Abrdn cuts outflows and acquires AI business
Sign of the times: new branding at offices in St Andrew Square (pic: Terry Murden)
Abrdn, formerly Standard Life Aberdeen, said it has reduced net outflows as it unveiled the acquisition of an AI business.
The Edinburgh-based wealth manager said net outflows for the half year reduced to £5.6bn with AUMA broadly flat at £532bn (FY 2020: £535bn).
It posted a 52% increase in adjusted operating profit for the the first six months to £160m against £105m last time. Profit before tax came in at £113m against a loss of £148m in the corresponding period in 2020.
The interim dividend is held at 7.3p.
Abrdn is buying Exo Investing from Nucoro for an undisclosed sum. It said acquisition will help it develop an industry leading technology solution for investors, powered by the Nucoro Platform. It is expected to complete in Q4 2021.
Chief executive Stephen Bird, speaking about the results, said: “We have made a strong start to the year and our three-year growth plan.”
“We have made a strong start to the year and our three-year growth plan.
Stephen Bird: strong start
“These results, the first as abrdn plc, show a 52% increase in adjusted operating profit. Each of our three growth vectors have delivered higher revenue and profits, contributing to the highest overall rates of growth since the merger.
“Our strategy is about focusing on client needs. The improved flows into our strategically-important products and services show that we are answering client demand. The majority of the outflows that we are seeing are lower margin.
“Low interest rates and central bank interventions have created supportive market conditions from which we have benefited. Market volatility is expected to continue due to COVID-19 and its unequal effects in different parts of the world.
“We have made good progress in simplifying and focusing our business. The leadership team is now in place to drive the growth we seek through our strategic priorities. Our capital strength gives us the ability to invest in these priorities.
“We have a clarity of focus under our new brand and are better positioned to have impact at scale as a global business. We are at the beginning of the journey and we are moving at pace to build our new future.”
On the acquisition he 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.”
Rebrand ‘fully embraced‘
In a conference call Mr Bird said the controversial re-brand had been well-received by staff and clients.
“The trolls are not our clients.. but the clients we get have fully embraced it,” he said.
“Andy Briggs at Phoenix said it is modern, bold and digital, and more importantly it brings the teams together.
“We have had a phenomenal response from employees. We are very happy with it.”
He said the move had reduced five brands to one and “now we are spending money on one.”
John Moore, senior investment manager at Brewin Dolphin, said: “There are number of positives in today’s results from Abrdn, following a tricky period of restructuring, cost-cutting, and rebranding.
“The reduction in net outflows, improved margin, and increase to profits, in particular, look positive, while the dividend remains in line with plans and is among the highest on the FTSE 100 – even after it was re-based last year.
“On paper, the shares look too cheap relative to the sum of Abrdn’s parts, which reflects worries about the company’s future direction in a rapidly changing and consolidating sector, as well as the continued pressure from a wider investor shift from active to passive investing.
“There are some positive signs, but despite some big moves over the last few years, there remain strategic questions over what is next for Abrdn.”
Half year results 2021
Strong start to the year, creating momentum for our growth ambitions
· Fee based revenue 7% higher and adjusted operating profit 52% higher than prior year which are the highest rates of growth since merger.
· Net outflows reduced to £5.6bn, including liquidity net outflows of £3.7bn. Excluding liquidity flows, which are volatile, net outflows were £1.9bn representing a significant improvement over prior periods and less than 10% of outflows at the low point in H2 2018.
· Consequently the impact on revenue from net outflows (excluding LBG) is less than 0.5% compared with 3% in H1 2020.
· AUMA of £532bn (FY 2020: £535bn) broadly flat as reductions due to flows and corporate actions were partially offset by positive market movements.
· Delivered improved operational leverage with cost/income ratio of 79%, 6ppts lower than prior year.
· Higher adjusted operating profits in all vectors – 61% higher in Adviser, 33% higher in Investments and Personal has recorded a small profit for first time.
· IFRS profit before tax of £113m, reflecting higher adjusted operating profit and significantly lower impairments than H1 2020.
· Adjusted diluted EPS of 7.0p is 3.7p higher, benefiting from the increase in adjusted profit after tax and the share buybacks in 2020.
· Adjusted capital generation increased by £73m to £176m, reflecting strong profit performance.
· Strengthened capital position with surplus regulatory capital increasing to £2.8bn (FY 2020: £2.3bn), including £0.7bn benefit from sale of 4.99% in HDFC Life.
· Interim dividend of 7.3p in line with our dividend policy.
Good progress in our growth vectors
· Gross flows (excluding liquidity) in Institutional and Wholesale were 21% higher than H1 2020 at £20.0bn.
· Institutional and Wholesale has seen best net flows performance (excluding liquidity) since merger of (£0.8bn).
· Liquidity gross flow in Institutional and Wholesale reduced from £9bn in H1 2020 to £2bn in H1 2021 reflecting client response to volatile markets.
· Strong client demand for private markets1 investments drove net inflows to £3.2bn, a 10-fold increase on prior year.
· Investment performance is 66% of AUM above benchmark over three years (FY 2020: 66%).
· Strengthened ESG product offering with launch of range of SFDR Article 9 climate funds.
· Adviser net flows increased to £2.0bn (H1 2020: £1.1bn), the highest flows in three years. Launched new adviser experience programme to accelerate our market-leading position.
· Personal had record net flows of £0.5bn with Aberdeen Standard Capital reaching record AUMA of £8.7bn.
Simplified the business, investing to focus on strategic priorities and client needs
· Changed company name and rebranded to abrdn plc in July.
· Achieved major milestone in investment platform integration with over 1,300 portfolios and c£460bn of AUM migrated onto one investment platform in July. Remain on track to deliver targeted £400m of synergies by end 2021.
· Continued to simplify the business by completing sale of Parmenion and Nordics real estate business and exiting from the Indonesian market.
· Modernised our real assets franchise by completing the acquisition of a majority interest in Tritax.
· Simplified and extended our strategic partnership with Phoenix as announced in February.