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Categorized | Financial

St James’s Place dividend to boost Lloyds

Posted on February 28, 2013

Shares in St James’s Place hit all-time highs after the wealth-manager-cum-life-assurer disclosed plans to lift its dividend by a third – a decision that will give shareholder Lloyds Banking Group a £50m annual cash payout.

The FTSE 250 company, in which state-backed Lloyds holds a 57 per cent stake, told investors to expect a similar dividend increase later this year, on the back of fresh inflows of client money.

    Presenting a 23 per cent rise in annual pre-tax profits to £135m, David Bellamy, chief executive, indicated that the company’s close relationships with wealthy clients had protected it from the woes afflicting the wider financial services sector.

    Vivek Raja, an analyst at Oriel Securities, said that these improving results strengthened the argument for Lloyds holding on to its stake in St James’s Place, which it inherited through its acquisition of HBOS in 2008.

    “The returns are getting better – and they are certainly better for Lloyd’s group returns,” he said.

    For at least two years, analysts have been speculating that Lloyds was preparing to offload its holding. The bank discloses annual results on Friday.

    Funds under management at St James’s Place, which sells a range of financial products to more than 200,000 people, rose more than a fifth in 2012 to £34.8bn.

    On the back of rising income garnered from the assets it manages, the group generated £92m worth of cash in 2012, up 37 per cent on a year ago.

    St James’s Place was benefiting from business written in previous years, said Mr Bellamy, explaining that distribution costs and other overheads tend to minimise initial cash generation.

    The company said it would pay a final dividend of 6.39p a share, giving a payout for the year of 10.64p – up 33 per cent on a year earlier. This is payable from diluted earnings per share, which were steady at 21.2p.

    Mr Bellamy indicated that the company might consider setting up a limited overseas distribution capability to serve wealthy British expatriates in places such as Hong Kong.

    St James’s Place said it was well placed to benefit from this year’s regulatory shake-up in the market for financial advice, as it has been hiring former independent financial advisers whose business has been by a new ban on commission payments.

    The number of St James’s Place partners – in effect sales agents – rose 8 per cent to 1,790 last year.

    Shares in St James’s Place rose 1.78p to 486.48p.