Abrdn PLC

LSE:ABDN

Earnings Call Transcript 2021-Q4

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Hello

and

welcome

to

our

2021

Results.

I'm

joined

by

Stephanie

Bruce,

our

CFO;

Chris

Demetriou;

René

Buehlmann;

Noel

Butwell;

and

Caroline

Connellan,

our vector

CEOs.

I

will

kick

off with

a

summary

of

our

2021

results,

my

first

few

years

as

CEO.

I

will

then

update

you

on

our

progress

in

delivering

our

strategy

which

demonstrates

the

power

of

our

client-focused

business

model.

Stephanie

will

then

take

you

through

the

financial

results

in

detail,

and

we

will

then

open

up

for

questions

from

the

broader

team.

2021

was

a

reset

year.

We

set

out

a

clear

strategy

and

the

results

that

we

expected

to

deliver.

Our

strategy

is

based

on

creating

long-term

sustainable

growth

and

in

the

short

term,

arresting

the

decline

in

revenue.

And

today,

I'm

very

pleased

to

report

strong

progress

for

the

first

year

of

our

three-year

plan.

For

the

first

time

since

the

merger,

we

have reported

increased

revenue

for

the

full

year,

up

by

6%.

This

is

in

the

context

of

disciplined

cost

management

which

has

enabled

us

to

improve

operating

leverage,

our

cost/income

ratio,

and

increased

operating

profit

by

47%.

On

this

graph,

you

can

see

our

progress

on

improving

operating

margin,

an

increase

of

6

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

target

of

30%.

This

combines

three-year

revenue

CAGR

of

high

single

digits

and

disciplined

cost

management

to

deliver

a

cost/income

ratio

of around

70%

as

we

exit

2023.

We

are

very

alive

to

the

heightened

volatility

of

markets.

So,

this

– so

far

this

year,

it's

been

evident

to

everyone,

and

I

will shortly

highlight how

we

will

continue to

improve

that

operating

margin

in

spite

of

this

environment.

We

will

also

improve

our

competitive

position

through

the

proposed

acquisition

of

the

UK's

leading

subscription-based

direct

investment

platform,

interactive

investor.

We

expect

ii to

be

double-digit

earnings

accretive

in

its

first

full

year

as

part

of

abrdn.

I'm

also

pleased

to

report

that

this

year

our

dividend

is

fully

covered

by

the

adjusted

capital

that

we

have

generated.

These

strong

financials

are

underpinned

by

the

various

bold

actions

that

we

took

in

2021

to

drive

growth.

Our

strategic

partnership

with

Phoenix

is

very

important

to

us,

and

that's

why

we

invested

our

time

early

in

the

year

in

simplifying

and

extending

it

to

at

least

2031.

As

our

single

largest

client

and

a

leading

life

company

in

the

UK,

we

jointly

bring

best-in-class,

sustainable

investment

solutions

to

the

UK

pensions

market.

We

have

new

and

innovative

solutions

in

the

pipeline,

and

the

first

of

these

tax

efficient,

low

cost,

sustainable

funds

is

already

winning

open

business

for

Phoenix.

A

lot

of

my

time

in

2021

was

spent

in

the

effective

management

of

our

capital.

We

successfully

realized

capital

from

non-core

asset

sales

particularly

from

the

sale

of

Parmenion

and

Nordic

real

estate,

as

well

as

the

monetization

of

stakes.

Together

with

the

increased

earnings

from

the

business,

these

actions

generated

£1.6

billion

of

capital.

In

addition,

in

early

2022,

we

sold

down

some

of

our

stake

in

Phoenix,

and

we're

pleased

to

be

returning

these

proceeds

to

shareholders.

Our

remaining

holding

of

10.4%

in

Phoenix

represents

a

commitment

to

this

key

strategic

partnership.

We

also

have

streamlined

our

operating

model

to

bring

decision-making

closer

to

our

clients

and

have established

our

three-vector

model

with

accountable,

strong

CEOs

driving

performance.

