Aberdeen Asset Management outflows accelerate in first half

Outflows continued to outweigh inflows at Aberdeen Asset Management in the second quarter but the fund management group still increased profits by a quarter in the first half of the year and announced a share buyback of up to £100m.

The rate of outflow has accelerated, with £6.5bn net outflows in the second quarter making for a negative £11.3bn flow of net new business in the six months to 31 March, after the £3.3bn announced in a first quarter when Aberdeen first suffered from the "fragile" investor sentiment, especially concerning emerging markets.

Chief executive Martin Gilbert pointed to the continued growth in new business inflows, almost doubled to £23.4bn, but that they have been offset by outflows that arose "from a combination of asset allocation decisions amidst continued weak investor sentiment towards emerging markets and some expected structural outflows from certain institutional clients".

Outflows have to some extent been cushioned by the strong rally in markets, with assets under management, at £330.6bn, roughly 2% higher than at the end of the preceding quarter and than a year ago.

Benefiting from the acquisition of Scottish Widows Investment Partnership, which was completed a year ago, first-half revenues rose 20% to £605.2m and underlying profit before tax soared 25% to £270.2m, within the range expected, with underlying earnings per share up 13% to 16.2p.

Gilbert hailed the "diversifying effects" of the acquisition on the business. He added: "We remain strongly cash generative and we again increased our dividend, whilst also adding to our regulatory capital headroom."

The dividend was raised 11% to 7.5p, less than many were expecting but, in line with previous indications on distributing capital to shareholders, management said they will launch a share buyback programme of up to £100m that will be conducted over the remainder of the year.

The results were "a little disappointing" said broker Numis, with all metrics apart from AuM "a little light".

Adjusted diluted EPS was 4% light of the 16.9p expected, reflecting a combination of revenue 2% lower than expected due
to light management and performance fees, a PBT margin that was lower than expected and a tax rate that at 16.9% versus 16% guidance was higher than expected.

"In summary," wrote analyst David McCann, "this is far from Aberdeen's finest hour, with most key metrics being a little disappointing and a relatively cautious short term outlook from the company. We remain comfortable with our 'hold' recommendation, balancing the subdued near term outlook against reasonable value (in particular the total yield) and the longer term potential."

Shore Capital's Paul McGinnis has provisionally revised down his full year assumption to a net outflow of roughly £12bn-£14bn, around 4% of AuM.

"The positive contribution from market movements, particularly in Q2, already matching our full year assumption, this will provisionally cushion the overall closing AuM downgrade to circa £5bn to circa £336bn."