The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Green555 - p2 of the 2023 Annual report gives operating profit at ii as £114m. Looks like some advance buying yesterday as the price has fallen back since the Q1 results were issued.
A chap called Anthony Miller posted on Linked In: " I invariably describe the company as having lost its vowels in a tragic rebranding accident." Arf!
As I used to say to IFAs and customers, "it is above my pay grade" https://www.bbc.co.uk/news/business-68769562 - or should that have been "t's abv m p grd". When they throw away £50m plus on trying to ramp the SP and however much they spent on this exercise, it makes packing the contact centre off to the wilds of west Edinburgh to save £1m look ridiculous.
I wasn't expecting to get it or even be interviewed. I was just flagging up my presence to see if there was anything over on the Asset Man side - Wealth Man is very dull and badly managed. They probably pay the best around the financial companies in Edinburgh, but I left as they are just badly run and I had taken enough age discrimination already. HR are a bunch of middle-aged white women! My contract was up and I could not rationalise staying on, so I left despite being told I was being made permanent.
But yes, I found myself in some hot water for criticising a number of things, notably diversity and the 'Power of Investment' campaign (no, i don't suppose you remember it). Their first push on diversity was 2015 with a Diversity Summit featuring Eddie Izzard and Bozoma St John (diversity hire booted from Netflix in Feb 22). I was a recent critic of both Britvolt and fixation with the Far east and EM. Turns out I was right - maybe I should have had the job!
Having been a critic of their strategy to go for the Far East and EM, I would say ‘No’ - having been rejected without interview for one of 6 Inv Analyst jobs they had in summer 22 for not having the “right experience”. They were and are very keen to flag up the number of female fund managers they have and reckoned ‘diversity’ was one of their key values - since 2015 - so I would say neither will help them.
There has been a lot of private equity activity in wealth management recently, but who would want the asset management business - could be an issue with flogging off the platform too. So, a t/o is still unlikely, despite Bird’s best efforts to minimise the share price.
Beta of over 2! And a management of without a clue - if you want to read Bird's crapology, try this at p.2 https://www.abrdn.com/docs?editionId=32cb561e-c19c-450e-8bbe-185d50f9b52f
Not to worry - abrdn are going to be saved by "diversity". Funny how these people are always middle-aged white women https://www.linkedin.com/feed/update/urn:li:activity:7138085914169282560?updateEntityUrn=urn%3Ali%3Afs_feedUpdate%3A%28V2%2Curn%3Ali%3Aactivity%3A7138085914169282560%29
It is worth about 150p con div, so much depends for any takeover on whether the buyer wants the platform. If they already have one, they only gain the end-clients, whose age profile is rather higher than those of most other platforms apparently. Still, get a load of women in there and wonder why you have to cut back maternity leave 7 years later https://www.linkedin.com/feed/update/urn:li:activity:7151538352905744384?updateEntityUrn=urn%3Ali%3Afs_feedUpdate%3A%28V2%2Curn%3Ali%3Aactivity%3A7151538352905744384%29 Even better buy back shares at over the market price - I reckon they have chucked about £50m doing this rcently and then close an office to save £1m. Sheer genius!
With a market cap now down to £2.7bn including a cash pile nett of borrowings of £600m, the market values the company at £2.1bn after paying £1.5bn for ii and the platform is supposed to be valued at £1.4gn, someone must be running the rule over this. Bird is just trying to get the value down low enough (after an £800k bonus!) for a t/o and a nice retirement cheque. He is trying to cut costs without thinking the effects through - he put the contact centre out on a business park on hte west side of Edinburgh and wondered why most of the experienced staff left.
I doubt Blackrock - they took £30bn of the Lloyds mandate from Standard Life Aberdeen (as was) - actively managed part I think. Why would you want to take over the poor previous managers? I thought JPM might have them when the USD was 1.15 against the GBP and abrdn had hit 140p - makes more sense as they have some asset management in Edinburgh and own that dog with fleas Nutmeg. Might be a joint bid with someone, who wants the platform. 'Mr Turnaround' Bird has had his three years and he certainly wants a takeover, so he gets a nice payoff and retires.
Today's 4% rise is presumably down to the announcement today:
"Event Date
abrdn plc intends to issue a pre-Close trading update at 7am on 24 January. The announcement will update on flows and trading during H2."
There is some reason for this, which we will see next Wednesday.
Svend, If you are talking about the earnings forecast on Simply Wall Street, it is only £185m for 2026. Interactive is already generating half of that figure.
