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SLA impairs after outflows and weak market outlook

The fund manager booked a £1.6bn non-cash impairment as client assets again dipped
March 10, 2020

Standard Life Aberdeen (SLA) singling out “an improvement in the rate of net outflows” among institutional and wholesale clients as a highlight of its 2019 results tells you a lot about the trouble facing the asset manager in recent times.

IC TIP: Sell at 250p

In the second half of the year, the group suffered £6bn in net outflows, although that was a sizeable improvement on the £15.5bn of client money that left the business in the prior six months, or the £39.8bn which pulled during 2018. Yet look to the wider group – including the loss of the Lloyds Banking mandate – and net outflows swelled to £58.4bn in 2019.

Although a decent investment performance partly offset those losses, the period ended with a reduction in assets under management and administration of 1.3 per cent. Together with a shift in the asset mix, that explained the fall in fee-based revenue and the rise in the cost-to-income ratio from 68 to 71 per cent.

Scars have now been left on the balance sheet. Noting a combination of net outflows, weaker market conditions and “competitive pricing on future revenue projections”, management has made a £1.57bn impairment of the intangible assets.

Consensus forecasts are for earnings per share of 18.6p in 2020, rising to 20.3p in 2021.

STANDARD LIFE ABERDEEN (SLA)  
ORD PRICE:250pMARKET VALUE:£5.81bn
TOUCH:250-250.4p12-MONTH HIGH:338pLOW: 209p
DIVIDEND YIELD:8.6%PE RATIO:28
NET ASSET VALUE:283p*NET CASH:£1.35bn
Year to 31 DecTotal income (£bn)   Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016^18.778918.719.8
2017^17.096429.821.3
20182.13-787-29.321.6
20193.992438.921.6
% change+87---
Ex-div:2 Apr   
Payment:19 May   
*Includes intangible assets of £1.7bn, or 73.6p a share. ^Insurance accounting pre-merger.