Abrdn : Half year results 2021

Half year results 2021

August 2021

Contents

1.	Management report	1
2.	Statement of Directors' responsibilities	19
3.	Independent review report from our external auditors	20
4.	Financial information	21
5.	Supplementary information	53
6.	Glossary	67
7.	Shareholder information	69
8.	Forward-looking statements	70

The Half year results 2021 are published on the Group's website at www.abrdn.com/hyresults

Details of forward-looking statements can be found on page 70.

Certain measures, such as fee based revenue, cost/income ratio, adjusted operating profit and adjusted profit before tax are not defined under International Financial Reporting Standards (IFRS) and are therefore termed alternative performance measures (APMs). Further details on APMs are included in Supplementary information in Section 5.

Standard Life Aberdeen plc became abrdn plc on 2 July 2021.

All movements shown are compared to H1 2020 unless otherwise stated.

Strong start to the year, with progress on strategic priorities

Stephen Bird

Chief Executive Officer

"We have made a strong start to the year and our three-year growth plan.

These results, the first as abrdn plc, show a 52% increase in adjusted operating profit. Each of our three growth vectors have delivered higher revenue and profits, contributing to the highest overall rates of growth since the merger.

Our strategy is about focusing on client needs. The improved flows into our strategically-important products and services show that we are answering client demand. The majority of the outflows that we are seeing are lower margin.

Low interest rates and central bank interventions have created supportive market conditions from which we have benefited. Market volatility is expected to continue due to COVID-19 and its unequal effects in different parts of the world.

We have made good progress in simplifying and focusing our business. The leadership team is now in place to drive the growth we seek through our strategic priorities. Our capital strength gives us the ability to invest in these priorities.

We have a clarity of focus under our new brand and are better positioned to have impact at scale as a global business. We are at the beginning of the journey and we are moving at pace to build our new future."

August 2021

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Half year results 2021

Strong start to the year, creating momentum for our growth ambitions

• Fee based revenue 7% higher and adjusted operating profit 52% higher than prior year which are the highest rates of growth since merger.
• Net outflows reduced to £5.6bn, including liquidity net outflows of £3.7bn. Excluding liquidity flows, which are volatile, net outflows were £1.9bn representing a significant improvement over prior periods and less than 10% of outflows at the low point in H2 2018.
• Consequently the impact on revenue from net outflows (excluding LBG) is less than 0.5% compared with 3% in H1 2020.
• AUMA of £532bn (FY 2020: £535bn) broadly flat as reductions due to flows and corporate actions were partially offset by positive market movements.
• Delivered improved operational leverage with cost/income ratio of 79%, 6ppts lower than prior year.
• Higher adjusted operating profits in all vectors - 61% higher in Adviser, 33% higher in Investments and Personal has recorded a small profit for first time.
• IFRS profit before tax of £113m, reflecting higher adjusted operating profit and significantly lower impairments than H1 2020.
• Adjusted diluted EPS of 7.0p is 3.7p higher, benefiting from the increase in adjusted profit after tax and the share buybacks in 2020.
• Adjusted capital generation increased by £73m to £176m, reflecting strong profit performance.
• Strengthened capital position with surplus regulatory capital increasing to £2.8bn (FY 2020: £2.3bn), including £0.7bn benefit from sale of 4.99% in HDFC Life.
• Interim dividend of 7.3p in line with our dividend policy.

2 abrdn half year results

Good progress in our growth vectors

• Gross flows (excluding liquidity) in Institutional and Wholesale were 21% higher than H1 2020 at £20.0bn.
• Institutional and Wholesale has seen best net flows performance (excluding liquidity) since merger of (£0.8bn).
• Liquidity gross flow in Institutional and Wholesale reduced from £9bn in H1 2020 to £2bn in H1 2021 reflecting client response to volatile markets.
• Strong client demand for private markets1 investments drove net inflows to £3.2bn, a 10-fold increase on prior year.
• Investment performance is 66% of AUM above benchmark over three years (FY 2020: 66%).
• Strengthened ESG product offering with launch of range of SFDR Article 9 climate funds.
• Adviser net flows increased to £2.0bn (H1 2020: £1.1bn), the highest flows in three years. Launched new adviser experience programme to accelerate our market-leading position.
• Personal had record net flows of £0.5bn with Aberdeen Standard Capital reaching record AUMA of £8.7bn.

Simplified the business, investing to focus on strategic priorities and client needs

• Changed company name and rebranded to abrdn plc in July.
• Achieved major milestone in investment platform integration with over 1,300 portfolios and c£460bn of AUM migrated onto one investment platform in July. Remain on track to deliver targeted £400m of synergies by end 2021.
• Continued to simplify the business by completing sale of Parmenion and Nordics real estate business and exiting from the Indonesian market.
• Modernised our real assets franchise by completing the acquisition of a majority interest in Tritax.
• Simplified and extended our strategic partnership with Phoenix as announced in February.

Key indicators for half year 2021

Fee based

revenue	Cost/income
up 7%	ratio
	79%

	H1 2021	H1 2020	Change
Financial indicators
Fee based revenue	£755m	£706m	7%
Cost/income ratio	79%	85%	(6ppts)
Adjusted operating profit	£160m	£105m	52%
Adjusted capital generation	£176m	£103m	71%
IFRS profit/(loss) before tax	£113m	(£498m)
Adjusted diluted earnings per share	7.0p	3.3p	112%
Diluted earnings per share	4.7p	(22.7p)
Interim dividend per share	7.3p	7.3p
Business indicators
Gross flows	£36.0bn	£38.2bn	(6%)
Net flows	(£5.6bn)	(£24.8bn)
Net flows excluding liquidity and LBG2	(£1.9bn)	(£6.8bn)	72%
AUMA	£532bn	£535bn3	(1%)
Investment performance (AUM) - 3 years4	66%	66%3

1. Private markets comprises real assets, private equity, private credit and alternatives.
2. Excluding Institutional and Wholesale liquidity net flows of (£3.7bn) (H1 2020: £6.9bn) and LBG tranche withdrawals of £nil (H1 2020: £24.9bn). Liquidity flows are low margin and volatile in nature. LBG tranche withdrawals relate to the settlement of arbitration with LBG in 2019.
3. At 31 December 2020.
4. Percentage of AUM above benchmark over three years. Further details on the calculation of investment performance are provided in Supplementary information.

Outlook

• Outlook remains unchanged as set out in our full year 2020 results in March.
• Arrest revenue decline in near term, inflecting to a high single digit three-year revenue CAGR over the period ending 2023.
• Target to exit 2023 at cost/income ratio of c70%.
• Disciplined approach to capital allocation with a focus on building returns for shareholders.
• Rebased dividend of 14.6p per annum until adjusted capital generation reaches 1.5x cover.

August 2021

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