Charles Stanley warns over hit from regulation and commission income
The City stalwart saw shares slump as much as 9% after cautioning it could struggle to meet full-year expectations due to upcoming “headwinds”.
Wealth manager Charles Stanley has warned surging costs of regulation and falling commission income could hit full-year results if trading activity does not improve.
The City stalwart saw shares slump as much as 9% at one stage after cautioning it could struggle to meet full-year expectations due to upcoming “headwinds”.
Charles Stanley said it would face surging costs from major new regulations over its second half, while commission income had also fallen in recent months.
The warning overshadowed half-year results showing a 53% jump in pre-tax profits to £6.9 million.
Chief executive Paul Abberley said: “There is an unusually high level of regulatory change being introduced in 2018 which is expected to give rise to an additional IT and process change cost in the second half of approximately £0.9 million.
“Secondly, although overall share trading volumes have been in line with our expectations, the commission income generated from it in recent months has been lower because of mix variances.”
He warned: “We will therefore need either a higher level of trading activity or other revenue increases to be generated in the second half in order to meet current market expectations.”
The industry is preparing for new regulations known as Mifid II and PRIIPS (packaged retail investment and insurance products), which both come into force in January.
But Mr Abberley said the group had been boosted by “favourable market conditions”, which the firm believes is likely to continue for the next six to 12 months at least.
This helped core business revenues rise 9.8% to £74 million in the six months to September 30, while funds under management lifted 1.3% to £24.3 billion.
Analyst Stuart Duncan, at Peel Hunt, trimmed his full-year profit forecasts for Charles Stanley after the group’s warning and added it could be cut further “given the importance of the fourth quarter for commission income”.