St. James's Place - embracing change

St. James’s Place: This company seems to be humming along like a well-oiled machine at the moment. Last year was very significant as they saw long time historical shareholder Lloyds Banking Group reverse out of their controlling stake, to leave St. James’s as a true independent. The group has benefitted in recent years from numerous regulatory changes that have pushed many mom and pop IFA’s into an early retirement. At the same time the upper end of the mass affluent market has had to face repeated changes to personal tax and pension rules that has made proper advice ever more necessary. They are continually looking to improve their offering and in an interesting move they are now going to offer banking services to customers, piggy-backed off the challenger Metro Bank.

In these better than expected annual results to 31^st December 2014 they have reached funds under management of £52bn (up from £44.3bn last year) and there are now 10.5% more advisers at 2835. The EEV operating profits are up 29% to £596.4m, whilst the EEV net asset value is up 14% to 657.9p per share. As the books of business mature the cash stream is building and the final dividend has been hiked a whopping 50% to 14.37p, to total 23.3p, up 46% year-on-year. They state that this is 70% of underlying cash and that in future years they will move this to 75%. This implies another useful rise in the dividend next year and beyond.

For investors, the concern that Lloyds had a controlling stake in the group has now gone away. Saturation is another concern, given that as they passed through the 1000 adviser barrier some years ago people wondered how many ‘St. Jimmies’ the market could absorb. The concentration of the IFA market seems to have pushed this concern away for now though. Excellent share price performance means that at 935p (up again today) they trade at 1.42x EEV NAV, which seems a stretch, even though others also trade at hefty premia too. Even though the dividend is moving ahead at a clip the share price means that the yield is a modest 2.5% historic and say even 20% growth next year would only take the dividend to 28p for a yield of 3.0%. It feels as if a lot of good news is in the price now, but with plenty of opportunity in the years ahead, some will still feel like clambering on board now. The more patient will wait for quieter days or duller markets before jumping in. (Neil Cumming^, 25^th February 2015)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower