FTSE 100 fund manager Abrdn posted a first-half loss in the first six months of the year as a global market slowdown and geopolitical uncertainty weighed on investment performance and rattled investor confidence .
The Edinburgh-based investment house posted a pre-tax loss of £320million on Tuesday, compared with a profit of £113million in the same period last year, while income from fees fell by 8%. Diluted loss per share was 13.9p, compared to earnings of 4.7p per share a year ago.
Abrdn said he expected the bleak outlook to improve in the second half as tough market conditions showed signs of easing and contributions from its acquisition of trading platform Interactive Investor ( ii) started. The deal, intended to help the group tap into Britain’s growing army of retail investors, was announced in December but only started to fuel the group about a month before interim results.
“Looking to the second half, we will see favorable revenue from a full six months contribution from ii and performance fees,” Chief Executive Stephen Bird said. “The strategy we have defined is solid and we are achieving it. . . the current market turbulence reinforces this logic.
However, the share price fell 5% as markets opened in London, taking its overall decline from last year to 45%.
The group’s assets under management and administration fell to £508bn from £542bn in the first half of 2021, although this was partially offset by assets from the deal ii. This decrease is largely explained by the withdrawal of an investment mandate from Lloyd’s Banking Group. Abrdn has confirmed that this will be the final tranche of Lloyd’s withdrawal.
New customer growth at ii has been lackluster, slowing to 19,000 in the first half of the year, well below the 47,000 who signed up to the platform in the first half of 2021.
Abrdn, which changed its name from Standard Life Aberdeen in 2021, was formed when the two fund managers merged in 2017. Since then, assets under management have fallen and the group’s combined market value has contracted.
“Almost all of the key figures were worse than the low expectations we or the consensus had. The company also said its targets will now take longer to achieve and with significant additional restructuring costs below the line,” a said David McCann of Numis.
“We continue to believe that a more radical strategy is needed to turn the group around and maximize value, such as breaking up the group or selling the group as a whole.”
The company said it would maintain its £300m capital return program to shareholders and keep its dividend stable at £7.3 per share.
“Now that the acquisition of ii is complete and through our disciplined approach to capital allocation to generate shareholder returns, we will continue to return capital beyond the needs of the business as further sales participations will be made,” said Bird.
He added: “People have been frustrated with the pace of change five years after the merger, but I’ve been here since September 2020. I can only move forward as fast as you can handle the change. [and] we are moving very, very fast.
The company plans to continue selling its stakes in HDFC’s insurance and asset management joint ventures in India, “for value and at the right time,” Bird said.
The liquidations will be necessary to help Abrn maintain its capital reserves, RBC analyst Mandeep Jagpal said in a note, adding that the company’s “high structural cost ratio relative to peers leaves . . . profitability more sensitive to market declines than its peers.