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CEO blames economic and political newsflow

Profits slide as investor sentiment weakens at Aberdeen

martin-gilbert-newInvestors have continued to withdraw funds from Aberdeen Asset Management, hitting revenue and profit for the year.

Chief executive Martin Gilbert (pictured) blamed “economic and political newsflow”. He said political events of the last year “have made managing money very difficult”.

However, he added that Aberdeen’s broad range of investment capabilities and global distribution platform “means we are well placed to address these challenges and also benefit from the opportunities they create.”

The group will continue to cut costs after seeing net outflow of £32.8 billion, which included £8 billion of multi asset and quantitative investment outflows from lower margin insurance books, some of which are in long-term run-off.

The level of equities outflows declined steadily throughout the year, although the company still expects some fluctuation from quarter to quarter.

Chairman Simon Troughton said: “We will have outflows in the first quarter of 2017 from two lower margin, but large blocks of assets under management.

“It has been pleasing to see more positive investor sentiment towards emerging markets as the year progressed and, while industry flows have initially favoured passive and Exchange Traded Funds strategies, we saw healthy net inflows to our emerging markets equities in the final quarter.”

Underlying profit before tax fell from £491.6 million to £352.7m on a 14% fall in net revenue to £1,007.1m (2015: £1,169m). Recurring management fee income was also 14% lower.

The company is recommending a standstill final dividend of 12p per share (2015: 12p), making 19.5p for the full year (2015: 19.5p).

Mr Troughton said “We have implemented the first £50 million of our cost efficiency programme during the year and, on a constant currency basis, the phasing of these savings has reduced 2016 costs by £28 million.

On the Brexit issue he said: “Until the negotiation begins formally, expected by the end of March 2017, the terms of the withdrawal and any impact will be largely unknown.

“We do not expect either our non-UK or UK businesses to be affected in a substantive way by the result of the referendum, although there may be regulatory and/or legal changes in the longer term.

“Our principal cross-border fund range for European investors outside the UK has been domiciled in Luxembourg for many years.

“Beyond the fund range, the core issue is how we will be able to provide our investment management skills from the UK into the EU market – whether through the benefit of passporting, acceptance that the UK forms an ‘equivalent’ regime or through co-operation agreements with member states.”

He added: “Future political and economic events, including the UK’s negotiations to exit the EU, the start of President-elect Trump’s term in office and European elections, will contribute to ongoing volatility in global markets in the short term.

“However, until there is greater clarity, it is difficult to predict the impact on markets over the medium and longer term. We will not allow any such volatility to distract us from our long term approach to investing, and we remain well positioned to identify and grasp the opportunities that may arise to deliver further profitable growth.”

Mr Troughton said the asset management sector is facing three head winds: fee pressure, increased investment in technology and regulatory capital requirements.

“We will continue to seek further cost efficiencies, whilst also being prepared to make appropriate investment in innovation and otherwise supporting the future growth of the business and motivating our diverse workforce.”

Highlights 

·         ·Net revenue is down 14% to £1,007.1 million (2015: £1,169.0 million)

·         ·Underlying profit before tax decreased to £352.7 million (2015: £491.6 million)

·         ·Strong year-end net cash position of £548.8 million (2015: £567.7 million)

·         ·Final dividend of 12.0p per share (2015: 12.0p), making 19.5p for the full year (2015: 19.5p)

·         ·AuM £312.1 billion (2015: £283.7 billion)

·         ·Product diversification and cost discipline progress in line with strategy

 

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