Abrdn : Transcript of presentation

abrdn plc

Full year results 2021 Presentation transcript

1 March 2022

Stephen Bird - Chief Executive Officer

Welcome

Hello and welcometo our 2021Results. I'm joined by Stephanie Bruce, our CFO, and Chris Demetriou, Rene

Buehlmann, NoelButwelland CarolineConnellan, our vector CEOs. I will kickoff with a summary of our 2021 results, my first fullyear as CEO. I will then updateyou on ourprogress indelivering our strategy, which demonstrates the powerof our client-focused business model. Stephanie will thentakeyou through the financial results in detailand we will thenopen up for questionsfrom the broaderteam.

Delivering on our strategy for growth

2021 was a reset year. We set out a clear strategy and the results that weexpected to deliver. Our strategy is based on creating long term sustainable growthand, in theshort term, arresting the decline in revenue. Today I'm very pleased to report strong progress for the firstyear of our three-year plan. For thefirst time

since the merger, we have reported increasedrevenuefor the fullyear, up by 6%. Thisis in the context of disciplined costmanagement, whichhas enabled us toimproveoperating leverage, ourcostto income ratio and increaseoperating profits by 47%.

On this graph, you can see ourprogress inimproving operating margin, an increase of six percentage points in the year. In year two of our plan, we will continue our relentless focus on improving operating margin, as we progress towards our targetof 30%. Thiscombines threeyear revenue CAGRof high single- digits and disciplined cost managementto deliver a cost to income ratio of around 70% as we exit2023. We are very alive to theheightened volatility of markets-so far this year it's beenevidentto everyone-and I will shortly highlight howwe will continueto improve our operating margin inspite of thisenvironment.

We will also improve our competitive position through the proposed acquisitionof the UK's leading

subscription-based directinvestmentplatform, interactiveinvestor. We expect iito be double-digit earnings accretive inits first full year as part of abrdn.

I'm also pleased to report thatthis year our dividend is fully covered by the adjusted capitalthatwe have

generated.

Strong progress in2021

These strong financials are underpinned by the various bold actions thatwe tookin 2021 todrive growth.

Our strategicpartnership withPhoenix is very importantto us, and that's why weinvested ourtime early in

the year in simplifying and extending itto at least 2031. As our single largest clientand a leading life company in theUK, we jointly bring best-in-class sustainable investment solutions tothe UK pensions market. We havenew and innovative solutions inthepipeline, and the firstof these, tax efficient, low cost, sustainable funds, is already winning open business for Phoenix.

A lot of my time in 2021was spent on the effective managementof our capital. We successfully realized

capital from non-core assetsales, particularly fromthe sale of Parmenion and Nordicrealestate as wellas the monetization of stakes. Together withtheincreased earningsfrom the business, theseactions

generated £1.6 billionof capital. In addition, in early 2022we sold downsome of our stake in Phoenix, and

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we're pleased to be returning these proceedsto shareholders. Our remaining holding of 10.4% inPhoenix

represents a commitmentto this key strategicpartnership.

We also have streamlined our operating model to bring decisionmaking closer to our clientsand have

established ourthree vector model withaccountable, strong CEOs driving performance. We havebrought in new talent, alongside promoting home-grownleaders, and I'm pleased tohave Rene, Chris, Noeland Caroline here withus today.

We completed platformintegration inthe investment vector, which simplifies our global investment operations and improves efficiencyand collaboration. And we havereplaced fivedifferentbrandswith a powerful singlebrand-Abrdn-that works digitally and thatwe ownglobally. Thissuccessful implementation makesit simpler for our clients to understand who weare and serves to unify us as a single team.

