Aberdeen holds fire on buyback despite pre-tax profit rising 15%

Martin Gilbert: 'Difficult and uncertain year in the financial markets'. Picture: Neil Hanna
Martin Gilbert: 'Difficult and uncertain year in the financial markets'. Picture: Neil Hanna
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FUND manager Aberdeen Asset Management dashed investors’ hopes of an imminent share buyback or special dividend yesterday despite a strong cash performance that shrugged off testing financial markets.

The group, which entered the FTSE 100 index earlier this year, kept its powder dry on one-off capital returns to shareholders despite a 15 per cent rise in full-year pre-tax profits to £347.8 million.

Revenues rose to just over £869m from £784m a year earlier, while the asset manager’s net cash reserves more than doubled in the latest 12 months to £266.4m from £127.5m.

“Once we’ve made the cash we’ll decide what to do,” Martin Gilbert, group chief executive, said. Aberdeen’s shares closed down 2 per cent, or 6.7p, at 336p as many investors had hoped for news of a buyback or special dividend in anticipation of its strong capital position.

However, shareholders will benefit from a 28 per cent leap in the total dividend to 11.5p for the year to 30 September from 9p last time, via a 7.1p final payment.

Bill Rattray, Aberdeen’s finance director, said: “It’s difficult for me to say whether the market is disappointed [on the lack of buyback news].

“But we have said consistently for 18 months that we need to build the 
balance sheet to certain levels to meet regulatory capital [requirements].

“We have signalled that we feel we will be there by the end of this 
December. We have no intention to build surplus cash for the sake of it. The board will consider what way to use it.”

Gilbert indicated this would be towards the middle of 2013 after what he said had been a “difficult and uncertain year in the financial markets”.

The City remains expectant that a capital return will come, even if delayed. RBC Capital Markets analysts said in a note yesterday: “With a net cash balance in excess of our expectation, we believe that the company could signal its willingness to enhance shareholder returns through the distribution of excess capital to shareholders.

“We continue to believe that a special dividend and/or share buybacks are possible and likely in H2 2013.”

Despite the tough backcloth, the firm’s funds under management rose to £187.2 billion from £170bn, with new client money and strong investment performance in equities driving the rise. New business in the year totalled £36bn, with two-thirds going into pooled funds.

As in recent years, the group benefited particularly from a strong performance in its Asia Pacific and global emerging market funds as investor sentiment continued to be influenced by the chronic eurozone crisis. The company said it saw “healthy interest” in emerging market debt

Aberdeen believed unfavourable conditions in the eurozone would likely “go pretty much as it is at the moment” in 2013, Rattray said.

But he said Aberdeen’s investment philosophy was to focus mainly on individual companies’ performances and prospects, ahead of sector preferences or macro-economic conditions.

“Markets have been uncertain. We are reluctant to predict the timing for any recovery or improvement. We still are a bit cautious.”