Edinburgh-based investment giant Standard Life Aberdeen (SLA) revealed on Tuesday its assets under management and administration remained steady in 2020, slipping 1.8% to £534.6 billion.
But the firm’s stock price slumped as it slashed is full-year dividend 32% to 14.6p per share to reflect “current operating profitability” and explained it is “rebasing the dividend to a level from which it can be grown …”
The asset manager’s 2020 fee based revenue fell 12.7% to £1.4 billion and adjusted profit before tax fell 16.6% to £487 million.
Net outflows reduced to £3.1 billion from £17.4 billion “driven by a significant improvement in institutional and wholesale net flows” — but that was excluding the previously announced large withdrawals by Scottish Widows owner LBG.
Including the LBG withdrawals, net outflows totaled £29 billion in 2020, an improvement on the £58.4 billion net outflows in 2019.
Shares of Standard Life Aberdeen fell about 7% on Tuesday to give the firm a current stock market value of around £6.5 billion.
The company’s shares have risen roughly 25% over the past 12 months.
IFRS profit before tax soared to £838 million from £243m “reflecting profit on disposal of interests in associates partially offset by impairments of goodwill and intangibles.”
Explaining its new dividend policy, Standard Life Aberdeen said: “The board remains committed to delivering a dividend that is sustainable over the medium term.
“Reflecting current operating profitability, industry trends, and economic and market uncertainties, the board is rebasing the dividend to a level from which it can be grown …
“Therefore the board is recommending a final dividend in respect of 2020 of 7.3p per share, bringing the total dividend for the year to 14.6p per share.
“The board intends to maintain the total dividend at this level until covered at least 1.5 times by adjusted capital generation, at which point the board will seek to grow the dividend in line with its assessment of underlying medium term growth in profitability.”
Recently-hired Standard Life Aberdeen CEO Stephen Bird is hoping to improve the fortunes of the asset manager, which will change its name soon after selling the “Standard Life” brand to closed life and pension fund consolidator Phoenix Group.
Bird has made big leadership changes at the Edinburgh firm and plans to build up a stable of “passive” investment products that could eventually account for as much as 30% of assets at the “active” fund manager.
SLA said it aims to arrest revenue decline in the near term “inflecting to a high single digit three year revenue CAGR (compound annual growth rate) over the period to 2023.”
It said it is targeting an exit of 2023 with its cost/income ratio down to 70%.
SLA said it is simplifying its business through the announced exits from Nordics real estate and Indonesia, and the proposed sale of Parmenion.
Numis analyst David McCann said: “It remains a judgment call on whether shareholders believe that this management can achieve these aims.”
McCann said the new SLA dividend policy was “disappointing.”
Bird said: “We have seen growing momentum in the second half of 2020 with improved investment performance and flows which represent an inflection point as we pull out of the post-merger era.
“We remain on track to deliver targeted synergies and have identified more that we can deliver.
“We have exited some non-core businesses and made an acquisition that has extended our capabilities in private markets.
“We have simplified and clarified leadership structures across the business and placed a refreshed focus on Asia.
“We have a clear vision; we will focus on the future to enable our clients to be better investors.
“To do this we will pursue efficient, sustainable growth by ensuring that our product capabilities, technology and performance are first class.
“Our pursuit of client led growth, combined with focus on efficiency and careful deployment of capital, will enable us to generate sustainable value for our shareholders.
“We have three growth vectors – Investments, Adviser and Personal.
“Thanks to our strong capital position, we have strategic flexibility around how we grow these businesses and we have set out clear ambitions.
“At this reset point for this business, we have rebased to set firm foundations on which we can build something great. I’m excited about what’s to come.”
SLA chairDouglas Flint said: “The economic backdrop caused by the pandemic meant we did not build revenue in 2020 but we made encouraging progress in related areas.
“Notably, we reduced net outflows, improved both consultant ratings and investment performance and met major milestones in delivering the technology framework needed to underpin future growth.
“In December, we announced the acquisition of one of Europe’s leading logistics real estate fund managers, Tritax.
“On top of this, we announced the intention to sell Parmenion, one of our three adviser platform businesses, in order to bring clarity to our adviser platform strategy.”