The company reiterated its confidence in the Financial Planning division and its future in its annual results today which showed higher profits and revenue overall for Charles Stanley.
Despite the progress operating losses at the Financial Planning arm increased to £5.1m from £3.4m the previous year.
Revenues for its Financial Planning division grew by 13.7% but costs also increased due to increased recruitment of Financial Planners and the 24-month lag in seeing revenue from new Financial Planning recruits, the firm reported.
The company said of the Financial Planning arm: “However, costs have also increased as a result of the recruitment of additional planners who typically take up to 24 months to achieve full productivity, and this has led to a reduced contribution, and after the absorption of a larger share of central overheads, a reported operating loss of £5.1m (2019: £3.4m).”
Despite the losses at the Financial Planning division the company will continue to invest in Financial Planning and sees positive long term prospects.
The company said: “The new financial year is likely to be challenging and there are significant uncertainties ahead, reflecting the still unfolding effects of the Covid-19 pandemic. Market values have declined sharply and interest rates have been cut. However, the steep market sell-off has led to greater market volatility and increased trading, so commission income is currently holding up well.
“There are also opportunities for us in areas such as Financial Planning as people seek to deal with the current change in circumstances, and at Charles Stanley Direct, reflecting the increased move to digital services.”
Financial Planning is the smallest of the three main division at Charles Stanley with the lion’s share of revenue produced by the Investment Management Services arm.
Total revenue for the company was up 11.5% to £173m and pre-tax profit was up 45.1% to £19.3m. Funds under Management and Administration (FuMA) at the year end were down by nearly £4bn from £24.1bn to £20.2bn due to the impact of the Coronavirus pandemic on markets.
A final dividend of 6p per share is proposed, pushing the total dividend to 9p per share (2019: 8.75 pence per share).
Paul Abberley, chief executive, said: "These strong results reflect the benefits of our ongoing transformation programme. In particular, the substantial rise in profits was achieved by the repricing exercise completed last year to bring our rates into line with market.
“Covid-19 is now the major challenge for everyone globally. I am pleased to report that the group responded swiftly to safeguard the well-being of all our staff through remote-working while also maintaining a very high level of service to clients.
“Trading results for the new financial year are expected to be significantly impacted by the crisis, with lower stock market valuations and reduced interest rates. However, Charles Stanley is well positioned to navigate through the challenges and to emerge strongly. We have a very robust balance sheet with significant cash balances, and we will continue to focus on transformation and growth initiatives."