Abrdn doubles share buyback programme as revenue rises

(Sharecast News) - Abrdn reported a positive overall first-half result on Tuesday, despite challenging market conditions, as it announced a doubling of its share buyback programme. The FTSE 100 company said its diversification strategy was evident with a full six months of revenue from Interactive Investor, which had a positive impact, though that was offset by a difficult market and a 'risk-off' environment leading to net outflows.

It reported net operating revenue rising 4% to £721m, with the adviser and personal segments seeing growth, which compensated for the lower revenue in investments.

Adjusted operating profit rose to £127m, marking a 10% increase.

Abrdn said that while there was an IFRS loss before tax of £169m, largely due to the fall in the market value of listed stakes, it was an improvement from the prior year's £326m loss.

Despite prevailing market conditions, the adviser segment recorded a 12% revenue increase to £103m, resulting from higher average cash margins.

The adjusted operating profit in the segment was up 29% to £49m.

However, the investments segment experienced a revenue drop of 15% to £466m, reflecting net outflows and a shift of client assets towards debt products and cash amid rising interest rates.

That led to a 66% drop in the segment's adjusted operating profit, to £26m.

Abrdn said its personal segment, boosted by the full inclusion of Interactive Investor's revenue for six months, saw a 162% surge in net operating revenue to £152m.

Treasury income benefited from rising interest rates, clocking in at £66m compared to the previous year's £5m.

In terms of capital allocation and distribution, Abrdn reported a strong position with surplus regulatory capital of £1.017bn and an additional unrecognized £554m from its Phoenix stake.

The company said it had successfully sold its final holdings in Indian stakes, securing £535m in net cash proceeds.

It added that it was close to completing its initial £150m share buyback, announcing an extension of another £150m, bringing the programme to £300m.

Looking ahead, Abrdn emphasised the advantages of its diversification strategy, pointing out that both adviser and personal were on a growth trajectory with more efficient operating margins.

However, it acknowledged an uncertain global market outlook, adding that it was working on strategies to optimise its investments business by focusing on core strengths and streamlining its operating model.

"We continued to move at pace to execute our strategy over the first six months of 2023 in a challenging macro environment," said chief executive officer Stephen Bird.

"Thanks to Abrdn's revenue diversification and the resilience we have built into our business with the acquisition of interactive investor last year, we grew revenue by 4% and adjusted operating profit by 10% over the period.

"We are on track to deliver our £75m cost savings target in Investments as we continue our work to restore that business to a more acceptable level of profitability."

Bird said the company had a strong balance sheet, bolstered by £535m of cash realised during the period from sales of its non-core Indian investments in HDFC Life and HDFC Asset Management.

"This supported a share buyback of £150m, which is near completion, and we are announcing an extension to this programme to £300m.

"We have also deployed capital during this period to further strengthen our position in investments through bolt-on acquisitions.

"We look forward to completing our acquisition of the specialist healthcare fund management business of the US-based Tekla Capital, during the second half, which will add some $3.2bn of assets under management and $32m of revenues."

Reporting by Josh White for Sharecast.com.