Investment giant Abrdn takes axe to costs and jobs
◆ Chief executive says the Edinburghheadquartered group’s diversity supported financial results in 2023, writes Scott Reid
cottish investment giant Abrdn has reported a pre-tax loss for the second year on the trot and seen its margins come under pressure as it begins major cutting, including the loss of hundreds of jobs.
The Edinburgh-headquartered firm posted a pre-tax loss of £6 million for 2023, though that was substantially down on the £612m deficit reported a year earlier when it took a series of charges. The full-year results come just weeks after the asset manager, formerly known as Standard Life Aberdeen, said it planned to cut some 500 jobs as part of a sweeping overhaul to save the group up to £150m in costs. These cuts will primarily take place this year and be completed by the end of 2025.
However, some City analysts have said that a more radical strategy is required to clamp down on costs and make the business more profitable, including a potential break-up of the group. The latest set of results showed that new outflows amounted to £13.9 billion in 2023 as many clients withdrew funds. That figure was up on the £10.3bn reported a year earlier. Assets under management and administration fell to £494.9bn from £500bn a year earlier. The full-year dividend was held at 14.6p per share.
Stephen Bird, chief executive of Abrdn, said: “Over the past three years we have reshaped the business to fit the modern investment landscape. We now have content and distribution aligned to the products and services clients need, and we are better positioned for future growth. The investment industry faced further structural and macroeconomic challenges during 2023 with a ‘higher for longer’ rate environment across developed economies adding sustained pressure on most asset classes.
“The diversity of our group supported financial results in 2023. We are taking action to rebuild and grow profit in our investments business. We have sharpened our focus on improving investment performance, streamlined our fund range, reduced costs by £102m in 2023, exceeding our £75m target, and we announced a new cost saving programme of at least £150m on January 24. There is significant work ahead, but we are confident we will be successful in delivering future growth.”
Net operating revenue was 4 per cent lower at just under £1.4bn, which the group said reflected “the impact of outflows and adverse markets partly mitigated by the diversification in sources of revenue, including the benefit from higher treasury income”.
Adjusted operating expenses were also down by 4 per cent, reflecting management actions to reduce costs.
We have reshaped the business to fit the modern investment landscape Chief executive Stephen Bird
Abrdn said the actions it was taking were necessary to restore its core investments business to an “acceptable level of profitability”. They are expected to result in the reduction of approximately 500 roles, or about 10 per cent of its workforce, as flagged last month.
Analysts at brokerage Panmure Gordon noted: “We raised many issues with the interim results both in terms of composition and delivery, and while we are not claiming that the company has had an epiphany there are at least some welcome signs from the statement that some of the more hubristic commentary has gone.
“The cost-cutting programme announced in January was a start but not an end. Even £150m out of costs is struggling to keep up with revenue attrition which we estimate to be £117m year-on-year while the benefit being seen at the moment from interest income must surely erode before long; we certainly hope that management assumes that anyway. It remains unclear that there is a business case for the retention of three disparate businesses, but a fair assessment of the current value of each does continue to suggest upside from the current share price, hence our buy recommendation, but our upgrade was always heavily caveated by the risk that management inaction could erode that value towards the share price. We remain conscious of that risk.”
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said: “High inflation and worries about economic
growth have been challenging for the asset management sector, and Abrdn has embarked on a deep cost-cutting plan to revive its performance. It sold off its US and European private equity arms but has been trying to keep revenue moving in the right direction through the acquisition of Interactive Investor.
“This should provide a relatively stable source of assets for the group, given it’s one of the UK’S biggest direct-toconsumer investment platforms, albeit in a highly competitive market. There is likely to be significant disgruntlement emanating from reports that the deteriorating performance hasn’t stopped the board awarding chief executive Stephen Bird an £800,000 bonus, particularly given the scale of the job cuts announced.”
Abrdn also announced that Catherine Bradley would not be seeking re-election at its annual shareholder meeting on April 24 and will stand down from that date as a non-executive director and as chair of its audit committee. She will remain chair of Interactive Investor (ii), which is a wholly owned subsidiary of the group, having been acquired for some £1.5bn in late 2021. Following this change, the board will comprise two executive directors, six non-executive directors and the chairman, Sir Douglas Flint.
He said: “I would like to thank Catherine for her significant contribution to Abrdn and our board and committee discussions. I’m delighted she will remain connected with Abrdn through her ii appointment where we will continue to benefit from her experience.”