14 BUSINESS
Cost cutting at Abrdn
500 Job losses announced at Edinburgh-based institution
ASSET MANAGER, Abrdn, has confirmed that
about 500 jobs will be lost as part of a £
million round of cuts by the end of next year.
The Edinburgh-based institution, which has
undergone a controversial restructuring under
chief executive Stephen Bird, has seen an outflow
of funds and its long-term credit rating
downgraded by Moody’s.
The job losses amount to about 10% of its 5,
workforce in London and Edinburgh and the
company confirmed speculation in a scheduled
trading update.
It said the cost-cutting programme is designed
“to restore our core Investments business to an
acceptable level of profitability and allow for
incremental reinvestment into growth areas.”
It is due to announce full-year results on 27
February when investors will look to see if it has
turned around a first half loss before tax of
£169million.
A pressing issue has been its inability to stem
an outflow of funds. It said today that institutional
and retail wealth net outflows in H2 2023 were
£11.2billion. Insurance Partners net outflows were
£1.3billion.INVESTOR CAUTION
It has not been alone in suffering outflows.
Most active investment houses in the UK have
seen a move to cheaper passive index-tracking
investment and investor caution towards
equities generally.
In a statement, Mr Bird said: “Market
conditions have remained challenging for our mix
of business, and this is reflected in our year-end
AUMA, flow numbers, and margins. The Board
and I are committed to taking these significant
cost actions now to restore our core Investments
business to a more acceptable level of profitability.
“Although our business model benefits from
the diversification that comes from operating
three businesses, we will not rest until all of them
are contributing strongly to group profitability,
as Adviser and interactive investor have done
in 2023.
“The new transformation programme
announced, when completed, will deliver a
step change in our cost to income ratio.
We exceeded our £75m cost reduction target for
2023 for Investments, but we recognise more
needs to be done.
“After a root and branch review, we are now
re-engineering and simplifying our business
model to remove at least £150m of costs – mostly
from group functions and support services.
The programme will largely be implemented in2024, completing in 2025. These changes will
allow us to continue our focus on building a
growth business.”
The company, originally Standard Life
Aberdeen, was created out of the 2017
merger of Standard Life and Aberdeen Asset
Management, and its rebranding as Abrdn
under new management prompted widespread
derision. The Standard Life brand and business
was sold to Phoenix.
Moody’s said it was cutting Abrdn’s long-term
issuer rating by one notch to Baa1 from A
because of what it called “idiosyncratic
weaknesses in its credit profile, exacerbated
by industry-wide headwinds”.
It was reported in January that Abrdn had
introduced a 52-week cap on redundancy
payments from this month in a fresh effort to
curb costs. Paid parental leave is also being
reduced for staff from October.
Standard Life Aberdeen had adopted a
controversial co-CEO model, but after both
Martin Gilbert and Keith Skeoch departed,
the board hired former Citigroup banker
Mr Bird in 2020.
He was tasked with turning the business
around and as part of the re-modelling of the
group he paid £1.5 billion for Interactive Investor,
the investment platform, which helped build a
position in the DIY retail market.
Under its newly-hired finance director Jason
Windsor, the company now plans to reintroduce
quarterly reporting which was dropped in 2017 in
a move to encourage long-termism.
Its shares have performed poorly, trading 17%down over the year and by a third over five years.
The share price and company value has fallen
sharply since the merger.
In recent years it has yo-yoed in and out of the
FTSE 100 and there has been pressure from some
investors to break up the business.
Last year the company vacated its purpose-
built head office in St Andrew Square that it only
moved into six years earlier and relocated to its
historic base in nearby George Street where it
employs fewer staff.
In a note Panmure Gordon said: “We have
argued strongly that the company has needed to
address the cost base in its Investments division,
as well as more broadly.
“It is now (belatedly) doing so, but the need
for that cost cutting becomes ever more apparent:
flows in H2/23 were awful and the profit outcome
for 2023 has been rescued by interest income
for which management should not seek to
take credit.
“The aim is to reduce costs by £150million
compared with 2023’s outcome but on marked-
to-market estimates revenues will fall by ~£80m
over that period too.
“The cost cutting is undoubtedly welcome but
not yet the end of the story. There remains value
in the shares on any reasonable assumptions
about the value of the quite disparate businesses,
at least now there appears to be an attempt to
preserve some of that value.”This article was first published by the Daily
Business news website.
http://www.dailybusinessgroup.co.ukBy PHYLLIS STEPHENAN EDINBURGH based retailer is among
the contenders to win at the China
Scotland Business Awards.
Museum Context is the leading
independent business involved in selling
Harry Potter merchandise.
Andrew McRae founded the business in
2007 out of a “love for cultural heritage
and a desire to offer top quality interior
accessories and giftware”. He said: “Being
shortlisted for this award is a testament to
our team’s hard work and dedication.”
He was keen to ensure that the
Edinburgh part of the Harry Potter story
should not remain untold. He wanted to
highlight that Edinburgh influenced the
settings and many of the characters
created by JK Rowling as she wrote the
early Harry Potter books in the Elephant
House café, known worldwide as ‘the
birthplace of Harry Potter’. McRae has
opened 24 outlets including two in
Edinburgh and one in Hong Kong.
In a new partnership between Museum
Context and Elephant house an immersive
experience bringing together the
merchandise and the story of the café
where it started will be established in
Hong Kong.
“Elephant House International Hong
Kong will be the centrepiece for Museum
Context’s expansion in the Greater Bay
area, Mainland China, and the Far East,”
McRae said. “Our connection to Hong Kong
is both emotional and business-driven.
We’re excited about this next chapter and
look forward to continuing to contribute
to the Scotland Hong Kong relationship.”
The awards will be announced and
presented at the China-Britain Business
Council’s Chinese Burns Supper in
Edinburgh on 8 February 2024.Edinburgh weaves
its magic in China
Andrew
McRaeStephen
Bird