Charles Stanley : Download RNS

27 May 2021 CAY.L

Charles Stanley Group PLC

("Charles Stanley" or "the Company" or "the Group")

Final results for the year ended 31 March 2021

Resilient Results and Encouraging Outlook

Key Points

Summary

• Resilient performance and good progress made in delivering strategy despite pandemic challenges

Financial:

• Record level of Funds under Management and Administration ("FuMA") up 26.7% at year end to £25.6bn (2020: £20.2bn)
• Revenue stable at £171.2m (2020: £173.0m) despite a 68.8% reduction in interest income
  and lower average FuMA at £23.2bn (2020: £24.2bn), which reflected stock market disruption
• Revenue margin improved to 74bps (2020: 72bps)
• Record revenues for Financial Planning of £10.0m (2020: £8.7m), up 14.9%
• Underlying1 profit before tax of £17.2m (2020: £19.3m)/ Reported profit before tax of £13.4m
  (2020: £17.3m)
• Underlying1 profit margin2 of 10.0% (2020: 11.7%)
• Underlying1 EPS of 26.44p per share (2020: 31.41 pence per share)/ Reported EPS of 20.16
  pence per share (2020: 28.03 pence per share)
• Balance sheet strengthened - cash balances up 12.7% to £105.4m at year end (2020: £93.5m)
• • net assets up 5.8% to £123.3m at year end (2020: £116.5m)
  • regulatory capital solvency ratio of 185% (2020: 189%) with capital resources of
    £100.6m (2020: £94.1m)
• Final dividend of 9.0p per share proposed, increasing the total dividend by 33.3% to 12.0p per share (2020: 9.0p per share)

1 Underlying profit before tax and earnings per share excludes exceptional restructuring costs, non-cash share options and the amortisation of client lists.

2. This underlying pre-tax margin is based on the underlying profit before tax excluding the charge in respect of non- cash share options awarded to certain investment management teams under revised remuneration arrangements settled in 2017, expressed as a percentage of revenues.

Operational:

• Effective transition to home working with high customer service levels maintained
• • client satisfaction score of 89% across all divisions
  • 'Best Customer Service' award from Boring Money 2021 for Charles Stanley Direct
• Ongoing transformation and restructuring programme has delivered further operational gains
• • IT infrastructure outsourcing completed, with digital strategy in place to enhance client proposition
• Partnership with MSCI to assign ESG scores to portfolios
• New Central Financial Services division to be established in new financial year to address client needs for simplified advice as opposed to full service discretionary management
• • division will incorporate model portfolio services, foundation financial planning and execution-only services

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Outlook:

• Trading conditions are expected to remain positive
• The Group remains well-positioned to continue delivering its growth and efficiency initiatives, supported by a strong balance sheet, with no debt and good cash flows

Paul Abberley, Chief Executive Officer, commented:

"Revenues and profits were inevitably impacted by market conditions but the results highlight the resilience of the business. This is a strong performance given the prevailing economic circumstances.

Our transformation and restructuring programme has resulted in continued operational efficiencies and productivity so we are coming out of the pandemic strategically and operationally stronger.

As we move through the new financial year, we will be continuing with our growth and efficiency initiatives. In particular the creation of a new division, Central Financial Services, to address client needs not currently met in the marketplace is important.

We look forward to the coming year, confident of further strategic and operational progress, and expect stock market sentiment to remain positive."

Charles Stanley Group PLC LEI: 213800LBSEGKE5MCYC90

For further information, please contact:

Charles Stanley	Canaccord Genuity	Peel Hunt	KTZ Communications
Siobhan Griffiths	Emma Gabriel	Andrew Buchanan	Katie Tzouliadis
Via KTZ	020 7523 8309	020 3597 8680	020 3178 6378
Communication

Notes to editors:

Charles Stanley provides holistic wealth management services to private clients, charities, trusts and institutions. Its origins trace back to 1792 and it is one of the oldest firms on the London Stock Exchange. The Company has a national presence, with 26 locations and over 800 professionals. Its wealth management services are provided direct to clients and to intermediaries.

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Financial highlights:	2021	2020
		Underlying profit before tax (£m)	17.2	19.3
		Reported profit before tax (£m)	13.4	17.3
		Underlying earnings per share (p)	26.44	31.41
		Reported basic earnings per share (p)	20.16	28.03
		Dividend per share (p)	12.0	9.0
Business highlights:
			2021	2020
		FuMA1 (£bn)	25.6	20.2
		Discretionary funds (£bn)	15.2	12.0
		Revenue (£m)	171.2	173.0
		Total net assets (£m)	123.3	116.5
		Cash balances (£m)	105.4	93.5
Revenue by division:
			2021	2020
		Investment Management Services (£m)	151.6	154.8
		Financial Planning (£m)	10.0	8.7
		Charles Stanley Direct (£m)	9.6	9.5
Financial calendar:
		Results announcement		27 May 2021
		Ex-dividend date for final dividend		10 June 2021
		Final dividend record date		11 June 2021
		Deadline for elections under DRIP2		18 June 2021
		Annual General Meeting		12 July 2021
		Final dividend payment date		19 July 2021

1Funds under Management and Administration.

