St James's Place  

SJP stays dividend decision as FSCS bill rockets

SJP stays dividend decision as FSCS bill rockets

St James's Place has stayed a decision on funds withheld from its dividend for 2019 in the wake of the coronavirus pandemic, as the advice giant faced an "unplanned and frustrating" Financial Services Compensation Scheme levy. 

In April SJP confirmed it had cut by a third its final dividend for 2019 - from 31.22 pence to 20 pence per share - withholding the difference until the "financial and economic impacts of Covid-19 [became] clearer".

But in an interim statement published to the market this morning (July 28) the company warned there remained "significant uncertainty for the world ahead" as it confirmed it would continue to retain the withheld funds for the time being. 

Andrew Croft, chief executive at SJP, has previously pledged to use the withheld funds to financially protect the company's partner firms if required during the coronavirus crisis. 

It comes as the UK's largest advice firm said its short-term profit had been impacted by a "more challenging new business environment", including the "unplanned and frustrating" rising cost of the FSCS levy, which had surged 72 per cent on H1 last year.

SJP reported operating profits in the period of £418.7m (on an EEV basis), down from £465.7m in 2019. It had an underlying cash position for the six months to June of £114.4m, compared with £125.1m in the same period last year.

The advice giant said: "Our contribution to the FSCS levy increased substantially, and disappointingly, during the period to £27.8m, up from £16.1m for the six months to 30 June 2019 and £22.3m for the year to 31 December 2019.

"This reflected a significantly increased rate of levy, over and above the 15 per cent increase we expected at the beginning of the year, and our growing proportion of the FSCS funding sectors in which we operate." 

In May analysts warned investors in St James’s Place, and Hargreaves Lansdown, predicting such firms could feel the pinch of rising regulatory costs amid an expected flurry of misselling claims across the industry.

A research note published by Berenberg warned the design of the FSCS meant even firms with strong processes were likely to be affected.

It said the additional cost pressure this implied for companies like SJP and Hargreaves was "particularly unhelpful", given the recent decline in revenue expectations.

SJP saw gross inflows of £7.3bn in the half year, 2 per cent less than in the first half of 2019 and resulting in net inflows of £4.5bn.
Closing funds under management amounted to £115.7bn.

Mr Croft added: "Nonetheless, from what we have experienced so far in July, we still expect new business flows for the third quarter to be similar or slightly lower in terms of value to the level of flows recorded for the second quarter.

"We are then hopeful that, as the country returns from the summer break refreshed and ready for a return to the office, and supported by the high levels of client service provided by the partnership since lockdown, we will see momentum build through the final quarter."