Aberdeen Asset Management leader Martin Gilbert has admitted there will be no early lifting of the emerging market gloom which saw equity outflows rise by 25 per cent to £16billion last year, sparking a 4.6 per cent fall in the group’s shares.
Total net outflows were £34bn, two-thirds up on the previous year, and assets under management fell by £40bn to £284bn, the group reported yesterday whilst hiking the dividend by 8.3 per cent on the back of a solid financial performance.
Chief executive Mr Gilbert said that while “we believe the current weakness may have some way to run” the group had a very strong balance sheet, was generating cash, and was paying a rising dividend. “ So, I suppose people are being paid reasonably well to wait for what the upturn ... will bring.”
He said: “We continue to rebalance and diversify the business, to focus on managing our costs and to generate cash and this has helped to mitigate the impact of the outflows we've seen.”
Analysts say the outflows may wipe £100m from revenues this year, but meanwhile Aberdeen has integrated last year’s SWIP acquisition which boosted its funds under management by 40 per cent.
It now says the cost synergies from the deal are ahead of expectations and it has identified further efficiencies within the enlarged business. “We have therefore implemented a programme to reduce annual operating costs by approximately £50m,” chairman Roger Cornick said. “ Much of these savings will be achieved later in 2016, with the full benefit to come through in 2017.”
Aberdeen employs 500 in Edinburgh and 250 in its home city but finance director Bill Rattray said there would be “no material change” on employment, with some roles not necessarily being filled when people moved on.
Mr Cornick said the group had been steadily rebalancing the business both organically and by acquisition. “Increasingly investors are seeking solutions to meet their investment objectives, rather than simply purchasing an array of products across different asset classes. The SWIP acquisition was a major step, with the acquisitions we have announced more recently adding further strength to our alternatives and multi-asset capabilities.”
Once fully integrated, last year’s acquisitions would create a “global alternatives platform with assets under management of over £20bn from which we will seek to build organically”.
The chairman said core operating cashflow was £531.7m and at the year end Aberdeen had £567.7m in cash, enabling a strengthening of the balance sheet which was “part of a deliberate strategy to enable us to weather market downturns and to continue to invest in the business”.
The final dividend of 12p is up seven per cent and the total 19.5p rises by 8.3 per cent, giving investors a notional dividend yield topping six per cent on yesterday’s share price.
Net revenue for the year of £1.17m was five per cent up on 2014, as was recurring fee income. Underlying pre-tax profit was up marginally from £490.3m to £491.6m, while statutory pre-tax profit was down by less than £1m at £353.7m.
Mr Cornick said Asian and emerging markets were in a “cyclical correction”, and the group had taken its share of market withdrawals made by sovereign wealth funds in response to the oil price, and had been affected by investors making macro-economic calls. “There has been focus on the underperformance of our equities products against their respective benchmarks,” he said. “While this is never comfortable, as a true active manager we are prepared to take positions which diverge from benchmark weightings..... While we will not change our investment approach, we will continue to make refinements to our process as we have over the past 30 years.”
Mr Rattray commented that this related to the group’s global equity performance, which had continued to suffer from being underweight in the US, a position that the group had made “pretty clear to investors”.
The shares closed down 15.4p at 319.4p.
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