Shares in the UK's largest financial advice business St James's Place (STJ) soared more than 25% on news of a £100 milion cost-cutting plan that chief executive Mark FitzPatrick hopes will hand the under-fire business some much-needed stability.
In half-year results for the six months ending 30 June 2024, SJP said it had posted underlying pre-tax profits of £220 million in the first half of the year, along with net inflows into its products of £1.9 billion, £1.5 billion lower than for the same six-month reporting period in 2023. However, "strong investment returns" mean the business now has record funds under management of £181.9 billion, up £13.7 billion on the £168.2 billion it posted at the end of 2023.
"Beyond our operating and financial performance, we have performed a thorough review of the business and the markets in which we operate," FitzPatrick said.
"We must .... acknowledge that, for all our qualities as a business, we have a lot of hard work ahead of us over the next 24 months to strengthen our core and execute our existing programmes of work, helping us to become a more efficient and effective business."
Why Are SJP's Shares Soaring?
To say SJP has had a turbulent year would be an understatement.
Last year, the company said it would be overhauling its fee model for new clients after coming under pressure from the Financial Conduct Authority (FCA), whose recent Consumer Duty rules require financial services firms to act in good faith for their clients and better enable them to achieve their financial objectives.
Following that news, SJP's shares have been on a downwards tear. In the past 12 months, shares in the company are down nearly 27% to £6.83, a world away from their December 2021 high of £16.83.
In February this year the company posted a full-year loss of £4.5 million for 2023, announcing it would slash its dividend. On the day of those results, shares plummeted 30%, making it by far the worst-performing FTSE 100 stock at the time. Investors also await the final cost of a proposed £426 million commitment to review historical client cases and provide refunds to certain clients.
Today, however, shares in the company have flown upwards on better-than-expected results and efforts to reduce the business's cost base.
SJP now aims to deliver a £100 million cost-cutting exercise by the end of 2026, the majority of which will come from £80 million saving in 2025 and 2026.
It also anticipates cumulative net savings of nearly half a billion pounds through to 2030. Around half of the savings will be reinvested in the business, SJP says, with the benefits emerging after 2026. It expects to the benefits of the approach will amount to a further £30 million in 2027, £50 million in 2028, and £70 million from 2029.
Why is SJP Under Regulatory Pressure?
SJP has long been seen as among the more expensive providers of investment advice and wealth management services, but its regulatory woes stem not just from price but from transparency.
In October last year, the company said it would overhaul its fees for new clients amid pressure from the FCA to remove penalties for clients withdrawing from products early. That came after years of public criticism of its charging practices, viewed by some as opaque.
"Making these changes will position SJP and the partnership for long-term, sustainable success," it said at the time.
Others have since questioned the business's actions, however.
In February this year, a concerned financial services professional-turned activist investor, Philip Rose, told Morningstar.co.uk he had taken a "non-material" stake in the company in a bid to challenge SJP on the effect of its plans on customers.
He even argued the Treasury Select Committee should conduct its own investigation into the business, and went so far as to write to its then-chair, the Conservative MP Harriet Baldwin.
