Charles Stanley  

Charles Stanley restructuring to cost £9.5m

Charles Stanley restructuring to cost £9.5m

Charles Stanley is set to spend £9.5m on restructuring its business but expects the changes to eventually lead to savings in excess of £4.5m a year. 

At the beginning of May the wealth management company announced a "major" restructuring project, seeking to achieve an increase of net profit margin to 15 per cent

In its annual results published today (May 31) Charles Stanley confirmed the cost of the "significant transformation project" was estimated to be £9.5m, to be incurred over a two to three year period. 

But the company stated the restructure should yield "immediate cost reductions" expected to build up annualised savings in excess of £4.5m from the financial year 2022 onwards. 

Charles Stanley warned the restructure would result in a cut to profits in 2022 but that profits were expected to be positive thereafter. 

At the beginning of the month the wealth manager confirmed the reshuffle would see three of its senior positions put at risk of redundancy, with Gary Teper, head of investment management services at Charles Stanley, recently resigning from his position. 

In today's results, for the year ended March 2019, Charles Stanley reported revenues of £155.2m, up from £150.9m in 2018, but saw its pre-tax profit dip slightly from £11.4m last year to £11m. 

Despite a fall in profit across the business as a whole, which the company attributed to last year's results including a number of "one-off gains", Charles Stanley saw growth in pre-tax profits across its core business including investment management services, asset management, financial planning, and Charles Stanley Direct.

In particular Charles Stanley Direct, the company's online execution-only platform, reported a profit for the year of £1m compared with a loss of £300,000 last year, with the group's chairman Sir David Howard marking it as a "turnaround" for the business. 

Discretionary funds and funds under management and administration continued on their upward trajectory seen earlier in the year, growing by 6.5 per cent to £13.1bn and 1.3 per cent to £24.1bn respectively. 

Sir David said he now saw opportunities in the future to provide a "favourable backdrop" to the company's "transformation programme", after a steep fall in equities and risk assets in the last quarter of 2018.

He said: "With the turn of the calendar year, we noted equities, bonds and commodities posting positive returns.

"The recent revised guidance by the US Federal Reserve to hold interest rates has helped ease financial conditions and mitigate the potential downside risk to the economy.

"Moreover, long-range inflation forecasts have come down again, so the emphasis has shifted back to a looser monetary policy which favours economic growth.

"However, given the extent of the equity market rally earlier this year, we anticipate much more modest returns over the remainder of the year." 

Sir David said the long-term prospects for equities remained positive, but equities were likely to "pause for breath" until evidence of better economic growth emerges.

rachel.addison@ft.com