We

have

brought

in

new

talent,

alongside

promoting

homegrown

leaders,

and I'm

pleased

to

have

René,

Chris,

Noel

and

Caroline

here

with

us

today.

We

completed

platform

integration

in

the

Investments

vector

which

simplifies

our

global

investment

operations

and

improves

efficiency

and

collaboration.

And

we

have replaced

five

different

brands

with

a

powerful

single

brand,

abrdn,

that

works

digitally

and

that

we

own

globally.

This

successful

implementation

makes

it

simpler

for

our

clients

to

understand

who

we

are

and

serves

to

unify

us

as

a

single

team.

Let

me

talk

a

little

bit

more

about

growth.

We

have

sharpened

our

focus

and

our

core

investment

strengths

to

those

where

our

clients

recognize

that

we

are

truly

distinctive.

We

will

not

try

to

compete

across

the

entire

waterfront.

For

the

Adviser

vector,

we

are

building

and

capitalizing

on

our

leadership

position.

When

I

joined

the

company,

I

describe

this

business

as

a

hidden

gem,

and

its

strong

results

in

2021

reinforce

why.

In

the

Personal

vector,

the

acquisition

of

ii,

the

UK's

number

two

direct

investing

platform,

will

transform

our

position

in

the

rapidly

growing

UK

wealth

market.

You

can

now

see

that

two

of

our

three

vectors

will

be

leading

platform

businesses,

which

we

will

support

by

investing

in

data,

digitization,

cutting-edge

research,

and

information

that

expands

our

capabilities.

In

2021,

we

acquired

Finimize,

a

global

investing

insights

platform

with

over

1

million

users.

We

are

utilizing

these

insights

daily

alongside

our

existing

capabilities

in

our

abrdn

Research

Institute.

Quality

information,

the

signal

and

the

noise

sits

at

the

heart

of

enabling

clients

to

be

smarter

investors.

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

drive

client-led

growth

and

create

value

for

our

shareholders

by

enabling

clients

to

be

better

investors.

We have

reorganized

our

business

around

our

clients

in

three

distinct

areas:

our

Investments

business,

our

Adviser

business,

and

our

Personal

business.

And

we

appointed

leaders

with

clear

accountability.

As

a

result,

we're

diversifying

our

revenue

streams,

accessing

new

growth

opportunities,

and

serving

a

broader

range

of

clients.

We're

focused

on

high-growth

areas,

where

we

believe

we

have

distinctive

capabilities.

Asia

and

emerging

markets,

private

markets,

sustainable

investing,

solutions,

and

the

UK

adviser

and

consumer

markets.

This

clear

strategic

framework

is

the

bedrock

of

current

and

future

performance.

Here

for

the

first

time,

you

can

see

the

power

of

our

client-focused

business

model.

Each

of

these

vectors

has

delivered

growth

in

revenue,

good

profit

performance,

and

improved

flows.

A

positive

picture

that

Stephanie

will

look

at

in

more

detail

shortly.

Let

me

focus

now

on

our

Investments

vector,

our

largest

business

and

where

I

spend

most

of

my

time.

Firstly,

as

I

mentioned

earlier,

we

simplified

our

relationship

with

Phoenix,

a

very

important

step

in

underpinning

the

asset

and

revenues

from

our

largest

client.

In

addition

to René

and Chris, we

have

made

new

appointments

in

Wholesale

and

Institutional

distribution,

and

we

flattened

structures

to

speed

up

decision-making.

We

brought

the

public

markets

investments

team

together

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

investment

platform,

and

we've

had

the

best

flows

since

the

merger.

With

more

than £100

billion

of

assets

invested,

we

are

unquestionably

one

of

the

world's

leading

investors

in

Asia

and

emerging

markets.

