27th Feb 2024 11:21
(Alliance News) - abrdn PLC on Tuesday said it significantly narrowed its loss by slashing jobs and other costs, although analysts highlighted it was a difficult period for the asset manager and that it "remains in flux".
The Edinburgh-based investment company reported an IFRS pretax loss of GBP6 million last year, narrowed substantially from a restated GBP612 million loss in 2022, despite net operating revenue declining by 4.0% to GBP1.40 billion from GBP1.46 billion.
This was thanks to total administrative and other expenses being reduced to GBP1.46 billion in 2023 from GBP1.92 billion in 2022. abrdn in January said it plans to cut around 500 jobs to save a further GBP150 million per year by the end of 2025. abrdn currently employs around 5,000 people.
As abrdn had reported in January, assets under management and administration fell to GBP494.9 billion as of December 31 from GBP495.7 billion at June 30 and GBP500.0 billion at the end of 2022.
Net outflows had worsened to GBP12.4 billion in the second half, from GBP5.2 billion in the first half, leaving net outflows of client cash for the full year at GBP13.9 billion, worsened from GBP10.3 billion in 2022.
With the cost cuts and despite the decline in revenue and AuMA, abrdn said its cost-to-income ratio stayed steady at 82%.
abrdn declared a 7.3 pence per share final dividend, meaning its full-year payout remained at 14.6p.
Hargreaves Lansdown said a "highly challenging period continues" for Abrdn as it "failed to stem money pouring out of its funds" in the second half.
"However, investors are clearly encouraged by its turnaround efforts so far, with shares jumping in early trade. Costs reduced by GBP102 million in 2023, ahead of targets and deeper cuts are now on the way to try and shore up profits with 500 jobs set to go. A further GBP150 million is expected to be saved by the end of 2025," said Hargreaves Lansdown analyst Susannah Streeter.
Meanwhile, RBC Brewin Dolphin said abrdn has been in "more or less a constant state of flux" for the past few years, amid financial services markets that are "changing more rapidly than ever".
"This challenging backdrop is reflected in today's mixed results, which has some signs of bright spots but also highlights areas for improvement. Interactive Investor remains the stand-out performer and the growing diversification of abrdn's business is helping to steady the ship," said RBC Brewin Dolphin analyst John Moore.
"However, another transformation programme introduces a degree of uncertainty and the uncovered dividend feels too high at its current level for the period of change the company is going through."
Hargreaves Lansdown's Streeter continued that high inflation and concerns about economic growth have been challenging for the asset management sector, with abrdn having "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 its one of the UK's biggest direct-to-consumer investment platforms, albeit in a highly competitive market," said Steeter.
Streeter added that 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 GBP800,000 bonus", particularly given the "scale" of the job cuts announced.
Jefferies noted that abrdn's adjusted operated profit was up on-year, while the asset manager expects asset rotation from active equity and fixed income strategies to passive quantitative strategies in Insurance Partners to continue into 2024, resulting in a drag on fee margins.
"Average cash margin for 2024 is expected to be broadly in line with 2023 and cost growth in ii and Adviser to be approximately 3-5% per annum over 2024-2026," said Jefferies analysts.
Jefferies rates abrdn at 'hold', setting an upbeat price target of 180.00p per share, although shares are trading 24% lower than 12 months earlier. Shares in abrdn were up 0.5% to 162.35 pence each in London on Tuesday morning.
Looking ahead, abrdn Chief Executive Officer Stephen Bird said: "Our balance sheet remains strong which enables us to fund our cost transformation while continuing to strategically invest in growth areas and maintain our dividend. There is significant work ahead, but we are confident we will be successful in delivering future growth.
By Greg Rosenvinge, Alliance News senior reporter
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