More than half a billion pounds was erased from the stock market value of St James’s Place after Britain’s biggest wealth manager revealed it was taking a £426 million hit to cover potential refunds to aggrieved customers.
Shares in the FTSE 100 company closed down 115¼p, or 18.6 per cent, at 505¾p, having earlier dropped by as much as 33 per cent, after the group disclosed the unexpected provision in its annual results, which pushed the company to an annual loss and forced it to cut its dividend.
It set aside the sum after last year experiencing a “marked increase” in complaints from clients, partly fuelled by claims management companies, about the service they had received from the wealth manager.
St James’s Place said it had “engaged extensively” with the Financial Conduct Authority, the City regulator, about the matter and had arrived at £426 million as its “best estimate” for the cost of refunds. This provision hit its results, with the group falling to a £9.9 million post-tax loss for last year from a £407.2 million profit in 2022.
In a further blow to investors, St James’s Place also cut its final dividend for 2023 to 8p a share from 37.19p a year earlier. Its shares plunged, leaving the company valued at less than £2.8 billion.
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It is just one in a series of setbacks faced by St James’s Place since last summer, after the group was twice forced to change its charging structure in the face of regulatory pressure over fees.
Analysts at Bank of America said the latest blow was the “culmination of an annus horribilis” for the business, which is based in Cirencester, Gloucestershire, and oversees £168.2 billion for almost a million clients. As well as cutting its 2023 dividend, St James’s Place also warned that it was resetting future cash returns to shareholders to a lower percentage of earnings than previous years, to reflect both the provision and the financial impact of its new fees.
It significantly tarnishes the company’s first set of results under Mark FitzPatrick, who succeeded Andrew Croft as chief executive at the beginning of December.
“We recognise that this is a disappointing outcome for everyone,” he said.
