ii view: Standard Life Aberdeen rebases the dividend

A new leader and an updated strategy. Can this Edinburgh headquartered company kick-start growth?

Full-year results to 31 December 2020

• Fee based revenue down 13% to £1.43 billion
• Adjusted pre-tax profit fell 17% to £487 million
• Final dividend of 7.3p per share
• Full-year total dividend down 33% to 14.6p per share
• Surplus capital position of £2.3 billion, up from £1.7 billion

Chief executive Stephen Bird said:

"We have seen growing momentum in the second half of 2020 with improved investment performance and flows which represent an inflection point as we pull out of the post-merger era. We remain on track to deliver targeted synergies and have identified more that we can deliver. 

“At this reset point for this business, we have rebased to set firm foundations on which we can build something great. I'm excited about what's to come."

ii round-up:

As largely expected, and under a new chief executive, fund manager Standard Life Aberdeen (LSE:SLA) today cut its dividend payment by a third as it continued to battle falling profits.

Adjusted pre-tax profit fell by a little under a fifth to £487 million, with the company - formed back in 2017 by the merger of Standard Life and Aberdeen Asset Management - suffering a further outflow of £3.1 billion in funds following last year’s £17.4 billion.

The dividend will remain unchanged until covered at least one and a half times by adjusted capital generation. 

Standard Life Aberdeen shares fell by more than 5% in UK trading, having gained by around a third over the last year. Shares for rival Schroders (LSE:SDR) are up by more than 40% over the same time. 

Total assets under management at SLA fell by £10 billion over the year to £534.6 billion. Switches to investments with lower fees, including cash during pandemic related market falls had played its part in reducing both revenues and profit, as had some previous underperformance of its funds.

But the new chief executive outlined a number of strategic initiatives which he hoped would kick start growth. A focus on Asia, a simplification of the business and a rebranding of products to bring the business back under one unifying brand are all included.

In February, SLA rejigged a deal with SunLife owner Phoenix Group (LSE:PHNX), selling its Standard Life brand to the life assurer while Phoenix re-committed to a 10-year strategic asset management partnership. Further details on SLA’s rebranding are expected later in the year. 

The Edinburgh headquartered company aims to reduce its cost-income ratio to 70% by the end of 2023. Down from a current 85%. 

ii view:

Standard Life Aberdeen is located across 50 worldwide locations. It operates through the three arenas of investments, advisor and personal. Investments takes in its global asset management business. Adviser encompasses its UK financial adviser business providing services through platforms to wealth managers and advisers. Its personal business combines its financial planning business 1825, with its digital direct-to-consumer services and discretionary fund management offering. 

An ageing population and moves by government to place a greater emphasis on individuals to save for their own retirements, provide for a favourable backdrop. Ultra-low interest rates have also seen savers seeking returns from cash alternatives such as equity-related products.

For investors, competition in the asset management arena remains intense. Low-cost index tracking products have put more traditional managers under pressure to compete and reduce fees. Combining two companies such as Standard Life and Aberdeen, despite cost savings, can bring corporate cultural clashes. That said, a recent rejigging of its partnership with Phoenix Group and today’s updated strategy provides a clearer vision. A rebased dividend offers cash to invest and still leaves the shares sat on a yield of over 4%. In all, while there is still much to achieve, the new head has shown his desire for improvement. 

Positives: 

• Updated strategy 
• Targeting more cost savings

Negatives:

• Fee revenue and adjusted profit both fell
• Intense competition including a number of banks

The average rating of stock market analysts:

Strong hold