Standard Life Aberdeen brings buyback forward as outflows disappoint

Standard Life Aberdeen said it would accelerate its £1.75bn share buyback programme after net outflows and profits fell slightly more than expected in the first half of the year.

As the merger of the two groups was completed in August 2017, half-on-half and yearly comparisons are pretty difficult, made more so by the sale of Standard Life's insurance operations, expected in the coming quarter, which management said will complete the transformation to a "capital-light investment company".

In the first six months of the year, there were gross inflows of £38bn into the group's investment funds, but AUM shrank to £610.1bn, down 2.7% over the year and 2.6% from six months ago. There were net outflows of £19.2bn from the Aberdeen Standard Investments unit, with a total net outflow of £16.6bn from continuing operations, from £54.6bn of redemptions in the period.

"Conditions for the asset management industry continue to be challenging," said joint chief executives Martin Gilbert and Keith Skeoch in a statement.

The pair felt it was encouraging that the outflows were concentrated in a narrow range of strategies and said inflows were well diversified across a broad range of "new active" capabilities and the distribution team was fully integrated post-merger and seeing strong interest in Credit, Private Equity, Real Estate and multi-asset solutions.

Adjusted profit before tax from continuing operations of £311m was down 12% year-on-year compared to the pre-merger businesses and up 2% on a pro forma figure from the second half of last year. Adjusted diluted earnings per share of 8.2p was down 15% over the year and up 9% over the preceding six month period.

Gilbert and Skeoch said the investment and distribution teams were winning new mandates, have a "good and diverse pipeline of business from around the world", and the group was "actively taking steps" to improve investment performance in key areas.

On the merger, the pair are now targeting a total of over £350m of savings, including merger related cost synergies of £250m as well as efficiency savings from a simplified global operating model of at least £100m.

"We are also pleased by progress on the integration programme and achievement of cost synergies. The sale of our UK and European insurance operations will complete our transformation to a capital light business and enhances our strategic partnership with Phoenix."

The first tranche of £175m of the share buyback will begin "in the next few days" rather than next year, while the interim dividend was nudged up 4.3% to 7.3p, which was as expected.

After the initial public offer of Indian associate's HDFC AFC on the Bombay Stock Exchange reaped around £180m for the FTSE 100 group, analysts at broker Numis suggested the acceleration of the buyback programme was effectively going to be funded from this cash, taking advantage of a share price that has fallen around 30% since the end of December. The shares perked up 3.6% to 317.7p on Tuesday.

Numis said the key numbers were "marginally below expectations", with net outflows of £19.2bn versus the consensus forecast of £17.8bn and adjusted PBT of £478m short of the £496m the market expected.

"The merger and de-merger appears to remain on track. Overall, we would not anticipate making any material changes to our key forecast figures following these results," analysts wrote in a note to clients, suggesting the the market is "materially undervaluing" SLA, but that investors will need "patience".