ii view: Standard Life Aberdeen reports lower profits

Asset manager Standard Life Aberdeen sees further fund outflows impacting profits. 

Half-year results

• Assets under management and administration up 5% to £577.5 billion
• Adjusted pre-tax profit down 10% to £280 million
• Dividend payment unchanged at 7.3p per share
• The total annual dividend per share to be held at the 2018 level of 21.6p

Chief executive Keith Skeoch said:

"We have made good progress in reshaping our business so that it is set up to take advantage of the trends impacting our industry both globally and in the UK. We are encouraged by an improvement in our investment performance and a growing number of strategies with positive ratings from investment consultants. We are seeing inflows that are more diverse and are pleased to have retained £35 billion of Lloyds Banking Group assets.”

ii round-up:

Formed by the coming together of Standard Life and Aberdeen Asset Management, the company today has a stock market value of over £6.5 billion and clients in around 80 countries. 

It operates through the two main channels of asset management and platforms and insurance associates and joint ventures. 

Standard Life Aberdeen (LSE:SLA) today reported figures which missed analyst expectations. 

Assets under management and administration rose by 5% to £577.5 billion, boosted by investment gains. 

But adjusted profit fell 10% to £280 million – below the consensus analyst estimate of £288 million. Fee based revenue fell by 15%, hindered by outflows of higher profit margin client funds. 

The share price fell by over 5% in early UK stock market trading.

ii view:

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.

But competition in the asset management arena remains intense. The growing popularity of low-cost index tracking products has put more traditional managers under pressure to compete and reduce fees.

For investors, a historic dividend yield of over 7%, not guaranteed, offers appeal, although this could be reviewed going forward. Moves to cut costs and conduct business in China also look sensible. But with net fund outflows still being suffered and low-cost managers such as Vanguard competing hard, room for investor caution persists.  

Positives: 

• Targeted annual cost savings of at least £350 million
• Chinese business secured a licence to develop a pensions business

Negatives:

• A fund net outflow of £15.9 billion 
• Vanguard previously cut its own fees further escalating a price war

The average rating of stock market analysts:

Buy