.
- The full-year dividend was announced of 48.22p, up by 12.5 per cent from 42.86p a year ago, due to the strong balance sheet and growing income from the existing business.
- Gross inflows of funds increased by 8 per cent year-on-year to reach £15.7 billion.
- Retention of clients remains steady at 96 per cent.
- The net inflow of funds grew by 8 per cent year-on-year to £10.3 billion.
- Group funds under management increased by 5 per cent to reach £95.6 billion.
- Qualified advisors also rose 8 per cent year-on-year to 3,954.
Ratios Commentary (for the Six Months to 30 June 2018)
- The pre-tax return on assets reported by the company is significantly less than the industry median. However, pre-tax return on equity stood at 9.1 per cent which was higher than the industry median of 9.0 per cent.
- On leverage front, the debt-equity ratio was relatively higher as compared to the industry median.
- On 27th February 2019, SJP share closed at GBp 941.2, down by 3.64 per cent against its previous day closing price.
- Stock's 52 weeks High and Low is GBp 1,246/GBp 905.6. At the closing price, the share was trading 24.46 per cent lower than its 52w High and 3.93 per cent higher than its 52w low.
- Stock’s average traded volume for 5 days was 1,595,616.20; 30 days - 1,552,364.70 and 90 days - 1,606,735.12.
- The average traded volume for 5 days was up by 2.79 per cent as compared to its 30 days average traded volume.
- On the valuation front, the stock was trading at a trailing twelve months PE multiple of 27.4x as compared to the industry median of 14.9x.
- The company’s stock beta was 1.07, reflecting relatively higher volatility as compared to the benchmark index.
- Total outstanding market capitalisation was around GBP 4.96 billion and a dividend yield of 5.12 per cent.
Growth Prospects and Risks Assessments
- The company offers a differentiated model where the services are vertically integrated, strongly backed by its distribution system.
- There are concerns about the near-term market volatility, primarily driven by Chinese economic growth, US trade wars and fund inflows.
- Company’s clients are not immune to external market factors.
- Volatility across assets due to political uncertainty may lead to pressure on business and margins.
- Political changes can adversely affect the present business model.
Broad-based challenges can be seen ahead of the group as Brexit induced uncertainty can creep into the business of the company, affecting the financials. However, the company’s differentiated business model can provide some respite from the harsh market conditions. Thus the investors can keep a cautious watch on the stock going ahead.
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