Divdend Frozen At Charles Stanley Group plc Following First-Half Loss

Restructuring costs plunge investment management firm Charles Stanley Group plc (LON: CAY) into a first-half loss.

Zach Coffell

Zach’s investment career began on his 20th birthday when his father gave him a copy of The Intelligent Investor, by Benjamin Graham, and the Fool.co.uk website address! He believes in buying quality companies with durable competitive advantages and his ideal holding period is forever. Zach owns shares in: boohoo.com (LSE: BOO), Craneware (LSE: CRW), GlaxoSmithKline (LSE: GSK), Judges Scienfitic (LSE: JDG), PZ Cussons (LSE: PZC), Somero (LSE: SOM)

Published 27 November, 2014 11:07 am GMT

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Shares in investment management group Charles Stanley (LSE: CAY) fell as much as 5% in early trading after the company reported a loss for the first half. It has already reported two profit warnings over the period, and its share price is down nearly 35% in 2014.

Administrative costs jumped 17.7% as the company invested in a major upgrade to systems and processes to meet the rising expectations of clients and regulators. A further £6.3m was incurred as the company took on more employees to accommodate the changes in systems.

Management pointed out that if these one off costs were excluded from results, the company would not have reported a half-year loss of £3.9m but a profit of £1.5m, still significantly below the £4.9m reported in the same period last year.

In light of the fall in profits, the company has maintained its interim dividend at 3p per share.

Charles Stanley also reported the effects of a re-balancing of their charging structure. The company now places a greater emphasis on investment management fees while charging lower commission rates on transactions. As a result, Investment management experienced a strong growth in fee income which was offset by lower commission and a decline in income from Administered clients. The advisory dealing service reported an 8.3% loss in assets under management as the structure change caused attrition amongst clients with lower levels of investment assets.

CEO David Howard announced he was stepping down after a “busy 42 years,” and will take up the position of Non-Executive Chairman of the company. Paul Abberley, CIO since June, has been appointed CEO. Prior to his employment at Charles Stanley Group, Abberley was the Acting CEO of Aviva Investors and a member of the Aviva Group Executive Committee. Mr Abberley has already begun a strategic review of the business to identify the best route to enhance the profitability of the Group.

Management warned that without either an uptick in trading levels or market volatility, margins are likely to remain under pressure in the second half. In his last results release before taking on a non-executive role, Sir David Howard said the investments Charles Stanley was making “will lead to a further enhancement in the high quality of service to our clients, as well as restoring the company’s profitability.”