Aberdeen forecast to reveal drop in profits

Published on Saturday 2 May 2009 13:31

INVESTMENT group Aberdeen Asset Management is expected to report a drop in profits and an outflow from its funds this week on the back of volatile markets.

On Tuesday the firm reports interim results for the six months to March 31. Analyst Stuart Duncan at Royal Bank of Scotland forecasts pre-tax profits will fall from 47.3m to 36m.

Duncan also predicts assets under management to decline from the 110.2bn reported in December. Outflows from funds are expected to be on a par with the 5bn that was lost between September and December last year.

It is thought its fixed income products will be worst hit, largely because they were too heavily invested in corporate bonds. New money is expected to have gone into its property and equity products which performed better, in particular its Asia Pacific, emerging markets and global equities.

Duncan says that while Aberdeen has taken decisive action to cut costs, it does not think this will be enough to offset declining revenues. It reported revenues of 201.5m for the same period last year. Last July it unveiled a programme to reduce worldwide annual operating costs by around 57m.

This includes staff cuts and building economies of scale from recent acquisitions.

He adds that the group's focus for the next six months will be the "successful completion and then integration" of the Credit Suisse business that it announced it was acquiring for around 40bn in December last year. He expects Aberdeen to increase earnings by 30% this year and rates it as "amongst the most attractive stocks in the sector".

It completed the first part of the Credit Suisse deal on schedule on Friday. This part of the acquisition relates to Asia Pacific operations. The rest of the deal is on course to be tied up at the end of June. When the transaction is complete, Aberdeen will be the largest independent asset manager in the UK.

A source said that Aberdeen has a low level of gearing and a diverse client base which means it is better placed than many of its peers.