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Charles Stanley's profits slump by 33% after year of 'significant cost'
by James Phillipps on Jun 19, 2014 at 08:10
Charles Stanley saw profits slump by 33% over the year to the end of March due to transaction and other 'exceptional' costs.
The wealth manager told the stock market in April that it was set to miss analyst expectations and today it announced that pre-tax profit fell from £9.1 million to £6.1 million, a 32.9% slump, in what the group called a year of building for the future.
Total funds under management rose by 14% from £17.7 billion to £20.1 billion with discretionary funds up 28% from £6.4 billion to £8.2 billion. Revenue rose by 17% from £127.6 million to a record high of £149 million.
The group reported that its direct to consumer arm, Charles Stanley Direct, now has over 16,000 clients and £840 million of assets under administration.
However, its profits were impacted by the £1.4 million cost of acquiring Evercore Pan Asset, with up to another £1 million payable over the next five years, with the hiring of new teams also representing a significant outflow.
The Evercore deal plus the poaching of teams for new offices in Cardiff and Leicester resulted in total acquisition costs of £2.4 million over the year with a further £1.3 million spent on building Charles Stanley Direct and other 'investment one-off costs'. The wealth manager is locked in a bitter legal wrangle with Brewin Dolphin after it lured the bulk of its rival's Leicester team over to open a branch for it in the city.
Other significant costs included a Financial Services Compensation Scheme levy of £1.2 million, albeit this was down from £1.9 million the previous year.
Charles Stanley's chair Sir David Howard (pictured) said: 'This has been a year of significant cost and investment in our future. In particular our profitability has been impacted by the acquisition of further teams of high-quality investment managers, the continuing roll-out of our direct-to-client web-based service Charles Stanley Direct, and a major programme of up-grading the quality of service of our principal business of discretionary and advisory investment management.
'Our underlying profit for the year, before tax, which excludes a number of adjusting items, was £13.5 million, the same as last year's figure of £13.5 million. When the adjusting items are deducted the reported profit before tax has decreased by 33% from £9.1 million (in 2012-13) to £6.1 million.
'We believe margin compression will also cause our sector to develop increasingly integrated business models to protect margins: vertical integration to access more value across the supply chain and horizontal integration, to offer a wider set of services.'
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