Having worked there for 9 months in 2021-2, it was clear that Bird has no strategy beyond flogging assets to get cash to continue the share buyback at inflated prices, hence the recent gains. Now that the buyback has stopped the shares are already halfway back to the September point if 155p. Bird was going to flog the active manager (about 70% of AUM) last year and they are trying to sell a commercial park in the Gyle (west of Edinburgh) for £126m at the moment. The line management is rubbish and HR are convinced that the new religion of "diversity" will save them. In a truly genius move just as they were replatforming, abrdn announced that the contact centre (somewhat key to two of the three vectors) was being sent to a desolate building in the Gyle, while the rest of the company stayed in a newly refurbished building in central Edinburgh - the result has been an exodus of experienced staff, just as they claimed to be recruiting 35 more staff and a net loss of AUA while almost everyone else was getting inflows. They proudly touted that a staff survey showed 70% backed Bird's strategy - assuming they knew what it was!
I think Bird is just trying to slim down to a Wealth Administrator, which will be taken over and he can retire with a nice cheque. The platform is supposed to be worth £1.4-1.7bn based on the figure being touted for Parmenion. Say ii is worth what abrdn paid (£1.5bn) and the rest of the business is not worth much by market assessment. Bird is almost at the end of his three year turnaround plan and not much has changed, due to a lack of strategy - as Panmure Gordon said last October following he break-up suggestion by Numis. The platform has fallen to the 8th most popular among IFAs and more platforms are coming, notably Scottish Widows.
As a middle manager, abrdn/Bird may have to take the risk of initiating the inevitable consolidation. I wondered about running the rule over the troubled Jupiter - it has a market cap of £480m, but does generate £45m in profit - about the same as ii did on takeover. Then there would be the savings from consolidating the fund management side. Even a total takeover cost of £600m would generate a 7.3% return, which is more than cash is earning now. I gather there is to be an emphasis on Emerging Markets - with a strong dollar and rising interest rates!
It is is driven by the US markets - the Dow is up 10% from its low of three weeks ago. Although the market beta is officially 1.25, I have thought it was pushing 2 for some time. Abrdn and it’s 60% subsidiary Tritax are also putting £1.7bn behind the Britvolt factory in Blyth, whose position has improved in the last few days. Much will depend on the US markets and the outlook for December’s move, as a 0.75% is expected today. Well done to someone below, who bought at 137p.
It will be a buyback to reduce the cost of the divi I. Reduce that and Bird is sunk along with the share price.
PD’s analysis looks pretty good - I have had a buy pencilled in for 130p for some time, but will wait until the reaction to the November rate hikes kicks in. I would only differ on the wisdom of that Tristan buy, which was doing well to Nov 21, but then the two REITs it manages fell back to roughly the level when abrdn bought by May, but since then they have almost halved. That and Phoenix will be another IFRS loss at final 22.
Interestingly, I noticed that the agency they use (Search) is now advertising for staff to work 9-6 37.5 hrs a week in the contact centre. That would suggest they are planning significant expansion of the direct vector.
Correction to my previous note - I have just read this https://www.thisismoney.co.uk/money/markets/article-11296925/Abrdn-facing-allegations-anti-money-laundering-failures.html It draws on the Sunday Times AML failures report, but then adds that Bird has been accused of aggressive behaviour by current and former staff members.
I don't rate his chances.
There is an interesting article on Bloomberg from August about Stuart Bird's pep talk to the staff after the H1 results. Bloomberg thinks they are too small to survive and others are writing the company's obituary, most recently the Telegraph. Having got into trouble and left after HR felt my collar about my views on diversity, it just confirms my view that faddy stuff takes the focus off what matters.
They do try to treat their staff well, but when they get into cost-saving panics like now, it ends up damaging the good work. It is being reported that they have brought forward the April 23 pay rise to help with the fuel issue. However, the 300 platform back office admins have been shipped out to fnz, a fintech, but I presume they will stay in the same building, and 30 jobs have been shipped to India from the asset management side in Edinburgh. The savings will not be great and there will be additional frictions, but if I were still in the contact centre, I would be wondering about my job. The Bloomberg report talks about low morale - not surprising as line management is poor in the contact centre - although reports say 77% of the staff back Bird's plan. Whether they understand it might be a different matter! I cannot be how a focus on Emerging Markets and real estate is going to go anything other than badly in the rising interest rate environment - those two Tritax funds manged by the 60% controlled Tritax have recently tanked very badly and things are going wrong at the Blyth gigafactory. As active managers, I cannot see any scope for growth and the cash cow will now have to be the platform and the advisory business, from which they have been losing senior advisers. IFAs have had a good run for 20 years, but they are in line for a kicking on fees, which puts pressure on the platform.
Having worked briefly for JPM Chase bank in 21, my own tip is JPM will bid for them as abrdn is worth about 45% of what it was a year ago in USD terms and they could at least fold Nutmeg into ii (as Nutmeg is a crock of rubbish). I have seen suggestions of M+G merging as they are under similar pressure to split the asset management from the wealth platform.