Let me talk a little bitmoreaboutgrowth. We have sharpened our focus in ourcoreinvestmentstrengths to those where ourclients recognizethatwe are truly distinctive. We willnot try to competeacross the entire waterfront. For the Adviser vector, we are building andcapitalizing on our leadership position. WhenI

joined the company I described this business as a hiddengem, and itsstrong results in 2021 reinforce why. In the Personal vector, theacquisitionof ii, the UK's number twodirect investing platform, will transformour position in the rapidly growing UK wealthmarket. You cannow seethattwoof our three vectors willbe leading platformbusinesses, which wewill support by investing indata, digitization, cutting edge research and informationthat expands ourcapabilities.

In 2021 we acquired Finimize, a global investing insightplatformwith over onemillionusers. We are utilizing

these insights daily alongsideour existing capabilities in our Abrdn ResearchInstitute. Quality information, the signal in the noise, sitsat theheart of enabling clientsto be smarterinvestors.

Our client-ledstrategy for growth

Before I turn to individual vector performance in more detail, I'd like to reinforce the power of our strategy. This will be familiar to you. We driveclient-led growth and create value for ourshareholders by enabling clients tobe better investors. We have reorganized thebusiness aroundour clientsin threedistinctareas: our Investments business, our Adviser businessand our Personalbusiness. And we appointed leaders with clear accountability. As a result, we're diversifying our revenuestreams, accessing new growth opportunities and serving a broaderrange of clients.

We're focused on high growthareas where we believe wehave distinctive capabilities: Asia and emerging

markets, private markets, sustainableinvesting, solutions, and the UK advisor and consumer markets. This clear strategic framework is the bedrock of current and future performance.

The power of a client-focusedbusiness model

Here for the first time you can see the power of our client-focused business model. Eachof these vectors has delivered growth inrevenue, good profitperformance and improved flows, a positive picturethat Stephanie will look at inmoredetail shortly.

Global investment strengths

Let me focus now on our Investments vector, our largestbusiness andwhereI spend most of my time. Firstly, as I mentioned earlier, we simplified our relationship withPhoenix, a very importantstep in

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underpinning the assets and revenues fromour largest client. In additionto Rene and Chris, we have made new appointments inwholesale and institutional distribution andwe flattened structures tospeed up decision making. We've broughtthepublic markets investments teamtogether, under Devan Kaloo, to improve collaboration, sharing of ideas and efficiency. Within private markets, we consolidated our

growing Real Assets business under Neil Slater. We completed the integration of our investmentplatform, and we've had the best flows sincethemerger.

With more than £100 billionof assets invested, we're unquestionably one of the world's leading investors in

Asia and emerging markets. Rene hastightened the focus inAsia to allow usto go faster, exiting some onshore franchises suchas Indonesia and Taiwan, and focusing resources where we're in the bestposition to compete and togrow. We are an acknowledged leader too in the UK and Europe inReal Assets. In 2021 our AUM increased by 25%. We have accelerated in the growing logistics segmentthroughthe acquisition of Tritax, and you'll have seenthatwe are the leading investor in the £1.7 billion fundraising for Britishvolt gigaplant.

Our Solutions capabilities enable usto address complexpartner needs. Thenew solutions thatwe have created for Phoenix this year are helping themto winnewbusiness. And whenthey grow, we grow. In the UK wealth market, our investmentcontentis increasingly well placed to compete on our and other open architecture platforms, and our connected ecosystemprovidesuniqueinsights.

This industry has a critical role to play indecarbonizing the globaleconomy. There are two key elements here: direct investmentin green assets and the greening of brown assets. We do both, and our actions match our words. In 2021we publicly committed toa 50% reduction incarbonintensity in our investments by 2030 and we launched four newclimatefunds, and have extensionsto these fund ranges planned for this year.

In the context of thedeeply troubling escalationof conflictby Russia against Ukraine, we have acted to

reduce our holdings inRussia and Belarus in a disciplined manner, protecting our clients' interests. And we've concluded that wewillnotinvestin Russia or Belarus for the foreseeable futureon ESG grounds.

