While the firm was at pains to highlight the steps taken to diversify its business away from Asian and emerging markets, it reported larger-than-expected net outflows of £33.9bn ($51bn, €48.3bn) over the year, largely on the back of weak sentiment toward these regions and expected outflows from closed life books managed for insurers.
The firm’s equities business was responsible for £16.4bn worth of net outflows, fixed income recorded £6.4bn, Aberdeen solutions business (which included the closed life books) saw outflows of £9.8bn and property flows decreased £1.3bn.
Martin Gilbert, Aberdeen’s chief executive, said: “The current weakness may have some way to run,” but added that “the long term fundamental attractions of investing in these high growth economies remain compelling for patient investors.”
Over the year, the firm reported a 5% increase in net revenue to £1.1bn but a 7% increase in operating costs to £670.3m, largely it said, on the back of the inclusion for the first full year of the SWIP business. However, chair, Roger Cornick, said the firm had identified cost savings of around £50m, most of which will be implemented in 2016, but with the full effect showing by 2017.
For the year, underlying operating profit, increased slightly from £490.4m to £498.7m over the year, while the total dividend rose 8.3% to 19.5p per share.
Diversification efforts
But, in many respects the story for the year has been the firm’s string of acquisitions that form part of the broader diversification plan.
As Cornick explained: “We have steadily been 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,” he added.
The other two pillars of Aberdeen’s stated plan to diversify away from such a strong reliance on emerging market equities, Cornick explained are cash management and cost discipline.
In its RBC’s First Glance note on the results, the firm said: “While revenue and PBT were slightly ahead of our forecasts, we believe that the AUM miss due to larger net outflows (primarily in higher margin equities) and weaker investment performance will impact our forecasts in future years.”
And, it added: “For FY16 we forecast adjusted PBT of £414.4m versus consensus of £413m and adjusted diluted EPS of 24.5p versus consensus of 24.5p (consensus provided by the company). Even though we already forecast large Y/Y declines in profitability in FY16 compared to FY15, we expect consensus to moderate further following today’s results largely because of higher-than-anticipated net outflows.”