Certainly, BIrd has not got long, especially as Deutsche had downgraded the forecast to 125p and RBC have put the boot into the Tritax funds.
On the name - about which I heard several comments - it is a tricky one. They had to separate from SL, while retaining the heritage. Going for a completely new name would lose any heritage. However, the 'Power of Investment' campaign, which did push the abrdn name, failed to give a reason to put your money with them. Obviously,. I would get rid of the diversity officers, if they want to save some cash instantly.
This diversity fad is based on a McKinsey report from 2011 called Diversity Wins, but the mental gymnastics they perform is of Olympic standard! It was updated in 2015, which coincided with BLM and #metoo, so it is a PR thing and abrdn get a nice jolly year at their Diversity Summits. It should be quite obvious that profitability is driven by many factors, several usually outside the company's control - abrdn's income is largely related to asset market values.
It just adds to this impression that senior management has no sense of direction nor strategy. They have invested in Tritax fund manager (its funds have tanked 40% this year) and the Far East, where the Chinese economy is in real trouble. Reaching for a fad takes your eye off what really matters - the contact centre career plan made no mention of even the basic industry exams, so the operators are not building up back ground knowledge.
No great surprise that going con div today has barely shifted the price, which would suggest the market is not confident about the divi being maintained. i expect this new special div will be more buybacks to reduce the cost of covering the divi. Why are they not investing in profitable businesses?
I should say I thought it went con div today, but it is Tuesday 27th. Tritax is down 8% today, which is dragging on the abrdn price. There is a report in the FT from Tuesday saying that hedge funds are continuing to short UK asset managers, so that pressure remains.
There is also talk of this Parmenion part-sale valuing abrdn’s platform at up to £1.7bn, which means either ii will have to be written down or the asset management business is technically worth not much. Of course, the H1 loss was mostly down to losses on Tritax, but the strange goings-on at the Blyth gigafactory suggest there is more trouble ahead there.
I was amused by the latest Fool article saying that Stephanie Bruce had invested 100k at at 1.48, but noted her previous buy was at 1.96 and the author was staying out. Bruce is basically an auditing accountant when you need someone with better skills as CFO. Bird’s focus on the Far East is risky too, given the rippling out of problems in the Chinese property sector.
It has been interesting to see little movement despite the talk of a special divi and the share going con div on Friday. I suspect that having diversity as a core value will not save them. Who will buy? Well, my tip was JPM, but some posters on the latest FT article are suggesting M&G after their significant investment in Edinburgh.
I was working for abrdn in the Edinburgh contact centre until recently, so I am limited in what I can say. However, like the markets, I lost faith in the leadership and in the end, was threatened with my job after saying that diversity is a fad.
However, the answer on Lloyds is basically, it was a smokescreen as abrdn managers are not that good. Aberdeen Asset Management was bleeding AUM (assets under management) and so went for the merger with SL to grab their asset management business and create a £1bn AUM. That decline coincided with their annual "diversity summits" (just saying). The SL retail operation - insurance, savings etc. to individuals and company schemes - is in direct competition with Scottish Widows. owned by Lloyds through HBoS. So, SLA were managing the assets of two competing retail operations. Lloyds wanted to get together with SLA's main similar competitor, Schroders. to create an active management/wealth management operation and put the passive funds under BlackRock, so they needed an excuse to dump SLA and this conflict of interest was it, Although Lloyds list the arbitration and had to pay £140m, they have basically dumped SLA (now abrdn). I don't think there are any other big mandates, so this was a big one-off.
abrdn have fired 5 of their asset management team, but even if everyone was fired, it would only save £250 million! Numis have said they either need breaking up or taking over. I tend to agree - having worked briefly at JPM Chase digital bank (got into trouble for saying Nutmeg was a bad buy), I can see that they might take abrdn over. The USD is right up, while abrdn's SP is 40% down over the last year. JPM has a small asset management operation in Edinburgh and could fold Nutmeg into ii (saving fixed costs by shutting Nutmeg's office), then selling off the abrdn platform and adviser operation.
There seems to be resistance around 142p, which the SP has touched twice recently (the second time while ex-div), but they are up about 4p over the last two days when the markets have fallen, but this might be a reaction to the fall prompted by DB marking them down to 135p. Fool has one recent article saying dump abrdn for HL (although the Woodford issue will hit HL), but another says buy abrdn, while it is cheap. The adviser operation is down from 100 to 70 https://www.moneymarketing.co.uk/news/the-morning-briefing-advisers-exit-abrdn-financial-planning/ and they sold the platform back office to a fintech FNZ, which has prompted more departures.