Standard Life Aberdeen has given a bullish outlook after booking a steady rise in assets under management and administration as market gains helped offset outflows of client money.
Releasing its half-year results, the Edinburgh-headquartered investment giant said total assets under management and administration had risen 5 per cent to £577.5 billion with assets on its own platforms up 11 per cent to £66bn.
However, adjusted profit before tax came in at £280 million, down from £311m a year earlier, and just shy of City hopes.
The UK’s largest listed fund manager – created in 2017 through the merger of Standard Life and Aberdeen Asset Management – said cost efficiencies remained firmly on track with actions taken to date delivering some £234m of the £350m per annum targeted.
Key developments included holding on to £35bn of Lloyds Banking Group assets and gaining a licence to sell pensions products in China via a joint venture. Net outflows in the first half amounted to £15.9bn, down from £16.9bn a year earlier and £24bn in the second half of 2018.
Chief executive Keith Skeoch said: “We feel like the heavy lifting that is part of our transformation process to turn us into a world-class investment company is making very good progress.
“We have seen a big improvement in investment performance over the course of 2019. Given everything that we’ve done, we retain strong financial strength.
“Our focus is very much on the medium to long term rather than the short-run swings that are generated by the markets and sentiment.”
He added: “We recognised in the second quarter that a no-deal or messy Brexit was a rising probability so we have been improving and extending our contingency plans to make sure that, while we hope for the best, we are prepared for the worst. We’ve moved the people that we needed to move.”
The group said further progress had been made in building a “UK savings ecosystem”, securing £3.5bn of assets from Virgin Money and partnering with Skipton Building Society to provide its customers with access to SLA’s £15bn MyFolio range.
It also highlighted the continued expansion of its financial advice business, called 1825, including the acquisitions of the wealth advisory businesses of BDO Northern Ireland and Grant Thornton UK. The board declared an unchanged interim dividend of 7.3p.
Shares were down almost 6 per cent in lunchtime trading.
Donald Brown, senior investment manager at Brewin Dolphin, said: “Two years after the merger that created the company, Standard Life Aberdeen remains in a period of transition.
“Market gains since January have boosted assets under management, but more depends on the performance of the group’s funds, which remains patchy. Meantime, the fact remains that net outflows continue, albeit at a slower pace.
“Although the fundamentals of a strong business are there in the long term and Standard Life Aberdeen’s shares appear cheap offering a high yield, the lack of underlying growth means patience is the key for investors.”
Steve Clayton, manager of the HL Select UK Income Shares, which has a holding in SLA, noted: "These numbers were a little below market forecasts, and showed a continuation of the outflows that the business has been suffering from in recent years. But progress is being made nonetheless.
"Assets under management and administration rose 5 per cent to £577.5bn, with market movements and acquisitions offsetting the ongoing net outflows. Reported profits were massively boosted by a gain on selling part of their stake in HDFC Life of India, while the underlying numbers came in at £280m, and earnings per share were up by 9 per cent to 8.9p. The interim dividend was unchanged at 7p per share.
"Standard Life Aberdeen has plenty of capital and valuable non-core assets to support their dividend for some time to come. This gives the group time to fix the performance issues and resulting outflows that have dogged the asset manager for some time now.
"The yield is very attractive, currently over 7 per cent. But the sustainability of the payment longer term requires the group to return to more predictable organic growth and net inflows."
Graham Spooner, investment research analyst at The Share Centre, said: "The results from the UK’s largest listed fund manager are somewhat of a mixed bag for investors.
"The CEO believes the group are well placed to take advantage of the opportunities and at the same time deal with the challenges the industry faces. The caveat to this however is the asset management environment remains tough as a result of political and macroeconomic uncertainties.
"A further focus will be on efficiency and cost control. The dividend was maintained and with current yield of 8 per cent potentially attracting income seekers, we continue to recommend the shares as a 'hold' for investors willing to accept a medium level of risk."