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Charles Stanley profit up 30%, expects greater volatility
Wealth manager Charles Stanley posted a 30% jump in full-year pre-tax profit on Wednesday but cautioned that it expects greater volatility and lower returns going forward.
In the year to the end of March 2018, pre-tax profit rose to £11.4m as revenue pushed up 6.6% to £150.9m, while reported basic earnings per share increased 40% to 17.23p.
Total funds under management and administration fell 0.8% to £23.8bn but discretionary funds were up 7.9% to £12.3bn.
Looking ahead, the company said rising inflation implies that growth in the global economy is nearing the peak of the cycle, leading the group to expect greater volatility and lower returns.
"Uncertainties around Brexit continue to give rise to greater economic volatility in the UK, at least in the short term. The threat of global trade barriers being raised as a result of US policy is also a concern. On the other hand, with around 70% of the FTSE-100 companies' revenues derived from abroad, sterling weakness would boost market returns. Finally, positive earnings per share momentum and attractive valuations give further cause for cautious optimism on a UK-centric view."
Charles Stanley also announced that it had replaced four board positions. These include the chair of the audit committee and the chair of risk.
Chief executive Paul Abberley said: "2018 has been another year of progress for Charles Stanley. We completed the disposal of non-core activities, further built profitability and began to scale the business. The group's transformation continues apace as we implement our strategy and deliver progress in the underlying key metrics. That said, we recognise the need to accelerate the improvement in our financial metrics to match what is being delivered qualitatively across the business.
"The focus for the 2019 financial year will be on driving top line revenue growth whilst improving operational efficiency and in turn harnessing operational gearing. I am confident that we will continue to make meaningful progress toward attaining our target 15% operating margin. The speed with which we attain it will in part be dependent upon the pace of investment to develop sales channels and standardise processes, and in part on how quickly the group assimilates change."
Canaccord Genuity said: "The outlook reflects the difficulty of growing the top line and gaining greater scale, with slower progress being made in terms of generating net inflows than we had anticipated, notwithstanding market tailwinds in the two months since the March year-end.
"The business continues to invest carefully in both growth and from an operational and marketing point of view, although given the low profit margins, this investment has a disproportionate impact on profits. Nevertheless, we believe that progress is continuing across the business and that the 15% target margin is achievable, but the date for doing so has likely been pushed out by 9-12 months to the year ended March 2021. We also note the strengthening balance sheet."
At 0920 BST, the shares were down 3.5% to 333p.