Tuesday, 5 May 2015

Aberdeen Asset Management interims

A global investment management group, managing assets for both institutional and retail clients from offices around the world. I have a holding in my income portfolio (epic code: ADN).

Aberdeen Asset Management released their interim results today, stating that revenue was up 20.2% to £605.2m.

Adjusted operating profit was up 24.9% to £270.6m, with reported operating profit up by 12.3% to £189.0m.  Adjusted EPS increased by 12.9% to 16.17p and reported EPS increased by 0.5% to 10.72p.

Assets under management increased by £6.2bn to £330.6bn, with market performance and foreign exchange gains of £13.5bn and £4.0bn respectively, offsetting net outflows of £11.3bn.  Net outflows were £6.5bn in the second quarter substantially up from the first quarter when they were £4.8bn. 

Free cash flow (FCF) was down £16.6m from last year to £161.2m, so the trailing twelve months (TTM) of FCF is £425.7m compared to £442.3m for 2014, but still represents a TTM FCF yield of 7.1% on today's price of 454p.  Dividends and share buy-backs totalled £196.7m, which along with acquisition and net investment spend totalling £60.4m, consumed all of the FCF and reduced the net cash by £87.3m (including a forex gain of £8.6m) to £566.6m.

An interim dividend of 7.5p was declared, an increase of 11.1% on last year.  Management have stated their intention to launch a share buy-back programme of up to £100m which will be conducted over the remainder of 2015.  With £221m of headroom over their regulatory capital requirement, strongly cash generative and £566.6m of cash on the balance sheet, they clearly have the capacity, but with their current share price at 3.5x their book value, this does not represent the best use of excess funds.  A special dividend would represent better value for shareholders, but since they have increased the dividend by a CAGR of 16% pa over the past 8 years I really have little to complain about, it is just that the allocation of capital is one of the key decisions management have and it irritates me when they get it so wrong.  See here for a company that eventually got it right by reversing their decision on buy-backs and replaced it with a special dividend.

Commenting on the outlook management stated "...We remain convinced that adherence to our long term investment approach will generate value for our clients and shareholders..."


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