St James's Place shares plunge 30% after dismal year and dividend cut

St James’s Place (LSE: STJ) shares nosedived 30% on Wednesday, becoming the worst performer on the FTSE 100 after the company reported a loss-making year and slashed its dividend by more than half.

The wealth manager’s share price has plummeted 66% in the past year, significantly exceeding the 2.8% decline of the FTSE 100 index over the same period.

While total funds under management increased by 13% to £168.2 billion in 2023, new client inflows dropped by 48% compared to the previous year. Moreover, the company swung to an annual pre-tax loss of £4.5 million, compared to a profit of £503.9 million in 2022.

St James’s Place attributed the poor performance to a review of its historical client servicing practices, resulting in provisions for potential client refunds. However, CEO Mark FitzPatrick assured shareholders that the issue is “historic” and the company is prepared for the future.

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Despite the challenges, FitzPatrick remains optimistic about the long-term prospects of the financial advice industry, citing the company’s “scale advantage, a strong partnership of advisers, and an investment approach that delivers for clients.”

To reflect the financial situation, the company significantly reduced its dividend payout, with a final dividend of 8.00 pence per share compared to 37.19 pence last year. The now company plans to fix the annual dividend at 18.0 pence per share for the next three years, with share buybacks making up the remaining returns. The company expects to gradually increase the cash component of the dividend in the future.