Central to our futuresuccessis our investmentperformance. For thethird year in a row our rolling three- year investmentperformance has improved, now standing at 67%, up from 50% in2018. Importantly, this figure includes 79% of assets outperforming in the critical institutionaland wholesale channel. These performance numbers are testamentto thesignificantworkthathas beenundertakenin recent years by our investment teams.

Driving growth

It is the combined power of our three vector modelthatwill continueto deliver profitablegrowth through time.

Let me cover justsomeof the highlights. Firstly, investments. To reinforcemy comments fromtheprevious

slide, our focus in Emerging Markets is twofold. Firstly, we wantto be the go to place for investors seeking asset exposure to Asia and China in particular. And secondly, we're enhancing ourdistributionin Asia and

emerging markets for clients seeking exposureto globalinvestmentsolutions.

In real assets, we will continueto accelerate growth inour logistics capabilityand are also building on our

strong position ininfrastructure and European residential. We have a number of newfunds and products

across thematics, sustainability, and wealth solutions planned over'22 and '23. At the same time, we will work towards rationalizing our existing fund suite, which is currently too broad.

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I have mentioned our growth partnership with Phoenix, which will be further enhanced in2022by additional tailored solutionsin workplace pensions and willsupporttheirannounced acquisition of £5.5billionof bulk purchase annuities. Beyond our Phoenix relationship, we're launching a newly created AbrdnPension Master Trust, which isa consolidation vehicle for UK DB pension schemes. Our strong pipelineof £11.3billion

is up 20% from this time lastyear.

We have made progress inMorningstar ratings as well, which are a key indicator for the wholesalemarket. And we have 52 positive consultantratings, whichare importantto our institutional clients.

In Adviser, the focus of our teamis constantly improving theadviser experience to ensure thatwe sustain and build on the leadership position that wehave. New technology in developmentwillenable advisers to be more effectiveand moreproductivefor their clientsand will encourage advisers to useus as their

primary platform. New capabilities likethe junior ISA willbe rolled outin '22and '23, and we will continueto improve our service toadvisers and totheir clients. Together, this will enable us toservemoreadvisers, more of their clients and sustain our already high retentionrates.

In the Personal vector, our market presence, scaleand profitability will be transformed by theacquisitionof

1. The connectivity between iiand abrdn will enableus to offer clients a fullrange of capabilities so that together we cangrow faster. Our existing discretionary managementbusiness, for example, has top quartile performance and is very well placed to continueitsgrowth journey, supported by our financial planning business.

Driving growth - interactive investor

Let me now take a more detailed lookat theacquisition of ii, whichis being putto shareholder votelaterthis month. ii is the UK's leading subscription-based directinvestment platform. As I said when we announced

the deal, this is righton strategy for us. We're building a leading positionin a high growthmarket. Direct investing is thehighestgrowth part of the UK's retailand savings marketand iiis theclearnumber two. It is

the disruptorand the consumers' champion. This, along with its simplepricing model and higher average customerbalances is what sets itapart. It has leading and scalable technology already, so does notrequire significanttechnology investment or integration.

1. has continuedto havegood momentumduring the second half of 2021, during whichtimethe business added around 17,500newcustomers, about 12% higher thanin the comparableperiod intheprior year. It also continues to retain high levels of assets per customer, withtrading volumesremaining significantly above pre-COVID-19levels, as you can see on this slide. ii will transformthe Personalvector and will give us both scale and clientreach. There is scope to develop the existing offering for ii customers over time through thematic investment content, discretionary fund management, and digital advice.

On completion, I look forward to welcoming Richard Wilson, CEO of ii, as part of the abrdn executiveteam

to ensure continuity and delivery of this plan. The ownership of ii by abrdn willprovide the resources and the

stability to drive further growthto realizeour fullambitions.

Over to Stephanie now.

Stephanie Bruce - ChiefFinancialOfficer

Financialprogress andcapital discipline

Thank you, Stephen, and good morning all.

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