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Abrdn swings to first-half loss as market turmoil dents performance

FTSE 100 fund manager Abrdn swung to a first-half loss in the first six months of the year as the global downturn in markets and geopolitical uncertainty dragged down investment performance and dented investor confidence.

The Edinburgh-based investment house on Tuesday posted a pre-tax loss of £320mn, compared with a profit of £113mn in the same period last year, while revenue from fees fell 8 per cent. The diluted loss per share was 13.9p, from earnings of 4.7p per share a year ago.

Abrdn said it expected the gloomy 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) began. The deal, intended to help the group tap into the UK’s growing army of retail investors, was announced in December but only started to feed into the group about a month before the interim results.

“Looking forward into the second half, we will see revenue tailwinds from a full six months’ contribution from ii and from performance fees,” said chief executive Stephen Bird. “The strategy we have set out is sound, and we are delivering against it . . . the current market turbulence reinforces this logic.”

However, the share price fell 5 per cent as markets opened in London, bringing its overall decline in the past year to 45 per cent.

Assets under management and administration at the group fell to £508bn, compared with £542bn in the first half of 2021, despite being partially offset by assets flowing in from the ii deal. This drop was driven largely by the withdrawal of a Lloyd’s Banking Group investment mandate. Abrdn confirmed this would be the final tranche of Lloyd’s withdrawal.

Growth of new customers at ii was lacklustre, slowing to 19,000 in the first half, well below the 47,000 who signed up to the platform in the first half of 2021.

Abrdn, which rebranded 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.

“Pretty much all of the key numbers were worse than the low expectations either we or consensus had. The company has also stated that its targets will now take longer to achieve and with material additional below the line restructuring costs,” said David McCann at Numis.

“We continue to think that more radical strategy is needed to turn the group around and maximise value, such as the break-up of the group or sale of the group in full.”

The company said it would maintain its £300mn capital return programme to shareholders and keep its dividend steady at 7.3p a share.

“Now that the ii acquisition is complete and with our disciplined approach to allocating capital to deliver shareholder returns, we will continue to return capital in excess of business needs as further stake sales are realised,” Bird said.

He added: “People have been frustrated by the pace of change five years after the merger, but I’ve been here since September 2020. I can only move as quickly as you can manage change [and] we are moving very, very quickly.”

The company plans to continue selling down its stakes in joint ventures in insurance and asset management businesses of HDFC in India, “for value and at the right moment”, Bird said.

The liquidations will be necessary to help Abrdn maintain its capital buffers, analyst Mandeep Jagpal at RBC said in a note, adding that the company’s “high proportion of structural costs relative to peers leaves . . . profitability more susceptible to market downturns than peers”.

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