Proof that dropping Es doesn’t always give you a woozy, loved-up, happy feeling. Who gets that with Abrdn? Guaranteed downers are more its forte.
The latest proof? The full-year figures, starring another £13.9 billion of net outflows plus an even bigger shocker: that the unbelievably lousy performance of its funds this time last year has somehow got even lousier. Back then, only 65 per cent of them had outperformed their benchmark over three years. Now? The figure’s down to a pitiful 42 per cent. On the equities front, it’s 17 per cent. Do its “active” fund managers, struggling against the trackers, spend their time contriving different ways to lose money? Seriously, you’d have a similar chance of success on the 3.30 at Kempton Park.
Overseeing this farrago is Stephen Bird: its e-averse boss around since September 2020. A year ago, he was pointing out that he’d first bought shares in the business at 216p and that being a misunderstood genius, or whatever, he was waiting for the market to catch up with the joys of his turnaround. “That’s the problem with being a visionary,” he said, only half-jokingly. Back then, the shares stood at 224½p. A year on? Just 156¼p, down 3 per cent on the results. The wait clearly goes on.
True, you can’t blame Bird for his inheritance: 2017’s £11.8 billion merger of Aberdeen and Standard Life. That value-destroying culture clash was put together by the fishing pals Martin Gilbert and Keith Skeoch, who in their joke co-chief roles took it in turns to hold the big rod. By the time Bird showed up, about £7 billion of value was already gone. But it’s down to him Abrdn’s now valued at only £2.9 billion.
Bird says he’s building a “modern investment company”. And he looks to be bringing more resilience. His revamp’s included raising £2 billion from selling out of the India-listed HDFC Life Insurance Company and using the proceeds to fund both the £1.5 billion purchase of investment platform Interactive Investor and share buybacks. He’s also bolstered the Adviser portal for wealth managers. The duo, both showing solid growth, chipped in 93 per cent of adjusted operating profits — down 5 per cent to £249 million.
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Yet Bird says their progress is being “masked” by the travails of a fund wing managing £495 billion of assets. He’s closed or merged 250 of Abrdn’s funds, with 74 per cent of the rest now at least £100 million in size. And, yes, it’s bad luck that the group’s focus is on out-of-favour Asia and emerging-market funds and that, faced with higher interest rates, investors also rotated out of the income sort, where 75 per cent of Abrdn’s outperform, and into cash. But the best he’s got for now is more cost-cuts to save £150 million, including axing 500 jobs.
Indeed, such cuts have been a post-merger theme — even if Bird says that, under him, the annual restructuring charge has averaged £185 million versus £305 million for the three years before he arrived. He’d also say that, thanks to returning £1.5 billion of capital, the same again 14.6p dividend now costs £260 million versus £543 million under the old guard. On top, it brings a 9.3 per cent yield, with a £700 million pension fund surplus potentially offering extra insurance. So patient investors have something to cling to. Still, others will wonder if, having junked its Es, Abrdn can ever deliver much of a high.
Beware cast-offs
Maybe Sir Iain Duncan Smith isn’t the target market for a Twist Front Halter One Piece swimsuit, priced at £7.24. Or even a Metallic Thread Sheer Cami Cover-Up Dress for £8.99. But the former Tory party leader has never been one to downplay the risks of Britain welcoming a large company from China, even a business now headquartered in Singapore.
True, Shein’s not big in nuclear power or telecoms — clobber for as little as £2 a pop is more its game. And, on the face of it, luring its mooted $90 billion float to London could be just the thing to bring some shine to the UK market after missing out on Arm and seeing the likes of CRH, Flutter and Indivior decamp across the pond. Yet while Jeremy Hunt may be doing his bit to sweet-talk Shein’s executive chairman Donald Tang, a float is not without risks.
For starters, Britain would be welcoming a cast-off from the US. If Shein comes to London, it’s because US regulators have heeded calls from politicians to block the listing. First, over the wider issues of US-Sino trade wars and political risk. Second, over claims that cotton from forced labour in the Xinjiang region, where China has repressed the Uighurs, is used in its clothes: allegations Shein would have to prove were untrue. Duncan Smith is already calling for “due diligence on their whole production line” as a prerequisite for any London float.
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On top, if Shein got the price tag it wants — way above the last funding round of about $60 billion — a China-founded, throwaway fashion outfit would also have a top ten berth in the FTSE-100. So it’d be a big part of any index tracker fund or pension. It’s worth pulling at the threads of this float for a bit.
Elliott falls short
Perhaps Elliott doesn’t know how Currys work. They need a bit of spice. So far it hasn’t even come up with enough for a korma, let alone what investors are really after: the sort of volcanic vindaloo that even eight pints of lager can’t tame. After a sighting shot 62p, Elliott’s now produced a still insipid 67p, barely above the share price — putatively valuing the electricals chain with the popadoms vibe at just £757 million. What was the point of that, not least when JD.com could yet come to the table? No surprise the Currys board found it easy to trot out their “significantly undervalued” line. They’d be daft to tuck in for anything less than 80p.
