The St James’s Place (LSE: STJ) share price has had a terrible time in the past few years, down 60% since late 2021.
And it got an extra kicking in February when the firm’s FY results update revealed overcharging complaints. It had to set aside £426m to deal with possible refunds.
But the share price has gradually come back up. And on 30 July, it spiked up 25% in morning trading. Here’s what’s happening.
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New growth targets
It’s all down to an H1 results release from the financial services firm. But it’s not just the results that have generated the excitement. No, an extra boost came from new cost-cutting and recovery plans.
Gross inflows in the half rose from £8bn to £8.5bn. Net inflows of £1.9bn helped lift funds under management to a record of £182bn.
The firm posted an IFRS profit after tax of £165m, up a bit from £162m in H1 2023.
The interim dividend came in at 6p per share. But it’s being boosted by a £32.9m share buyback, effectively doubling the cash being returned.
The board expects total returns for 2024 to come in at the equivalent of 18p per share. That’s still well down from the 52.78p dividends paid in 2022 though.
The way ahead
But what about the future? The new plan aims to reach cost savings of £100m a year by 2027. After expected costs of £80m to implement, the board anticipates “cumulative net savings of approaching £500 million through to 2030”.
About half the achieved savings are marked for reinvestment back into the business, “supporting strategic initiatives and underpinning long-term growth ambitions”.
Those ambitions do seem to be bold. The company hopes to “double the underlying cash result from 2023 to 2030”.
What might that mean for the stock valuation?
Cheap as chips?
Prior to this latest news, broker forecasts had St James’s Place shares priced at just eight times forward earnings for 2024. That alone looks cheap, though it will take into account the possible outcomes of those customer complaints.
If a doubling of the company’s underlying cash result should lead to a similar boost to earnings per share (EPS), that could imply a price-to-earnings (P/E) multiple of only four by 2023.
A doubling like that might not work through all the way to EPS. And 2030’s still a very long way off from a financial perspective. There’s still plenty of time there for a repeat of the 2020 stock market crash and another recovery, for example.
Volatility ahead?
We still need to see how the new customer charging structures will work out. And how much effect it might all have on long-term profitability. And until we see some of the recovery promise turn into real profits and cash, I reckon the share price could remain volatile.
But St James’s Place has just climbed into my top 10 candidates for my next Stocks and Shares ISA buy.
