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‘Old fashioned’ Jupiter takes the special route

‘Old fashioned’ Jupiter takes the special route

The merger and acquisition frenzy is a race Jupiter is unlikely to join.

This year has seen some high profile purchases, including Aberdeen’s buy of Scottish Widows Investment Partnership and Standard Life Investment’s swoop on Ignis. Jupiter itself was involved in the action, selling its private client business to Rathbones.

Yet while Jupiter’s cash position grew from £160.8 million to £172 million in the first six month's of the year, the group’s focus is very much on organic growth.

Following its interim update, chief executive Maarten Slendebroek (pictured) in his first set of numbers since replacing Edward Bonham Carter, told Wealth Manager: ‘A lot of organisations are sitting on cash, which is burning a hole in their pockets.

‘I don’t believe there is overwhelming evidence that acquisitions add value. I am convinced by organic growth and will pursue this strategy vigorously.’

Rather than invest this money on acquisitions the firm intends to return cash to shareholders in an income bonanza.

It hiked the interim dividend from 3.5p to 3.7p and expects to continue rewarding shareholders. While no final decision has been taken, it intends to deliver profits to investors through progressive ordinary dividends, targeting a 50% payout ratio, topped up by special dividends dependent on the size of residual earnings.

‘The magical side effect of having an organic growth strategy is that you don’t need to pay out tens of millions of pounds on acquisitions,’ Slendebroek said.

‘We don’t need this money, it belongs to shareholders – our philosophy is “you get paid handsomely to own the shares and we get on with growing the company organically”. It’s an old fashioned and good way to run a business.'

This strategy has won the support of JP Morgan Cazenove analyst Edward Morris, who repeated his overweight rating on the stock. 'The combination good growth potential and a yield approaching 6% is a compelling one,' he said.  

Numis, which has an add rating, is equally supportive of the dividend policy. 'We think this [the policy], coupled with long term expected structural growth, is very attractive within a market where such attractive yields (with growth) are hard to find,' the broker said. 

Jupiter’s results showed pre-tax profit fell from 18% during the first half of the year as costs associated with the sale of its private client business, along with a £2.6 million write down relating to a iO Adria – a Croatian property fund Jupiter set up in 2006.

The results were also distorted by the £6.7 million the firm netted from the disposal of its stake in Cofunds in the corresponding period of the previous year.

Slendebroek described the period as a 'flashpoint' for costs and is confident profits will be stronger in the second half.

However, the market saw the numbers as an opportunity to take profit from Jupiter, with shares down 3% at 12.15pm at 402.9p.  

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Profile: The opportunity set that attracted Brett Williams to wealth management

Profile: The opportunity set that attracted Brett Williams to wealth management

Brett Williams is best known for helping to build some of the biggest platforms in the IFA market.He made the move over to wealth management to head SEI’s UK business earlier this year in the belief that this is where the best opportunities now lie.

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