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Standard Life Aberdeen profits drop by a third as pandemic dents fee income

Despite the profit and revenue declines, the asset manager still managed to deliver new inflows of £0.1bn during the period compared to £15.9bn in net outflows a year ago

Standard Life Aberdeen PLC - Standard Life Aberdeen profits drop by a third as pandemic dents fee income

Standard Life Aberdeen PLC (LON:SLA) has reported a hefty drop in profits for the first half of 2020 as the coronavirus pandemic dented revenues at the asset manager.

The FTSE 100-listed group reported an adjusted pre-tax profit for the six months to June 30, 2020, of £195mln, 30% lower year-on-year, while fee-based revenues dropped by 13% to £706mln which was attributed to 2019 outflows, clients changing asset mixes in the more volatile market environment and tranche withdrawals by Lloyds Banking Group PLC (LON:LLOY).

READ: Standard Life Aberdeen dividend under threat as new boss takes reins says Berenberg

Despite the profit and revenue declines, Standard Life still managed to deliver new inflows of £0.1bn during the period compared to £15.9bn in net outflows a year ago, while 68% of its assets under management (AUM) were above benchmark over three years.

The company also maintained its interim dividend at the same level as the prior year at 7.3p per share.

Looking ahead, the group said the pandemic and associated shutdowns had “precipitated significant negative growth shocks across the world”, however, the contraction phase of the crisis had been short-lived and they anticipated an element of recovery as restrictions are lifted.

“While revenue outlook remains challenging for the industry, we continue to focus on what we can control. We will continue to diversify our revenue and reshape our cost base to ensure it is future fit … Although the future is unpredictable, we believe our mix of customers and channels, continued investment performance, enduring relationships, geographic spread and financial strength will enable us to continue to demonstrate resilience in periods of ongoing uncertainty”, the company said in its statement.

“Despite exceptional circumstances we have delivered a resilient performance. In the first half of 2020 redemptions have slowed and net inflows have improved, excluding expected LBG withdrawals. Investment performance has been robust and we continue to deliver on our synergy commitments”, added SLA's outgoing chief executive Keith Skeoch, who will be replaced by Stephen Bird, the former CEO of Citigroup’s global consumer banking arm.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the results showed “some promising progress under the surface” despite the lower revenues and profits.

“Lower revenue reflects historic outflows and a shift towards lower margin, and lower risk, money market funds by clients – and there’s really not much SLA can do about either. However, the crucial equity funds have seen investment performance improve substantially, and while there’s still work to be done, if performance can be maintained that should drive future inflows. In fact strip out the decision by Lloyds to shift its assets…and asset flows have already crept into positive territory – driven by inflows from retail investors”, Hyett said.

“Longer term SLA still has to contend with the rise of passive investment alternatives. However, a better investment performance, good retail distribution platforms and lower operating costs give it all the tools it needs to make the most of its situation”, he added.

Shares in SLA were 0.3% higher at 264.4p in mid-morning trading on Friday.

--Adds analyst comment and share price--

Quick facts: Standard Life Aberdeen PLC

Price: 208.9 GBX

LSE:SLA
Market: LSE
Market Cap: £4.66 billion
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