Standard Life Aberdeen’s (SLA) upcoming sale of the “capital-intensive” insurance business to Phoenix (PHNX) may be a case of giving with one hand and taking with the other. As flagged in May, around £1.75bn of proceeds from the sale will be returned to shareholders, with management accelerating an initial £175m share buyback to commence within a few days of publication of this result. However, it also makes the group even more heavily reliant on its investment management operations – a business that suffered net outflows of £19.2bn during the first half, up from £16.4bn at the 2017 half year.
The Wrap and Elevate UK retail savings platforms may have gained £2.5bn in net new business, but group net outflows still rose to £16.6bn from £12.4bn. The Aberdeen Standard investment arm suffered net outflows across all asset classes, including a net loss of £5.3bn in business from the flagship Global Absolute Returns Strategy (GARS).
However, it wasn't all bad news. Management is targeting £250m in savings from the merger of Aberdeen and Standard Life and efficiency gains of more than £100m from operating a simplified business model. Some of those benefits are already coming through, with the cost-to-income ratio declining to 69.4 per cent from 70.6 per cent. Management aims to reduce this to 60 per cent in the medium term.
Analysts at Numis expect adjusted pre-tax profit of £913m for the December 2018 year-end, giving EPS of 26.1p (from £1.04bn and 28.9p in 2017).
| STANDARD LIFE ABERDEEN (SLA) | ||||
| ORD PRICE: | 318.2p | MARKET VALUE: | £9.48bn | |
| TOUCH: | 318.2-318.3p | 12-MONTH HIGH: | 449p | LOW: 301p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 277p* | Assets under administration: | £610bn | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 (restated) | 0.66 | 94.0 | 4.3 | 7.0 |
| 2018 | 1.08 | 127 | 3.8 | 7.3 |
| % change | +64 | +35 | -12 | +4 |
| Ex-div: | 16 Aug | |||
| Payment: | 25 Sep | |||
| *Includes intangible assets of £4.4bn, or 148p a share | ||||
