By Scott Wright

STANDARD Life Aberdeen saw first-half profits tumble by nearly one-third to £195 million as revenue came under pressure from market volatility sparked by coronavirus and outflows linked to the loss of a major fund management deal with Lloyds Banking Group.

The Edinburgh-based investment giant cited the fall-out from Covid-19 as fee-based income dropped by 13 per cent to £706m, noting that investors had been taking shelter from the volatile conditions by switching to less risk-based cash and liquidity assets.

However, chief executive Keith Skeoch hailed a “resilient” investment performance amid what he described as the “one of the most volatile periods I have witnessed in my 40 years in the business” in the last three to four months. He hailed “significant improvements” in the firm’s track record over three and five years, and said it was now ranked in 51 investment strategies by consultants, up from 43.

“You can see the benefit of that coming through in a much slower rate of redemptions,” he added.

The loss of the £109bn Scottish Widows mandate, sparking a dispute with Lloyds that ultimately ended in SLA’s favour, resulted in an expected £24.9bn of withdrawals in the first half.

The withdrawals resulted in total assets under management and administration at SLA dropping to £511.8bn by June 30 from £544.6bn at the end of 2019. But, stripping out the Lloyds withdrawal, SLA reported net inflows of £0.1bn, with first-half redemptions, down 27% at £38.1bn, the lowest since the merger of Standard Life and Aberdeen Asset Management in 2017.

With gross inflows increasing by 5% to £38.2bn compared with the first half of 2019, Mr Skeoch highlighted SLA’s investment performance in smaller companies “across a whole suite of products”, China, and emerging market debt. He noted that the recent merger of its Murray Income Trust with Perpetual Income, creating a £1bn trust, was “testament to our expertise in equity income”.

SLA maintained its interim dividend at 7.3p per share. Profits were better than analysts forecast, with costs down 11% year on year to £601m, driven by synergies, cost efficiencies and savings made to mitigate Covid-19.

Mr 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.”

The firm’s improving investment performance was welcomed by analysts, who noted that profits were better than expected due to cost savings that were higher than forecast.

Nicolas Hyett, equity analyst at Hargreaves Lansdown, said: “At first glance these results look like standard fare from SLA, with AUM (assets under management) falling on significant outflows and revenues and profits lower as a result.

“However, there are signs of some promising progress under the surface.

“Lower revenue reflects historic outflows and a shift towards lower margin, and lower risk, money market funds by clients – and there’s really not much SLA can do about either. However, the crucial equity funds have seen investment performance improve substantially.”

Mr Skeoch is expected to step down in September, after the appointment of successor Stephen Bird is approved by regulators. Mr Skeoch had led the £11bn merger of Standard Life and Aberdeen Asset, and subsequently ran the enlarged business as co-chief executive with Martin Gilbert.

SLA has been battling net outflows for much of the period since. Mr Gilbert stepped down earlier this year after a spell as vice-chairman.

Shares in SLA closed up 1.7p at 265.2p.