René has

tightened

the

focus

in

Asia

to

allow

us

to

go

faster;

exiting

some

unsure

franchises,

such

as

Indonesia,

Taiwan;

and

focusing

resources

where

we

are

in

the

best

position

to

compete

and

to

grow.

We

are

an

acknowledged

leader,

too,

in

the

UK

and

Europe

in

real

assets.

In

2021,

our

AUM

increased

by

25%.

We

have

accelerated

in

the

growing

logistics

segment

through

the

acquisition

of

Tritax,

and

you

will

have seen

that

we

are

the

leading

investor

in

the

£1.7

billion

fundraising

for

Britishvolt

Gigaplant.

Our

solutions

capability

enables

us

to

address

complex

needs.

The

new

solutions

that

we

have

created

for

Phoenix

this

year

are

helping

them

to

win

new

business.

And

when

they

grow,

we

grow.

In

the

UK

wealth

market,

our

investment

content

is

increasingly

well

placed

to

compete

in

our

and

other

open

architecture

platforms,

and

our

connected

ecosystem

provides

unique

insights.

This

industry

has

a

critical

role

to

play

in

decarbonizing

the

global

economy.

There

are

two

key

elements

here,

direct

investment

in

green

assets

and

the

greening

of

brown

assets.

We

do

both,

and

our

actions

match

our

words.

In

2021,

we

publicly

committed

to

a

50%

reduction

in

carbon

intensity

and

our

investments

by

2030.

And

we

launched

four

new

climate

funds,

and

we've

extensions

of

these

fund

ranges

planned

for

this

year.

In

the

context

of

the

deeply

troubling

escalation

of

conflict

by

Russia

against

Ukraine,

we

have

acted

to

reduce

our

holdings

in

Russia

and

Belarus

in

a

disciplined

manner,

protecting

our

clients'

interests.

And

we've

concluded

that

we

will

not

invest

in

Russia

and

Belarus

for

the

foreseeable

future

on

ESG

grounds.

Central

to

our

future

success

is

our

investment

performance.

For

the

third

year

in

a

row,

our

rolling

three-year

investment

performance

has

improved

now

standing

at

67%,

up

from

50%

in

2018.

Importantly,

this

figure

includes

79%

of

assets

outperforming

in

the

critical

Institutional

and

Wholesale

channel.

These

performance

numbers

are

testament

to

the

significant

work

that

has been

undertaken

in

recent

years

by

our

investment

teams.

It

is

the

combined

power

of

our

three-vector

model

that

will

continue

to

deliver

profitable

growth

through

time.

Let

me

cover

just

some

of

the

highlights.

Firstly,

Investments.

To

reinforce

my

comment

in

the

previous

slide,

our

focus

in

emerging

markets

is

twofold.

Firstly,

we

want

to

be

the

go-to

place

for

investors

seeking

asset

exposure

to

Asia

and

China

in

particular.

And

secondly,

we're

enhancing

our

distribution

in

Asia

and

emerging

markets

for

clients

seeking

exposure

to

global

investment

solutions.

In

real

assets,

we

will

continue

to

accelerate

growth

in

our

logistics

capability,

and

are

also

building

on

our

strong

position

in

infrastructure

and

European

residential.

We

have a

number

of

new

funds

and

products

across

thematics,

sustainability,

and

wealth

solutions

planned

over

2022

and

2023.

At

the

same

time,

we

will

work

towards

rationalizing

our

existing

fund

suite,

which

is

currently

too

broad.

I

have

mentioned

our

growth

partnership

with

Phoenix,

which

will

be

further

enhanced

in

2022

via

additional

tailored

solutions

in

workplace

pensions,

and

will

support

their

announced

acquisition

of

£5.5

billion

of

bulk

purchase

annuities.

Beyond

our

Phoenix

relationship,

we're

launching

a

newly

created

abrdn

pension

master

trust,

which

is

a

consolidation

vehicle

for

UK

DB

pension

schemes.

Our

strong

pipeline

of

£11.3

billion

is

up

20%

on

this

time

last

year.

