abrdn plc (LON:ABDN) has announced its full year results for 2023.
Summary results
| Performance indicators | 2023 | 2022 | Change |
| Net operating revenue | £1,398m | £1,456m | (4%) |
| Cost/income ratio | 82% | 82% | – |
| Adjusted operating profit | £249m | £263m | (5%) |
| Adjusted capital generation | £299m | £259m | 15% |
| IFRS loss before tax1 | (£6m) | (£612m) | |
| IFRS profit/(loss) for the year1 | £12m | (£546m) | |
| Adjusted diluted earnings per share | 13.9p | 10.5p | 32% |
| Diluted earnings per share1 | 0.1p | (26.6p) | |
| AUMA | £494.9bn | £500.0bn | (1%) |
| Net outflows excluding LBG and liquidity2 | (£13.9bn) | (£10.3bn) | (35%) |
| Investment performance (AUM) – 3 years3 | 42% | 65% | (23ppts) |
| Full year dividend per share | 14.6p | 14.6p | – |
1. Comparatives have been restated for the HASL implementation of IFRS 17. Refer Basis of preparation in the Group financial statements.
2. Excludes Institutional/Retail Wealth liquidity net outflows of £3.7bn (2022: £3.2bn) and LBG tranche withdrawals in 2022 of £24.4bn relating to the settlement of arbitration with LBG.
3. Percentage of AUM above benchmark. Calculations for investment performance use a closing AUM weighting basis and are made gross of fees except where the stated comparator is net of fees.
Stephen Bird, Chief Executive Officer of abrdn plc, 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. ii and Adviser are delivering, and we are scaling up these market-leading platforms to benefit from the long-term structural growth in UK savings and wealth. 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 the 24th January.”
“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.”
Our diversified business creates resilience
– Net operating revenue 4% lower at £1,398m, reflecting 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 decreased by 4% reflecting management actions to reduce costs, mostly offset by the inclusion of a full 12 months of ii expenses. Excluding ii, expenses were 9% lower.
– Adjusted operating profit 5% lower at £249m largely due to the revenue impact of continued net outflows and adverse market movements which particularly impacted high yielding equities.
– IFRS loss before tax of £6m (2022: loss £612m), reflects adjusting items of £336m including losses of £178m relating to the fall in share prices of our listed stakes and £152m of restructuring and corporate transaction expenses.
– Cost/income ratio was stable at 82%.
– AUMA at £494.9bn, 1% lower with net outflows in Investments and Adviser partly offset by positive market movements and continued net inflows in ii.
– Adjusted diluted EPS increased to 13.9p (2022: 10.5p) owing to the higher adjusted profit after tax and the benefit from share buybacks in 2022 and 2023.
Action to build and grow profitability
– The transformation programme targets an annualised cost reduction of at least £150m by the end of 2025, compared to 2023, with approximately 80% of the savings benefiting the Investments business.
– Designed to restore our core Investments business to an acceptable level of profitability.
– Expected to result in the reduction of approximately 500 roles.
– Implementation expected to take place primarily in 2024, and will be completed by the end of 2025.
– Total implementation costs are estimated to be around £150m.
– Expect group adjusted operating expenses to be c. £60m lower in 2024.
Investments: Refocusing to capitalise on areas of strength
– Adjusted operating profit reduced by £80m (62%) to £50m, reflecting 17% lower revenue, partly offset by 11% lower costs.
– We exceeded the £75m cost reduction target, with expenses reducing by £102m.
– Gross flows were £50.3bn, £9bn lower (2022: £59.3bn) reflecting the client response to the uncertain market environment which impacted the wider industry.
– Insurance Partners continued to benefit from the Phoenix bulk purchase annuity and pensions growth.
– Net outflows of £15.3bn (ex. LBG and liquidity) (2022: £13.4bn), represented (4%) of opening AUM.
– Investment performance weakened to 42% of AUM above benchmark over 3 years (2022: 65%). This reflects a challenging period for active managers and in particular Equities were impacted by our AUM bias towards Asia and Emerging Markets and the quality growth style.
interactive investor: The UK’s leading subscription based D2C investment platform
– Significant benefit to the Group of full 12 months of ii (excluding Personal Wealth) which has continued to perform well against an uncertain market environment.
– Net operating revenue 43% higher to £287m (2022: £201m) and adjusted operating profit 58% higher to £114m (2022 £72m). Treasury income of £134m (2022: £58m) benefited from higher interest rates.
– Average cash margin of 236bps. Indicative average cash margin for 2024 is expected to be broadly in line.
– Net customer growth for 2023 was 4% (excluding run-off from historic acquisitions), taking total customers to 407k with 21% growth in SIPP customers, reflecting successful focus on this key growth segment.
– Average AUA per customer increased to £152k (2022: £134k).
– Net flows were £2.9bn, reflecting continued positive flows in interactive investor.
Adviser: Leveraging technology to create value for our clients
– Delivered the largest and most advanced technology release we have ever completed on the Adviser platform.
– Net operating revenue in Adviser 21% higher to £224m (2022: £185m) supported by higher treasury income.
– Average cash margin of c.228bps. Indicative average cash margin for 2024 is expected to be broadly in line.
– Adjusted operating profit 37% higher at £118m (2022: £86m).
– Inflow activity (including MPS) reduced by 12% in 2023, reflecting muted client activity across the industry.
– Net outflows of £2.1bn reflect the points noted above and the short-term impact in 2023 resulting from the technology upgrade.
– 12% AUA market share with customer satisfaction score of 90%.
Retaining a strong balance sheet
– CET1 capital of £1.47bn (coverage of 139%), total coverage ratio of 184% (2022: 168%).
– Further balance sheet strength from Phoenix stake and staff pension scheme surplus.
– Returned £0.6bn to shareholders in dividends and buybacks in 2023.
– Final dividend of 7.3p, total 14.6p per share in 2023.
– Annual dividend cost reduced through buybacks to £267m; 1.12x covered by adjusted capital generation in 2023.
Outlook
– We expect inflation to moderate slowly, and we have assumed a stable interest rate environment.
– We expect the average cash margin for 2024 to be broadly in line with 2023.
– While market conditions, structural and cyclical, remain challenging for active asset managers we continue to expect headwinds arising from changing client demand and preferences.
– Within Insurance Partners in particular, we expect the asset rotation from active equity and fixed income strategies to passive quantitative strategies to continue into 2024. This together with related pricing changes, may result in a further contraction of revenue margin.
– The work to achieve at least £150m of annualised cost savings is now underway. 80% of the cost savings is expected to benefit Investments.
– We anticipate cost growth in ii and Adviser to be approximately 3-5% per annum over 2024-2026 reflecting continued growth and reinvestment in these businesses.
– We expect total restructuring costs of less than £150m in 2024, to support the cost transformation programme, and further investment in the Adviser platform.
– The strength of our balance sheet allows us to fund restructuring.
– Our balance sheet strength includes our Phoenix stake and the staff pension scheme which has a significant surplus.
– Our aim remains the disciplined allocation of our capital to drive growth and reduce costs, to improve net capital generation in the medium-term.
Annual report and accounts 2023
The Annual report and accounts 2023 has been published today and is available at www.abrdn.com/fyresults
This press release contains certain information that has been extracted from the Annual report 2023.
Investors and analysts
A presentation for analysts and investors will take place 09:00am (GMT) on 27 February 2024. To view the webcast live please go to www.abrdn.com/corporate
