St James's Place  

Activist shareholder calls for cost overhaul at SJP

Activist shareholder calls for cost overhaul at SJP

A shareholder in St James’s Place has warned of a "bloated organisational structure" at the wealth giant as it called for an overhaul of its cost structure to improve investor returns. 

In an open letter sent to the board of SJP today (October 26) PrimeStone Capital, which owns 1.2 per cent of SJP's stock, claimed the company had "failed to deliver value for shareholders" over the past five years. 

Whilst the shareholder said SJP was a "fundamentally strong" business which had delivered value for clients, partners and employees, it warned its shares had underperformed in recent times. 

A source familiar with the situation said PrimeStone Capital wanted to see an overhaul of SJP's structure to reduce costs and "realise its full profit potential", which it claimed could see the company more than double its share price. 

The shareholder began investing in SJP last year but in an eleven-page letter today warned the advice giant had a "bloated organisational structure" with an "overly generous" compensation package "well above" its peers. 

SJP has frequently come under fire for its policy of rewarding partners with lavish perks such as cruises, but earlier this year announced it was overhauling its incentive packages to reward "the right behaviours".

Benoît Colas, managing partner at PrimeStone Capital, and Damian Hahnloser, partner at PrimeStone Capital, said: "SJP has delivered tremendous value for clients, advisers, employees and management … but not so much for shareholders over the last five years.

"It is time for the company to address its high cost base and change its culture in order to deliver its full value-creation potential to long-neglected owners.

"Far from coming at the expense of other stakeholders, we believe such a change will provide SJP’s clients and advisers with a leaner, more agile and more reactive SJP."

Shareholder value 

The main theme of the letter centred around a perceived shortfall in shareholder value, with PrimeStone warning the SJP share price had dropped 7 per cent since the end of 2015. 

It said this was "especially disappointing" given client assets had doubled over this same period. 

At £9.40 a share, SJP's stock price has slipped 2.5 per cent from the £9.65 it cost in October 2015 and 6.9 per cent from its price at the end of that year. 

However, before the pandemic struck and tumbled global markets, SJP's stock had reached £11.88 a share — up 25 per cent on October 2015.

But the wealth manager has struggled to maintain consistent growth, reaching its stock price high of £12.70 in January 2018.

The letter said: "The current share price does not reflect the full value of the strength of its business model, its leadership position or its long-term growth potential."

PrimeStone Capital also called on SJP to improve its financial communication to shareholders by reporting on revenues, costs, margins and KPIs "more comprehensively". 

A "bloated" structure 

PrimeStone, which owns 1.2 per cent of SJP's stock, took aim at "a suboptimal management" of SJP's cost base, which it claimed was the primary cause of falling shareholder value.