St James’s Place PLC (LON:STJ) (SJP) has found itself in the crosshairs of an activist investor, PrimeStone Capital, which delivered a letter to the company’s board on Monday demanding an overhaul of the firm’s cost base and an improvement on returns for shareholders.
In an open letter, PrimeStone unveiled a 1.2% stake in St James’s and said that the share price of the FTSE 100 wealth manager failed to reflect a doubling of client assets over the last five while also pointing to what it said was a “bloated” organisation structure, rising losses in the Asia business and excessive pay.
The investment firm added that while funds under management had expanded by 18% each year since 2015, the price of the shares had decline 7% while total shareholder returns stood at 2% annualised.
“The SJP business model has yielded best-in-class growth and retention of advisers, clients and assets. Unfortunately, however, it has failed to deliver meaningful value for shareholders over the last five years. This is especially disappointing given that client assets have doubled over this time”, PrimeStone said.
The activist investor went further, saying it believed the company could “more than double its share price” if its realised its full profit potential, proposing a number of initiatives including bringing its cost base down to the same level as its peers and improving financial communication with shareholders.
”SJP has delivered tremendous value for clients, advisers, employees and management … but not so much for shareholders over the last five years. It is time for the company to address its high cost base and change its culture in order to deliver its full value-creation potential to long-neglected owners. Far from coming at the expense of other stakeholders, we believe such a change will provide SJP’s clients and advisers with a leaner, more agile and more reactive SJP”, PrimeStone added.
Responding to the letter on Monday morning, St James’s Place said it “proactively engages with shareholders with regards to Group strategy and structure and looks forward to commencing a dialogue with PrimeStone in regard to the views outlined in its letter”.
The letter also comes ahead of a third quarter trading update due on Tuesday, which may provide further fuel for PrimeStone to pursue its overhaul proposals at the firm.
Shares in St James’s were 0.3% lower at 934.2p in late-afternoon trading on Monday.