Why Scots investment giant Abrdn 'needs to shrink into its new skin' following H1 return to profit

Scottish investment giant Abrdn has swung back into an interim profit, as its bid to fill the CEO seat vacated by Stephen Bird earlier this year continues.

The Edinburgh-headquartered firm reported that net operating revenue for the period was down 7 per cent year on year to £667 million, while adjusted operating profit was broadly flat at £128m. It notched up an IFRS pre-tax profit of £187m, from a loss of £169m on the same basis 12 months previously, with an interim dividend per share flat at 7.3p.

Abrdn under Bird’s leadership undertook a sweeping overhaul of the funds business, including axing some 500 jobs, controversially rebranded from Standard Life Aberdeen in 2021, and has made some key acquisitions including buying investment platform Interactive Investor. Some analysts have called for action such as a break-up of the group, which in February of this year reported a pre-tax loss for the second year in a row.

The group sponsored the Scottish Open in 2021. Picture: Mark Runnacles/Getty Images.

The group’s interim chief executive Jason Windsor (formerly its finance boss) has now said: "In the first half of the year we have made an encouraging start as we become more efficient, and we enhance our propositions to lay the foundations for growth.

“We have three core businesses, with strong, scale positions in attractive markets, and each has headroom to grow. While market conditions remain challenging, we are firmly on track to realise at least £150m of annualised cost savings by the end of 2025.

“These are solid foundations, positioning us for a step-change in performance, and allowing us to invest further in growth. I am excited about the potential in Abrdn, and confident that by delivering against our priorities, we can deliver better outcomes for our clients, more attractive performance for our shareholders and nurture a culture that sustains long-term success."

John Moore, senior investment manager at RBC Brewin Dolphin, deemed the results “another mixed bag” from Abrdn. “While its adviser offering is heading in the right direction with positive flows, there is progress on cost savings, and Interactive Investor remains a stand-out performer, the overall business is suffering from a degree of inertia.

“There is going to be an element of Abrdn shrinking into its new skin, which may mean decisions will need to be made about what remains of the fund management business, among other areas requiring self-help measures. After a period of flux, Abrdn has a reasonable direction of travel, and the next couple of years will be about further execution of that strategy, following the appointment of the new interim CEO.”

Analysts at Panmure Liberum said: “The range of expectations for interim results was wide, which has not necessarily helped Abrdn in the past, but the outcome is – across most lines of business – a bit better than might have been feared.

“While Jason Windsor has not been confirmed yet as CEO, his statement certainly reads like one of a CEO-in-waiting. There is still much to do: confirmation of existing cost-cutting plans is welcome, but that will not return this business to an appropriate level of profit and profitability. The chance of the share price rising to meet the sum-of-the-parts is getting better, however, and that is enough for now.”