Half Year Results 

SLA buyback accelerated despite worsening outflows

SLA buyback accelerated despite worsening outflows

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:318.2pMARKET VALUE:£9.48bn
TOUCH:318.2-318.3p12-MONTH HIGH:449pLOW: 301p
DIVIDEND YIELD:6.8%PE RATIO:11
NET ASSET VALUE:277p*Assets under administration:£610bn
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017 (restated)0.6694.04.37.0
20181.081273.87.3
% change+64+35-12+4
Ex-div:16 Aug   
Payment:25 Sep   
*Includes intangible assets of £4.4bn, or 148p a share

IC View

The shares are trading near a 12-month low, but closed the day up 5 per cent on the release of these results. That leaves them trading at 12 times forward earnings, a discount to the broader asset management sector. However, the continued high level of outflows – which show no sign of abating – is a concern and one that justifies that discount. Hold.

Last IC View: Hold, 382.4p, 26 Feb 2018

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