Firm say headwinds, forex, and outflows led to 28% fall in pre-tax profits
Companies: Aberdeen Asset Management
Aberdeen Asset Management has reported a 28% fall in pre-tax profit in its full-year results, citing investment outflows across a range of its funds and challenging headwinds.
The Scottish asset manager reported net revenue for the year of £1bn, 14% lower than 2015, with recurring management fee income also down 14%.
It has been another difficult year in terms of investment outflows for Aberdeen, with equity net outflows reaching £13.6bn this year, down 17% on 2015. AAM has suffered from investors losing confidence in emerging markets, the asset class it is perhaps most well known for.
"Equity net outflows have reduced to £13.6 billion this year from £16.4 billion in 2015, with much of the improvement being in the second half year. Emerging market equities recorded a small net inflow of £0.6 billion for the final quarter, albeit negative for the year overall with net outflows for the year of £0.8 billion (2015: £4.0 billion)."
As a consequence of lower revenues, the Group's underlying EPS was 20.7p, down from 30p in 2015.
Dividend
The Board has kept the final dividend in-line with the 2015 payout of 19.5p per share, covered 1.06x by earnings, below the 1.5x safety threshold normally considered sustainable, and below the 1.53x coverage of 2015.
Brexit
Management says the impact of Brexit is largely unknown until the terms of withdrawal are decided:
"We do not expect either our non-UK or UK businesses to be affected in a substantive way by the result of the referendum, although there may be regulatory and/or legal changes in the longer term."
Aberdeen's principal cross-border funds have been domiciled in Luxembourg for several years so investors need not worry about the impact on those:
"Beyond the fund range, the core issue is how we will be able to provide our investment management skills from the UK into the EU market - whether through the benefit of passporting, acceptance that the UK forms an 'equivalent' regime or through co-operation agreements with member states."
Outlook
According to Chairman Simon Troughton, the asset management sector is facing three headwinds: fee pressure, increased investment in technology, and regulatory capital requirements.
"We will continue to seek further cost efficiencies, whilst also being prepared to make appropriate investment in innovation and otherwise supporting the future growth of the business and motivating our diverse workforce."
He said the firm's primary objective remains unchanged, that is to ensure that its clients achieve their long-term outcomes.
"We enter the new financial year with a healthy balance sheet and as a full-service asset manager with a strong distribution focus, and a broad range of capabilities which can adapt to changing investor appetites to enable us to remain competitive in a rapidly adapting market."
Chief Exec Martin Gilbert said the results reflected AAM's diversified business model and cost management, before attributing worsening investor sentiment and outflows to political and economic newsflow:
"Structural themes including fee pressure, technological innovation, and greater regulatory requirements are a focus for all asset managers. Aberdeen's broad range of investment capabilities and global distribution platform means we are well placed to address these challenges and also benefit from the opportunities they create.
By continuing to invest in the business and by being a good steward of our customers' money we are committed to helping our investors - from individuals through to institutions - achieve their financial goals."