2Dividend Reinvestment Plan.

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Chairman's statement

Despite an unprecedented external environment, Charles Stanley has delivered a resilient set of results. We made good progress in delivering our strategy whilst maintaining and improving upon delivery of our high touch, personal service to clients.

The past year has been dominated by the COVID-19 pandemic, which resulted in unprecedented emergency measures by governments. I am proud of the Group's exemplary response to this critical situation. Our IT department in particular has ensured the firm's operations have been unaffected as we moved to ensure staff safety while maintaining the smooth running of all our services for clients. We are pleased not to have needed to furlough any staff or use Government funding schemes during the year.

It is difficult to predict the full long-term impact of the COVID-19 pandemic on the UK economy and investment markets. However, the past year has demonstrated both the resilience of our business model - our people, systems and clients - and the Group's capacity to innovate and change.

Financial results

Funds under Management and Administration (FuMA) increased by 26.7% to £25.6 billion as at 31 March 2021 (2020: £20.2 billion). This represents an increase to the level seen before the COVID-19 pandemic which affected global markets during the last quarter of the prior financial year. The Group's average FuMA for the year was marginally lower at £23.2 billion (2020: £24.2 billion).

Reflecting lower average FuMA, Group revenues for the year ended 31 March 2021 declined by 1.0% to £171.2 million (2020: £173.0 million). Fee and commission income increased by 0.8% for Investment Management Services, but overall revenues for the division declined by 2.1% to £151.6 million (2020: £154.8 million) due to lower interest income. Financial Planning delivered a strong improvement with revenues up 14.9% to £10.0 million (2020: £8.7 million); and Charles Stanley Direct increased its revenues by 1.1% to £9.6 million (2020: £9.5 million) thanks to trading commissions up 60%, more than offsetting lower interest income.

Reported profit before tax decreased by 22.5% to £13.4 million (2020: £17.3 million), whereas

underlying profit before tax decreased by 10.9% to £17.2 million (2020: £19.3 million).

The Group's cash balances remained strong, ending the year 12.7% higher at £105.4 million (2020: £93.5 million). Likewise, our regulatory capital solvency ratio is robust at 185%.

Governance

Adherence to regulatory standards and the management of conduct risk have remained our priorities. This helps to ensure excellent client outcomes and to demonstrate transparency and value to our clients. Our strong Governance structure has enabled us to invest the significant resources needed to meet the complexities of the evolving regulatory agenda, such as those relating to ESG, Stewardship, Product Governance and the incoming prudential regime for investment firms.

Risk

Our 'three lines of defence' model, which enables us to continuously manage risk and improve systems and controls across the firm, has served us well over the last tumultuous year. Working alongside this, we continued to identify the risks facing the Group, and to manage them to ensure we maintained sufficient capital. We worked to strengthen our operational resilience in the face of disruption and continued to prioritise cyber security in response to an increase in financial crime during lockdown.

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Culture

In a year dominated by the global health emergency, the wellbeing of our staff has been a top priority. I am pleased to report that the year's staff engagement survey showed an improvement in our staff engagement score, which rose to an upper quartile score of 79% from 75%. The number of women in senior roles also increased again to 37.1% from 36.6%. This is a significant change from the figure of 28% when we signed the HM Treasury Women in Finance Charter in 2017.

In alignment with our values, we rose to the challenges presented by COVID-19 by building on our work in the communities in which we operate. We established the CS Community, which provided practical support for vulnerable clients and maintained and created connections during a period of significant disruption.

Board changes

Having joined the Board in 2012, Bridget Guerin stepped down as Non-Executive Director on 30 September 2020 and she left with our thanks and best wishes for the future. We were delighted to welcome Anna Troup, who joined as Non-Executive Director on 1 October 2020.

Dividend

The Board is pleased to recommend a final dividend of 9.0 pence per share (2020: 6.0 pence per share). Together with the interim dividend of 3.0 pence per share, this takes the total dividend for the year to 12.0 pence per share, an increase of 33.3% on the prior year (2020: 9.0 pence per share).

Outlook

With Brexit behind us, the vaccine rollout providing glimmers of light at the end of the pandemic tunnel and strong pro-cyclical policy support over the next 12-18 months envisaged, we may see the strongest global growth since the 1980s. Market sentiment is improving as the prospects for corporate earnings remain positive and central bank policy accommodation is likely to continue until there is clear evidence of a self-sustaining recovery.

The future direction of our marketplace is positive, with some people using lockdown to get into a better financial position by paying down debt and saving and investing. While recognising the considerable external risks that remain, we are cautiously optimistic that demand for wealth management services will continue to be buoyant, creating positive long-term prospects for growth.

Charles Stanley's transformation programme is well underway and we are in a good position to drive greater efficiencies and to develop new methods of engaging with and supporting existing and new clients, as the need for advice continues. The creation of the new Central Financial Services division is another step forward with this goal.

The Group continues to generate good cash flows, carries no debt, has a healthy balance sheet and a high level of regulatory capital resources.

Finally, on behalf of the Board, I would like to extend our thanks to all our staff for their contribution to these excellent results, particularly in the face of exceptionally difficult conditions.

Sir David Howard

Chairman

26 May 2021

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