Aberdeen AM maintains dividend despite increased outflows

Annual profits fell by more than a quarter at Aberdeen Asset Management as its funds under management were hit by almost £33bn of outflows, which have continued in the new financial year but have begun to improve.

With net revenue down 14% to £1.0bn in the year to 30 September, underlying pre-tax profits shrank 28.3% to £352.7m, a marked improvement from the 40% slide in the first half and ahead of most forecasts. Statutory profits were down 37% to £221.9m.

Underlying diluted earnings per share tumbled by close to a third to 20.7p but the board kept the final dividend at 12p, meaning the total payout remained flat at 19.5p.

Assets under management grew 10% to £312.1bn thanks to market movements and exchange rates, offsetting continued outflows as investors remained cautious, with the fourth quarter seeing £7.2bn of net outflows.

"Economic and political newsflow has weighed on investor sentiment and as expected has led to further outflows from our business," said chief executive Martin Gilbert.

He said the level of outflows from equities funds improved steadily throughout the year, although "we will have outflows in the first quarter of 2017 from two lower margin, but large blocks of AuM".

One pleasing point was the more positive investor sentiment towards emerging markets as the year progressed and, while he noted that while industry flows initially favoured passive and exchange-traded fund strategies, there were healthy net inflows to emerging markets equities funds in the final quarter.

Gilbert said the industry faced structural headwinds of fee pressure, technological innovation and greater regulatory requirements but emphasised that the group's broad range of investment expertise and global distribution meant it was "well placed to address these challenges and also benefit from the opportunities they create", though it will continue to seek further cost efficiencies and was prepared to invest in innovation and other means of supporting future growth.

In recent weeks, some analysts had warned the dividend could be at risk given the recent weakness in emerging markets following the US presidential election.

RBC Capital Markets pointed out that profits were ahead of two different measures of the consensus forecast, £331m and £329m, but as the figure included £23m of net gains likely from seed investments the results would be bang in line with expectations.

The conclusion was mixed: "Results are relatively in line with expectations when the £23m net gain is excluded; however, net flows have improved better than expected, especially in equities."

But analysts added that while results were as expected, the outlook has deteriorated in the current quarter given the correction occurring in emerging markets and they did not anticipate a material change in consensus expectations for adjusted EPS of 21.6p for 2017.

Aberdeen shares, which have been at four month lows, were up 4% in early trade before easing to 290.1p by 0920 GMT on Monday, a rise of 1.2% on the day.