St. James's Place Full Year Results 2023

Robust underlying financial performance impacted by one-off provision

Financial Highlights

• Robust underlying financial performance
  • Pre-tax Underlying cash result of £483.0 million (2022: £485.5 million) in line with prior year, reflecting growth in average FUM and management of controllable costs
  • Post-tax Underlying cash result of £392.4 million (2022: £410.1 million) reflects higher corporation tax rate in effect in 2023
• Post-tax Cash result of £68.7 million (2022: £410.1 million) significantly impacted by one-off Ongoing Service Evidence provision
  • Provision of £426.0 million pre-tax (£323.7 million post-tax) established for potential client refunds linked to the historic evidencing and delivery of ongoing servicing
• IFRS loss after tax £(9.9) million (2022: £407.2 million profit)
• EEV net asset value per share £14.11 (2022: £16.66)

Shareholder Distributions

• Final dividend of 8.00 pence per share (2022: 37.19 pence per share), resulting in full year dividend of 23.83 pence per share (2022: 52.78 pence per share)
• Change in future dividend guidance:
  • Going forward, total annual shareholder distributions will be set at 50% of the full year Underlying cash result
  • Annual distributions are expected to comprise a fixed full year dividend of 18.00 pence per share declared for each of FY2024, FY2025 and FY2026, with the balance of distributions delivered through share repurchases
  • As earnings trajectory improves during FY2027 and beyond, anticipate capacity to grow dividend proportion of total shareholder distributions
  • Revised approach balances the need to retain investment for growth while recognising the importance of returns to shareholders

Other

• Announced, in October 2023, the conclusion of a comprehensive review of our client charging model, and plans for the future of simple and comparable charging at SJP
• Achieved 3% net growth in qualified adviser numbers to 4,834

Mark FitzPatrick, Chief Executive Officer, commented:

““It has been a challenging backdrop for UK savers and investors, but it is at times like these that advice really makes a difference, helping people stay on course to meet their long-term financial goals. Against this background, the hard work of everyone in our SJP community to keep delivering for clients has driven a resilient business performance where we’ve achieved continued strong net inflows underpinned by high client retention, strong investment performance, and record funds under management. With expenses managed tightly in the context of a high inflation environment, our underlying financial performance has been robust and the pre-tax Underlying cash result is broadly unchanged year on year, albeit 4% lower on a post-tax basis due to the higher corporation tax rate in effect for 2023.

The Cash result for the year of £68.7 million (2022: £410.1 million) has been significantly impacted by an assessment into the evidencing and delivery of historic ongoing servicing and the provision we have established for potential client refunds. This work was undertaken following a significant increase in complaints, particularly in the latter part of 2023, mostly linked to the delivery of ongoing servicing. The assessment revealed that our evidence of ongoing client servicing was less complete in the years preceding investment into our Salesforce CRM system in 2021, and we have therefore made a provision for potential client refunds to address this. Looking forward, the investment we’ve made into Salesforce means we are confident this is a historic issue.

While our financial results have been significantly impacted by this legacy matter, the Board recognises the importance of returns to shareholders and is confident that sufficient capital and liquidity is available to deal with the financial impact of the provision. In light of this, the Board therefore proposes a final dividend of 8.00 pence per share (2022: 37.19 pence per share) to make a total of 23.83 pence per share for the full year (2022: 52.78 pence per share).

A combination of the provision we have established and an expected decrease in the level of profit growth in the next few years as we transition to our new charging structure, reduces our ability to invest for long term growth in our business over the next few years. Accordingly, the Board has decided to revise our approach to shareholder distributions. Going forward, the Board expects that total annual distributions will be set at 50% of the full year Underlying cash result. For the next three years this will comprise 18.00 pence per share in annual dividends declared, with the balance distributed through share repurchases.

Once our new charging structure is fully embedded, we anticipate that the business will be on an improving earnings trajectory during 2027 and beyond. The Board expects that distributing 50% of the Underlying cash result will continue to strike the right balance between investment for growth and returns to shareholders, while seeing shareholder distributions increase over time. The upward trajectory in profits should then provide the Board with options to grow the dividend element within the total return.

Overall, 2023 was a difficult year for SJP but we’ve faced into our challenges. We’ve raised our standards around both the delivery and evidencing of ongoing client servicing and we’ve announced changes across our business, including our charges structure, so that we’re in good shape for the future.

In the near-term, we expect the industry outlook to remain challenging given the pressures that clients continue to face. The near-term environment notwithstanding, the longer-term structural opportunity for the financial advice industry is hugely attractive. With scale advantage, a strong Partnership of advisers, and an investment approach that delivers for clients, we are very well placed to capture this opportunity and deliver value for all our stakeholders.”

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