Shares in abrdn, the financial services heavyweight, closed down nearly 12% last night, wiping nearly £500 million from its worth, after its investment division felt the impact of market volatility.
The Edinburgh-based company reported net outflows of £4.4 billion from its investment funds in the first six months of the year, with assets under management dipping to £495.7bn from £500bn.
Net operating revenue from investment activity was 15% lower at £466m, with adjusted operating profit down 66% to £26m, amid lower AUM and net outflows. abrdn noted that clients had moved assets from equity funds to debt products and cash as interest rates rose during the half.
Those challenges offset revenue growth in both abrdn’s adviser division and personal business, the latter including interactive investor (ii), the subscription-based direct investment platform which it acquired for £1.5bn in December 2021.
Net operating revenue within the adviser business, which provides solutions to wealth managers and financial advisers, grew by 12% to £103m, and profits increased by 29% to £49m as it benefited from higher interest rates.
And a six-month contribution from ii helped abrdn's personal division increase net operating revenue by 162% to £152m.
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Overall, adjusted operating profit increased by 10% to £127m, as net operating revenue rose by 4% to £721m.
The company announced an interim dividend of 7.3p per share, in line with last year, and extended its share buyback programme to £300 million, up from £150m, underpinned by £535m of cash generated from the sale of stakes in Indian businesses HDFC Life and HDFC Asset Management.
It also said it was on track to make £75m of cost savings this year.
Chief executive Stephen Bird said: “The first six months of 2023 were an extremely active period for our business. We are continuing to move at pace to execute our strategy in spite of what is a tough market backdrop.
"Thanks to the diversity and resilience we have built into our business with the acquisition of interactive investor last year we grew revenues by 4% revenue year-on-year, and operating profits grew by 10%. The profits [were] delivered by a strong performance across personal and advisor, and these have helped offset the impact of market conditions within the investment business.”
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Mr Bird, who succeeded Keith Skeoch at the helm in 2020 and took the company through a controversial name change to abrdn from Standard Life Aberdeen in 2021, said the period had seen the completion of “significant” technology upgrades at its personal and adviser divisions, which he said would support “future growth”.
“And we made strong progress in investments,” he added. “We have continued to reshape the business at pace against an ongoing challenging market backdrop, and we are focusing on our areas of strength. Our sales pipeline is strong and on a total assets basis, we returned to net inflows in the second quarter.
“We are winning mandates in the areas of focus: credit, emerging markets, and real estate. Investment performance is strong in those key areas and our new CIO, Peter Branner, is having a big impact already.
“We are selling well, gross inflows were consistent at £22bn in the first half, and the cost reduction plan is on track. We said we would take out £75m of costs this year and we are very much on plan to do that.”
However, despite the progress, Mr Bird said there will be an unspecified number of redudancies as the firm continues to reorganise it financial planning team. A spokeswoman was unable to provide an exact number though said the majority of redundancies would be outside Scotland.
abrdn employs in the region 2,000 and 2,500 people in Edinburgh.
“We have been making some of our financial planning team redundant,” Mr Bird said. “Obviously, we are very sensitive about how we have done the surgery to that business. But if you look at the total quantum of our employment in Scotland, it is a marginal change.”
Mr Bird highlighted the company’s recent acquisition of Tekla Capital, a US healthcare and biotech investment business, and pledged that more of these “bolt-on” deals would follow. He said: “These kind of bolt-on acquisitions indicate where we are heading as a company. We are establishing abrdn as a global specialist investor.”
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Asked about recent changes to the company’s presence in Edinburgh, Mr Bird noted that abrdn had closed one of its two city centre offices, 6 St Andrew Square, and shifted the bulk of its team to its premises at 1 George Street. The latter, which is now its headquarters, was refurbished extensively during the pandemic.
The company, which has an office in Bishopsgtate, London, has also shifted its advisor business in Edinburgh to an office in The Gyle.
Meanwhile, referring to the recent decision to cease operating its global absolute returns strategies (GARS) fund, Mr Bird said the move to integrate GARS with its multi-asset teams had created synergies and lowered the cost of operations. GARS had become a “relatively small piece of our business”, he said.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Abrdn’s results are a real mixed bag, but there are some tentative signs its move towards diversification is beginning to pay off.
“The closure of its Global Absolute Return Strategies fund and the selling down of its Indian investments mark the end of an era as it looks to build a modern financial services business. The latter is helping to fund further shareholder returns, with the share buyback programme being extended.
"The addition of interactive investor is proving to be a major part of abrdn’s transformation plan, while further acquisitions will bolster its offering."
Shares closed the day down 11.67%, or 25.5p, at 193p.
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