Reaction: analysts call for 'radical' change to Abrdn strategy after swing to H1 loss and muted revenue outlook

Analysts have deemed investment giant Abrdn in need of radical action, such as a break-up of the group, with fears that it faces being edged out of the FTSE 100, after it swung to an interim loss and reined in its ambitions for revenue growth.

The Edinburgh-headquartered group – which rebranded from Standard Life Aberdeen last year – has reported an IFRS pre-tax loss of £320 million in the six months ending June 30, compared to a profit of £113m 12 months previously. It said the move into the red was mainly driven by losses of £313m from the change in fair value of its “significant” listed investments in the period.

Adjusted operating profit was 28 per cent lower at £115m, while fee-based revenue fell 8 per cent to £696m and total net outflows reached £35.9 billion, the major increase from £5.6bn in the year-ago period mainly attributed to the final Lloyds Banking Group tranche withdrawal of £24.4bn.

Assets under management and administration amounted to £508bn, down from £542bn, with the group saying this reflected lower markets, for example, but was partly offset by the contribution of online investment platform Interactive Investor, whose £1.5bn acquisition was announced in December.

The group also predicted that current market uncertainty means its ambitions for revenue growth and an improved cost/income ratio are likely to take “longer than originally expected”.

Boss Stephen Bird said: “The half-year group results largely reflect the challenging global economic environment and market turbulence. When I became CEO in late 2020 I said that we would pursue a strategy of diversification by refocusing our investments business in to areas of strength, where we have scale... lean into global growth trends and also significantly expand our reach into the higher-growth UK wealth market.

"We are doing exactly that and the addition of Interactive Investor transforms our UK retail presence and future revenue streams. The strength of our balance sheet means that we can continue to invest and reward shareholders.”

Abrdn says the latest results 'largely reflect the challenging global economic environment and market turbulence'. Picture: contributed.

Tricky

However, John Moore, senior investment manager at Brewin Dolphin, branded the results “mixed” – adding that the numbers “confirm the tricky position” in which the company finds itself. It is now “at the edge of the FTSE 100, having lost around 30 per cent of its value since the beginning of 2022,” he added.

"The purchase of Tritax and Interactive Investor have reshaped the company and appear to be performing well, but there are some more strategic moves required to get the fund manager back on track. Abrdn seems certain to be relegated from London’s top index unless it can pull something out of the bag in the near term.”

David McCann’s team at Numis also commented: “Pretty much all of the key numbers were worse than the low expectations either we or consensus had. We continue to think that more radical strategy is needed to turn the group around and maximise value, such as the break-up of the group or sale of the group in full.

“Abrdn is not a top pick or a buy recommendation that we have huge conviction in, and we do not see any obvious shorter-term positive catalysts. However, we do think it is very cheap compared to its intrinsic value, although it is probably worth more dead than alive in the current form in our view.”