Abrdn adviser growth eases weak investments
Abrdn said first half revenue from last year’s acquisition of Interactive Investor (ii) offset a decline in its investments which were hit by deteriorating market conditions.
The Edinburgh-based asset manager posted a reduced IFRS interim loss as it diversified its business model. Its shares closed down 25.5p, or 11.7% to 193p.
Group revenue rose 4% to £721m and adjusted operating profit was up 10% over the period to £127m with growth in Adviser and Personal Investments showing a 29% rise in adjusted operating profit to £49m .
But net operating revenue in Investments was 15% lower at £466m due to lower average AUM and net outflows, particularly in equities as client asset allocation moved to debt products and cash in the rising interest rate environment. Adjusted operating profit is down 66% to £26m.
The group IFRS loss before tax was £169m (H1 2022: loss £326m), largely driven by the fall in market value of the company’s listed stakes.
Chief executive Stephen Bird said the business is on track to deliver its £75m cost savings target in Investments. He announced that its £150m shares buyback is being doubled.
“We continued to move at pace to execute our strategy over the first six months of 2023 in a challenging macro environment.
“Thanks to abrdn’s revenue diversification and the resilience we have built into our business with the acquisition of interactive investor last year, we grew revenue by 4% and adjusted operating profit by 10% over the period.
“We are on track to deliver our £75m cost savings target in Investments as we continue our work to restore that business to a more acceptable level of profitability.
“We have a strong balance sheet, bolstered by £535m of cash realised during the period from the sales of our non-core Indian investments in HDFC Life and HDFC Asset Management.
“This supported a share buyback of £150m, which is near completion, and we are announcing an extension to this programme to £300m. We have also deployed capital during this period to further strengthen our position in Investments through bolt-on acquisitions.
“We look forward to completing our acquisition of the specialist healthcare fund management business of the US-based Tekla Capital, during H2, which will add some $3.2bn of AUM and $32m of revenues.”
In a media conference call he said the company was being set up as a “global specialist investor” and its new divisional structure meant it now had “three ways to win”.
Its real estate footprint was down by a third, which included the closure of its head office in St Andrew Square, Edinburgh and relocation of staff to nearby George Street.
The company told staff last month that its Global Absolute Return Strategies (Gars) fund, which once managed tens of billions of pounds of investors’ money, is to cease operating as a standalone vehicle.
He said in the conference call that it had become a “relatively small” part of the business and “no longer needed to stand alone.”
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. Although its share price is up one-quarter on a year ago, Abrdn still has some way to go with its plans and there will be challenges ahead as markets remain volatile.”
Rae Maile of Panmure Gordon said: “The company has announced a further £150m buy back this morning, the highlight of the results statement, it appears.
“AUA was shy of consensus, albeit better than our low estimate, but the composition of flows remains poor: -£3.1bn from Equities within -£6.7bn from Investments, -£0.6bn from Adviser.
“Only ii’s inflows and a surprise (and unusual) inflow into Insurance flattered the position. Profits were short of our estimate and consensus: despite much stronger interest income other sources of revenue were lower than anticipated and costs higher.
“The turnaround of the business is taking longer, and is less apparent, than it needs to be after three years and another buy back, while sensible enough, is little compensation.”