Abrdn FY losses narrow; transformation programme underway

Fund manager Abrdn said on Tuesday that it has started work on its plans to cut around 500 jobs as part of a cost-reduction programme that is running ahead of targets, as it posted a narrowing of its full-year losses but warned of a hit to margins as clients shift to passive investing.

The company’s transformation programme - which was first announced last month - is targeting an annualised cost reduction of at least £150m by 2025, compared to 2023, with around 80% of the savings benefiting the investments business.

The plan is designed to restore the investments business "to an acceptable level of profitability", it said.

Abrdn said its IFRS pre-tax loss for 2023 narrowed to £6m from £612m a year earlier.

Meanwhile net operating revenue fell 4% to £1.4bn, reflecting the impact of outflows and adverse markets partly mitigated by the diversification in sources of revenue, including the benefit from higher treasury income.

Adjusted operating profit fell 5% to £249m, largely due to the revenue impact of continued net outflows and adverse market movements, which particularly impacted high yielding equities.

Net outflows came in at £13.9bn, up from £10.3bn a year earlier, and assets under management and administration dipped 1% to £494.9bn.

The company also said that for 2023, costs were reduced by £102m, ahead of target.

Abrdn struck a cautious note on the outlook. It said that while market conditions, structural and cyclical, remain challenging for active asset managers it continues to expect headwinds arising from changing client demand and preferences.

In Insurance Partners in particular, the fund manager expects the asset rotation from active equity and fixed income strategies to passive quantitative strategies to continue into 2024.

"This together with related pricing changes, may result in a further contraction of revenue margin," it said.

Chief executive Stephen Bird said: "Over the past three years we have reshaped the business to fit the modern investment landscape. We now have content and distribution aligned to the products and services clients need, and we are better positioned for future growth.

"The investment industry faced further structural and macroeconomic challenges during 2023 with a 'higher for longer' rate environment across developed economies adding sustained pressure on most asset classes.

"The diversity of our group supported financial results in 2023. ii and Adviser are delivering, and we are scaling up these market-leading platforms to benefit from the long-term structural growth in UK savings and wealth. We are taking action to rebuild and grow profit in our investments business. We have sharpened our focus on improving investment performance, streamlined our fund range, reduced costs by £102m in 2023, exceeding our £75m target, and we announced a new cost saving programme of at least £150m on the 24th January."