Abrdn profits down a fifth after ‘one of the toughest investing years’

Abrdn is planning to buy back more than £300mn of shares despite a difficult period last year in which profits fell by a fifth, as markets slumped and investors withdrew funds.

Stephen Bird, chief executive of the FTSE 100 company, said the asset manager was aiming to return about £600mn to shareholders this year including share buybacks, as it continues to sell down stakes in external businesses.

Bird, a former Citigroup executive, told the Financial Times: “We’ve got £1.3bn in stakes remaining. We’ve built a machine that can generate capital through operating earnings plus by adding divestments [and] we will do a total capital return in the region of £600mn.”

The company currently has £700mn of surplus capital and has committed to a dividend of 14.6p. Abrdn’s stakes include a holding in Indian insurer HDFC and Phoenix Group. Abrdn also sold its discretionary fund management arm to private bank LGT for £140mn, it announced on Tuesday. Shares were flat in early morning trading.

However, Abrdn said the market turmoil last year made it “one of the toughest investing years in living memory”. Operating profit fell to £263mn, down 19 per cent from 2021 driven by a decline in investment revenues, although the squeeze on profits was smaller than analysts expected.

Abdrn suffered net outflows of £10.3bn, three times higher than the previous year and largely from its equities businesses. Assets under management fell 8 per cent to £500bn.

Tom Mills, analyst at Jefferies, said fee-based revenue of £1.5bn beat expectations by 3 per cent. But David McCann, analyst at Numis, argued that although the results were broadly in line with analysts’ expectations, a “more radical strategy” was needed to maximise value, such as a break-up of the group.

Bird, who joined Abrdn in 2020, has restructured the group including merging or closing 58 funds, and is now attempting to position it for growth.

Abrdn last year acquired Interactive Investor for £1.5bn, which Bird said had boosted its presence in the UK savings and wealth market. Interactive Investor reported net revenue of £176mn, up nearly 40 per cent, and doubled operating profit to £94mn.

Bird said he was considering further small acquisitions. “I am in discussions with specialist investors, things with specialisms, so think about the ageing society, health tech, biotech.”

He said the company would be focusing on a few areas in particular to boost growth. “We’ve got £120bn of fixed income at a time when the markets are anticipating peak rates and as a wall of money moves back into bonds.

“Secondly, this business has been challenged by the fact the emerging markets and China have been in the doldrums over the past seven or eight years. As the US slows down, there’s capital moving back into emerging markets. The third area, which is almost £90bn, is alternatives.”