Wealth unit sold

Market turmoil blamed as Abrdn slumps to loss

Stephen Bird
Stephen Bird: ‘We are building a stronger Abrdn’

Asset manager Abrdn slumped to a full-year pretax loss and reported a slide in client funds as it fell victim to global market turmoil.

The Edinburgh-based company posted a £615 million pretax loss for the year to the end of December compared to a £1.1 billion profit in the previous 12 months.

Assets under management fell 8% to £500bn from £542bn. However, shareholders will receive a 14.6 pence per share full-year dividend.

The company has agreed to sell its discretionary fund management arm Abrdn Capital to Liechenstein-based private bank LGT for £140m. The sale involves the transfer of around £6.1bn of assets and about 140 employees, the company said.

Abrdn Capital, previously Standard Life Wealth, operates as an investment management company offering wealth management and asset allocation. It also offers investment strategies, financial planning, and advisory services.

Brian McBride has advised that he will not seek re-election at the annual general meeting on 10 May and will stand down from that date as a non-executive director.

Shares in the company closed 11.2p (5.25%) higher at 224.6p, close to the day’s high of 225.6p.

But the outflow of funds means Stephen Bird, chief executive, has seen his bonus slashed by 62.4%.

Mr Bird, who took over in September 2020, received a total pay packet of £1.7m last year, against remuneration in 2021 of £2.8m.

Commenting on the results, he said 2022 had been “one of the toughest investing years in living memory”, but added the firm was resilient and had posted an annual profit on an adjusted operating basis of £263m. This is 19% lower than the previous year.

“We are building a stronger abrdn. As we exit year two of our three-year strategic plan, the structure of our group is now broadly set. We are increasingly well positioned for growth.

“In one of the toughest investing years in living memory, the resilience we have created in our business model helped us to deliver adjusted operating profit of £263m.

“Adviser and Personal, which benefited from the acquisition of ii, both delivered increased revenue and profits. This provided an important offset to the impact of market conditions on our Investments business.

“In Investments, gross flows excluding liquidity held up well at £49bn in spite of the considerably worse environment. Underlying net outflows were 3% of opening AUMA, excluding the last LBG withdrawals and liquidity, and were concentrated in equities.

“We are making progress on our commitment to focus on areas of scale and strength, and to simplify and reduce costs in the business.

“Overall, we are increasingly well positioned for the cycle turning. Our three businesses work well together and we are building the linkages that will create value across the group.

“Our capital position is strong and we are reinvesting into growth areas, while providing returns to shareholders. We look to the year ahead with confidence and a clear focus on delivering for clients and our wider stakeholders.”

Market reaction

John Moore, senior investment manager at RBC Brewin Dolphin, said: “abrdn’s results were always going to be messy after a period of huge changes at its businesses and volatile markets last year.

“While the numbers show a company in flux, the strategic plan continues to reshape the business – the sale of the discretionary fund management division and hollow-out of the managed portfolio service offer another step toward better scale and simplification.  

“Stakes in Phoenix and HDFC Life Insurance, along with reducing the company’s overall share count, could be next up for consideration. abrdn’s share price has been strong on the back of the company becoming a recovery play at the tail end of last year, which boomeranged it back into the FTSE 100.

“Whether it can remain in the UK’s top index will depend on the company’s ability to continue with its strategic plan and re-shaping of the business, while keeping investors on side through its dividend policy and ongoing share buybacks.”

Rae Maile at Panmure Gordon says: “There are many layers to the abrdn results, not all (many?) of them good. At a headline level the company can claim revenues and PBT ahead of estimates on flows fractionally better than feared.

“Look a little harder and those flows owed much to £4.5bn of cash/liquidity inflows in H2; the revenue and profits benefited from interest income at interactive investors which the market has had a problem with elsewhere; and there was £9m of compensation-related revenues (and presumably profits) from Phoenix.

“The goodwill for ii might not have been written down, but Finimize was. The company continues to cut costs, but it has to. A feeling that there is direction and purpose remains absent, what remains is a valuation putting little chance on success. Hopefully that proves to be wrong.”

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