Profits set to fall at Charles Stanley on market chaos

The group, which has a Scottish office in Edinburgh, said its securities division in particular had been adversely affected by the dire market conditions.

The FTSE 100 Index had its worst quarter for nine years in the three months to September, affecting commissions earned on share trading as big investors shied away from the market.

Corporate finance and advisory fees have also been weak as company deals and new listings have dried up because of the uncertainty.

Stanley’s private client and wealth management divisions, which look after and invest money on behalf of individuals, did better and had a “solid” half.

These businesses, which include Birmingham-based wealth manager Jobson James and Beverley-based investment group Garrison, saw investment management fees and financial services revenue ahead of last year.

As a result, group revenues overall will be similar to the £59.7 million seen in last year’s first half, though interim profits will be below the £7.3m previously reported.

The firm said: “Whilst elements of our operating cost base have been reduced in line with the market volatility and decline, the effect of inflation on our fixed costs means that profits overall are below those of the equivalent period for last year.”

Stanley, which at the end of June had more than £15 billion of investment funds under management, said it still sees the opportunity for growth year-on-year but added that current market conditions make it difficult to see very far ahead.

One of the company’s top five institutional investors, who declined to be named, said the update had been expected.

“It’s no surprise, they’ve been heavily impacted by the market downturn and I’m sure they won’t be the last,” he commented.

The group acquired Jobson James in May to boost its presence in the Midlands and group finance director James Rawlingson said that the current uncertainty could also offer up other potential acquisitions to boost its regional network, which he added was key to its ability to access its private client customer base.

Another UK fund manager, City of London Investment, also yesterday blamed the market slump for a fall in assets under management by £600m to £2.9bn since the end of May.

In a statement, the firm, which specialises in emerging markets, said: “While this clearly impacts revenues adversely, the volatility has provided significant opportunities.”

The company also said that a number of its clients had taken advantage of lower prices to increase their investments in emerging markets.

City of London Investment said that it expects to maintain or increase its dividend during the current year unless there is a “further very significant deterioration in markets over the remainder of the year”.

Shares in Charles Stanley closed down 23.4p, or 8.7 per cent, at 245p.

City of London shares closed 13p, or 3.6 per cent, lower at 350p.