Cost target raised
Standard Life Aberdeen warns of turbulence as profits fall
Keith Skeoch: turbulence
Standard Life Aberdeen reported a fall in profits and revenue following outflows of funds and has warned of growing turbulence.
Adjusted profit before tax for the year came in at £584m, down 10% largely reflecting lower revenue.
Fee based income was £1.6 billion, down 13% reflecting impact of net outflows in 2018 and 2019.
The company now expects to deliver £400m of annualised synergies – £350m by end of 2020 and an additional £50m during 2021, at a total cost of £555m.
It has a strong surplus capital position of £1.7bn continues to support investment in the business and shareholder returns.
Keith Skeoch, chief executive, said the industry was dealing with turbulence made more complex by the coronavirus outbreak.
“We have seen growing momentum in the second half of the year across the business with improved investment performance and flows. We remain on track to deliver targeted synergies and have identified more we can deliver as we continue to reshape the business and sustain resilience.
“Our strong financial position, capital generation potential and focus on operational efficiency enables us to invest in the business to drive profitable revenue growth and shareholder return.
“The outlook for the markets and our industry in 2020 is turbulent with the additional complexity of COVID-19. Importantly we are focused on what we can control, namely delivering for our clients, customers, colleagues and shareholders; diversifying our revenues; investing for the future and maintaining financial discipline.”
Over £1bn has been returned to shareholders in dividends and share buybacks in 2019.
A final dividend of 14.3p is proposed, giving a full year dividend of 21.6p, in line with guidance.
The company said there has been an improvement in investment performance with 74%, 60% and 67% of AUM above benchmark over 1, 3 and 5 years, respectively.
Gross inflows are up 15% at £86.2bn. Net outflows were reduced to £17.4bn (excluding Lloyds Banking Group tranche withdrawals), a significant improvement on £40.9bn net outflows in 2018. AUMA of £544.6bn, up 6% (excluding LBG tranche withdrawals).
The cost/income ratio is 71%, weaker than 68% in 2018.
The company said: “We are focused on what we can control and will build a business that is fit for the future and well positioned to manage through the uncertainties ahead.”
John Moore, senior investment manager at Brewin Dolphin, said: “Net outflows continue for Standard Life Aberdeen and, coming up for three years since the merger, the business remains very much in transition. The share price has been hammered since the turn of the year, along with the wider market; but the foundations of a strong company are there if you take a long-term view.
“Standard Life Aberdeen has been rigid with its cost-cutting, while new outflows have slowed to a degree and, reflecting the optimism attached to this, the dividend remains in line with guidance. Nevertheless, until there is asset growth and better market conditions, investors in Standard Life Aberdeen will have to remain patient.”