St James’s Place reported a big jump in cash profits in the first half, allowing it to raise its interim dividend by more than half as it reaps the benefits of a big expansion in its asset base several years ago.
David Bellamy, chief executive, said the company was seeing a “correction” in its statutory earnings and dividend pay-out from its expansion five to six years ago, while it continued to attract a good inflow in spite of market volatility.
“The build-up of funds under management over the past five years is now starting to generate stronger cash flows,” he said. “The growth in IFRS [statutory] profits is more of a correction, like we have been doing with the dividend.”
St James’s Place raised its interim dividend by 58 per cent to 3.2p after pre-tax profits for the first six months rose 52 per cent to £55.3m from £36.3m in the same period last year.
For the full year last year, IFRS profits, which are close to cash and so important for dividend payments, grew 69 per cent to £84.2m.
Mr Bellamy said profits were unlikely to keep growing at such a pace, but that shareholders could expect a significant increase in the final dividend this year as the company intended to set a 60-40 split between the full-year and interim payments.
The company, which sells life and pensions products through a network of advisers across the country, is 60 per cent owned by Lloyds Bank and has long been subject to speculation about when the stake might be sold.
Mr Bellamy said on Thursday that he had heard nothing more from the bank about its intentions. At the Lloyds strategy update last month, António Horta-Osório, chief executive, would say only that he liked the business.
St James’s Place grew funds under management by £2.1bn during the half, £1.7bn of which was net inflows from new business. New business sales were up 15 per cent at £335.6m, while profits on an embedded value basis, which show the future profitability of an insurance company, were 13 per cent higher at £183.6m.
Analysts said the results, which were in line with expectations, demonstrated the group’s resilience in tough markets. “[The] results highlight that SJP is not dependent on financial markets for growth, that operating performance remains positive, and that it is capable of translating this into improved cash returns for shareholders,” said Robin Buckley at Deutsche Bank. “Given current market volatility we expect these characteristics to remain in demand.”
The stock slipped 1.1p to 356p.