ii view: Standard Life figures fall, but dividend stays

As the CEO departs, Covid-19 has damaged results, but income seekers are happy.  

Half-year results

• Fee based revenue down 13% to £706 million
• Adjusted profit before tax down 30% to £195 million
• Interim dividend unchanged at 7.3p per share
• Surplus regulatory capital of £1.8 billion, up from £1.7billion at 31 December 2019

Chief executive Keith Skeoch said:

"Despite exceptional circumstances we have delivered a resilient performance. In the first half of 2020 redemptions have slowed and net inflows have improved, excluding expected LBG withdrawals. Investment performance has been robust and we continue to deliver on our synergy commitments.

"There is no question that the impact of Covid-19 has played a role on our results today, and across our industry, particularly in relation to lower revenue. Our foundations are firm, we have a strong balance sheet which enables us to both invest in our business and maintain our interim dividend of 7.3p."

ii round-up:

Fund manager Standard Life Aberdeen (LSE:SLA), formed from the merger of Standard Life and Aberdeen Asset Management back in 2017, today reported mixed first-half results. 

Revenues, dragged lower by client outflows in 2019 and Lloyds Banking Group (LSE:LLOY) withdraws, declined by 13% to £706 billion. They fell by 12% over 2019. As such, adjusted profit retreated by 30% to £195 million. At switch to investments with lower fees, including cash during the Covid market falls, also played their part. 

But the fall in profits was less than the drop to nearer £180 million which analysts had broadly expected, while the maintaining of the dividend payment also wrong-footing forecasts for a reduction.

Standard Life shares were little changed in early UK trading, having fallen by around a fifth year-to-date. Shares for rival fund managers Schroders (LSE:SDR) and M&G (LSE:MNG) are down 11% and 29% respectively in 2020. 

Total assets under management and administration fell by nearly 12% to £512 million, although operating expenses were cut by 11% by the departing chief executive.

Standard continued to highlight what it described as ‘robust’ investment performance in volatile markets, with 68% of monies under management outpacing their respective benchmarks over the last three years.

Accompany outlook comments noted that “While revenue outlook remains challenging for the industry, we continue to focus on what we can control. We will continue to diversify our revenue and reshape our cost base to ensure it is future fit.”

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.

However, 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 8% (not guaranteed) offers appeal. Moves to cut costs are necessary, while a change of the chief executive could see an eventual overhaul and rejuvenated strategy. 

But the new recently appointed leader and ex Citigroup (NYSE:C) executive Stephen Bird could look to rebase the now generous dividend payment, using saved cash to invest in potential future growth or even acquisitions. Rivals such as M&G are also not standing still, while low-cost managers like North America’s Vanguard continue to compete hard. In all, some investor caution still looks sensible.  

Positives: 

• Targeted annual cost savings of at least £400 million
• Attractive dividend payment (not guaranteed)

Negatives:

• Fee revenue and adjusted profit both fell
• Vanguard previously cut its own fees further escalating a price war

The average rating of stock market analysts:

Hold