Charles Stanley saw profits fall by 26% in its half-year results to September, while revenue across all its divisions grew.
In an update this morning, the company reported profit of £5.1m, down from £6.9m during the same period last year.
Core business costs for the period were also up 4.9% to £72.4m from £69m last year. Charles Stanley said the majority of this increase was accounted for by front office staff costs, as well as £0.7m associated with share options granted to certain investment management teams under the revised remuneration arrangements last year.
In an analyst note, Stuart Duncan, analyst at Peel Hunt, said modest progress has been made in H1 but there is still more to do, particularly against a more uncertain market backdrop.
Revenue up
Charles Stanley still saw overall revenue increase by 5% to £77.7m from £74m last year, while funds under management and administration (FUMA) also increased by 5% to £25bn. Discretionary funds grew 7.3% to £13.2bn.
Asset growth was higher than the 4.6% reported in its trading update posted in July, when FUMA hit £24.9bn.
All four of its operating divisions reported higher revenues than in the first half of 2018, with investment management bringing in the most at £66.9m, up from £65.2m the previous year, down to a combination of higher fees and interest offsetting lower commission.
The three smaller divisions all recorded strong progress in revenues too with Charles Stanley Direct up 34.6%, financial planning up 20.7% and asset management up 15.2%.
But, despite revenue increases for the financial planning division, it was less profitable with losses from £1.2m to £1.7m. Charles Stanley said this was because of continued expansion in the division.
Paul Abberley (pictured), chief executive officer, said the firm’s turnaround strategy is “starting to bear fruits” with funds, revenues and profits from the core Business all increasing on the prior period.
“Whilst the progression of our revenues and profit margin has been pleasing, we are fully focused on increasing the rate of improvement. In tandem with the efforts to improve the rate of top line growth by building higher margin assets and implementing revised pricing structures, we are also sharpening our investment capabilities in marketing and sales.
“In addition, we have identified several core programmes to improve operating efficiency in both the front and back offices.”
Group head of distribution opening
In September, Charles Stanley said it implemented a new charging structure in Charles Stanley Direct, to drive revenue, and expect to complete the three-year repricing exercise of its investment management services division by 31 March 2019.
Duncan added: “Fee income continued to increase (by 3%), and interest income also improved, but this was offset by the decline in dealing commission. Operating expenses also increased by 5% to £72.4m, with part of the increase in fixed staff costs a result of the investment in the Financial Planning business, which has yet to yield full revenue benefits.
“The improved group result was to some extent a reflection of the marked improvement in the CSD business.”
Elsewhere, Charles Stanley is continuing to grow its intermediary sales team and is to announce the appointment of a group head of distribution in due course.
The statement said: “A central initiative for remuneration has been launched alongside this, to ensure we are capturing the operational gearing that should flow from this enhanced sales capability. We expect the continuing shift away from advisory managed and dealing services to discretionary services also to drive revenues by improving the mix.”
Operating margins for Charles Stanley rose to 9.3% from 8.4% last year. Duncan forecast full-year expectations at 11%.
