Assets slip

Bird plans to reignite Abrdn growth amid outflows

Stephen Bird
Stephen Bird: reshaping the business

Abrdn has posted a reduced operating loss and said it is taking action to rebuild and grow profit in its flagging Investments business following further asset withdrawals.

Chief executive Stephen Bird dismissed suggestions that the group should be broken up. After announcing year-end results he said: “We have very valuable parts of this business and we like the way they work together”.

The Edinburgh-based asset manager reported an IFRS loss before tax of £6m (2022: loss £612m) for 2023, including losses of £178m resulting from the fall in share prices of its listed stakes and £152m of restructuring and corporate transaction expenses.

Adjusted operating profit was 5% lower at £249m, largely due to the revenue impact of continued net outflows and adverse market movements which particularly impacted high yielding equities.

Net outflows surged to £13.9bn in 2023, up from £10.3bn in 2022. Assets under management and administration slipped to £494.9bn from £500bn.

The company announced in January that it is cutting 500 jobs and taking £150m of annual costs out of the business.

Despite the outturns in the business today’s statement included a £786,000 bonus for Mr Bird. His total rewards for 2023 were raised by 26% to £2.14 million.

The company said his cost-cutting efforts last year were one of the reasons it had boosted his bonus from £662,000 in 2022.

The cost/income ratio was stable at 82%. A proposed total dividend for 2023 of 14.6p per share is unchanged from 2022. This is made up of an interim and final both at 7.3p per share. Over the short term, the dividend will largely be supported by adjusted capital generation and our surplus capital, said the company.

Work to achieve at least £150m of annualised cost savings is now underway and should come in lower this year. About 80% of the cost savings is expected to benefit Investments.

The company anticipates cost growth in Interactive Adviser to be approximately 3-5% per annum over 2024-2026 reflecting continued growth and reinvestment in these businesses.

It said the strength of its balance sheet allows the firm to fund restructuring. Balance sheet strength includes the Phoenix stake and the staff pension scheme which has a significant surplus.

Abrdn head office
Abrdn’s HQ has returned to its historic home in George Street, Edinburgh (pic: Terry Murden)

Mr Bird said: “Over the past three years we have reshaped the business to fit the modern investment landscape. We now have content and distribution aligned to the products and services clients need, and we are better positioned for future growth.”

“The investment industry faced further structural and macroeconomic challenges during 2023 with a ‘higher for longer’ rate environment across developed economies adding sustained pressure on most asset classes.

“The diversity of our group supported financial results in 2023. ii and Adviser are delivering, and we are scaling up these market-leading platforms to benefit from the long-term structural growth in UK savings and wealth.

“We are taking action to rebuild and grow profit in our Investments business. We have sharpened our focus on improving investment performance, streamlined our fund range, reduced costs by £102m in 2023, exceeding our £75m target, and we announced a new cost saving programme of at least £150m on the 24 January.

“Our balance sheet remains strong which enables us to fund our cost transformation while continuing to strategically invest in growth areas and maintain our dividend. There is significant work ahead, but we are confident we will be successful in delivering future growth.”

Speaking afterwards to Daily Business, Mr Bird said the board has not discussed any break-up options for the company, despite speculation. He said there were “no active approaches” for the business, but did not say if there had been earlier interest.

Responding to a question about low morale at the company as a result of constant changes, he said: “Any company that’s not changing its shape … is going to have more problems with morale.”

Market reaction

Shares in Abrdn initially surged by 7%, but after a briefing with analysts they ended the day down 3.33% or 5.25p, at 156.25p.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Financial services markets are changing more rapidly than ever and, with that, abrdn has been in more or less a constant state of flux for the past few years.

“This challenging backdrop is reflected in today’s mixed results, which has some signs of bright spots but also highlights areas for improvement. Interactive Investor remains the stand-out performer and the growing diversification of abrdn’s business is helping to steady the ship.

“However, another transformation programme introduces a degree of uncertainty and the uncovered dividend feels too high at its current level for the period of change the company is going through.” 

Rae Maile and Ross Luckman at Panmure Gordon said: “Perhaps the most important change we have seen is in a considerably less hubristic assessment of performance and prospects and we are delighted that we cannot find a single use of “vector”.

“There are many headwinds still, and the boost from interest income will not last, but at least there now seem to be some (belated) signs of action with respect to Investments, the biggest area of potential and to date largely ignored. We retain our BUY.”

New tenants for St Andrew Square

Two blue chip companies are among new tenants signed up for Abrdn’s former head office in St Andrew Square. Full story here

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