By Scott Wright
THE financial services giant formerly known as Standard Life Aberdeen has declared it has made a “strong start” to its three-year transformation plan as it continued to staunch outflows and returned to profit in the first half.
Reporting its first results since changing its name to Abrdn in a controversial rebranding in April, the company said net outflows fell to £5.6 billion, compared with £24.8bn in the first half of last year. Assets under management and administration dipped marginally to £532bn from £535bn.
Abrdn cited the benefit of the fall in client fund withdrawals as fee-based revenue increased by seven per cent to £755m. The company booked a first-half pre-tax profit of £113m, following a loss of £498m at the same stage last year, while reporting that operating profit was 52% higher at £160m.
Abrdn said the growth in revenue and profits in the first half had been at their highest rates since the £11bn merger of Standard Life and Aberdeen Asset Management in 2017. The company suffered continual net outflows in the immediate aftermath of that deal, which resulted in Keith Skeoch and Martin Gilbert running the business as joint chief executives for a period. More recently the net outflows have slowed.
Yesterday’s results come after current chief executive Stephen Bird, who succeeded Mr Skeoch in September 2020, unveiled a simplified strategy for the investment giant in March. The three-year plan aims to grow the business by focusing on three “vectors” – global asset management, the company’s UK financial adviser technology platform, and its UK wealth and savings business. It has a particular focus on the UK and Asia.
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Mr Bird said yesterday: “We have made a strong start to the year and our three-year growth plan. Each of our three growth vectors have delivered higher revenue and profits, contributing to the highest overall rates of growth since the merger.”
He added: “The improved flows into our strategically important products and services show that we are answering client demand. The majority of the outflows we are seeing are lower margin.”
Nicholas Hyett, equity analyst at Hargreaves Lansdown: “Abrdn’s name change has coincided with a revenue recovery for the long suffering asset management group.
“Assets continue to leak out the door, but the flood has become a trickle. Positive trends in the wider market means total assets under management have held up well, and more assets in lucrative emerging market equity and property funds, together with a strong result in advisory, has boosted overall revenues. Meanwhile lower costs, helped by the pandemic but also reflecting synergies from the 2017 merger, mean operating profits are flying.
“However, there’s more work to do before Abrdn is on really stable footing. Dividends continue to exceed profits and without the proceeds from selling stakes in HDFC and Parmenion, Abrdn would have been eating into its capital reserves this half. The group’s planning a significant revenue inflection by the end of 2023, and really that can’t come soon enough.”
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The first half saw Abrdn take steps to simplify its business with the sale of Parmenion, an adviser platform, and the Nordics real estate business– raising around £100m. It exited the Indonesian market and further trimmed its stake in HDFC Life, an India-based insurance business.
The company acquired a majority interest in Tritax, a specialist logistics fund manager, which has around £5.1bn of assets under management throughout the UK and Europe.
In February, the historic Standard Life brand was sold to Phoenix Group, which three years earlier had acquired the pensions business that operates under the name. The sale of the name presaged the development of the Abrdn brand identity.
Abrdn declared an interim dividend of 7.3p per share yesterday.
The first-half results were unveiled as Abrdn announced its acquisition of Exo Investing, an artificial intelligence powered wealth management solution, from Nucoro. Exo will offer the business a “world-class, AI digital investing capabilities” via an app.
Mr Bird said: “This is an exciting and significant step forward in building out our Personal vector capabilities. Exo was the first of its kind to offer a fully automated wealth management platform, leveraging machine learning to feed into portfolio decision-making. There is a downward pressure on fees, changing customer expectations and increasing regulatory requirements. It’s important to address these issues by providing a highly-scalable, next-generation service to investors.”
Shares closed down 2.3% at 290.8p.
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