We

have

made

progress

on

Morningstar

ratings

as

well, which

are

a

key indicator

for

the Wholesale

market. And

we

have 52

positive

consultant

ratings,

which

are

important

to our

Institutional

clients.

In

Adviser,

the

focus

of

our

team

is

constantly

improving

the

Adviser

experience

to

ensure

that

we

sustain

and

build

on

the

leadership

position

that

we

have.

New

technology

and

development

will

enable

advisers

to

be

more

effective

and

more

productive

for

their

clients

and

will

encourage

advisers

to

use

us

as

their

primary

platform.

New

capabilities

like

Junior

ISAs

will

be

rolled

out

in 2022

and

2023,

and

we

will

continue

to

improve

our

service

to

Advisers

and

to

their

clients.

Together,

this

will

enable

us

to

serve

more

Advisers,

more

of

their

clients

and

sustain

at

already

high

retention

rates.

In

the

Personal

vector,

our

market

presence,

scale

and

profitability

will

be

transformed

by

the

acquisition

of

ii.

The

connectivity

between

ii and

abrdn

will

enable

us

to

offer

clients

a

full

range

of

capabilities,

so

that

together

we

can

grow

faster.

Our

existing

discretionary

management

business,

for

example,

has

top

quartile

performance

and

is

very

well

placed

to

continue

its

growth

journey

supported

by

our

financial

planning

business.

Let

me

now

take

a

more

detailed

look

at

the acquisition

of

ii, which

is

being

put

to

shareholder

vote

later

this

month.

ii

is

the

UK's

leading

subscription-based

direct

investment

platform.

As

I

said

when

we

announced

the

deal,

this

is

right

on

strategy

for

us.

We're

building

a

leading

position

in

a

high-growth

market.

Direct

investing

is

the

highest

growth

part

of

the

UK

retail

and

savings

market,

and

ii is

the

clear

number

two.

It

is

the

disrupter

and the

consumers'

champion.

This,

along

with

its

simple

pricing

model

and

higher

average

customer

balances,

is

what

sets

it

apart.

It

has

leading

and

scalable

technology

already,

so

does

not

require

significant

technology

investment

nor

integration.

ii

has

continued

to have

good

momentum

during

the

second

half

of

2021,

during

which

time

the

business

added

around 17,500

new

customers,

about

12% higher

than

in

the

comparable

period

in

the

prior

year.

It

also

continues

to

retain

high

levels

of

assets

per

customer

with

trading

volumes

remaining

significantly

above

pre-COVID-19

levels,

as

you

can

see

on

this

slide.

ii

would

transform

the

Personal

vector

and

will

give

us

both

scale

and

client

reach.

There

is scope

to

develop

the

existing

offering

for

ii

customers

over

time

through

thematic

investment

content,

discretionary

fund

management,

and

digital

advice.

In

conclusion,

I

look

forward

to

welcoming

Richard

Wilson,

CEO

of

I,

as

part

of

the

abrdn

executive

team,

to

ensure

continuity

and

delivery

of

this

plan.

The

ownership

of

ii

by

abrdn

will

provide

the

resources

and

the

stability

to

drive

further

growth

to

realize

our

full

ambitions.

Over

to

Stephanie

now.

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Thank

you, Stephen,

and

good

morning,

all.

Our

financial

strength

and

strategic

focus

enable

us

successfully

to

navigate

the

impacts

caused

by

the

pandemic

and

the

ongoing

uncertainties

in

global

markets.

I'm

pleased

to

report

the

strong

progress

towards

our

financial

aims

while

recognizing

that

we

have

more

to

do.

With

stronger

markets

persisting

for

the

majority

of

2021,

fee-based

revenue

was

6%

higher.

Encouragingly,

strong

revenue

growth

was

delivered

in

all

vectors.

In

Investments,

our

activities

in

Asia

and

the

US

returned

to

growth

following

restructuring

of

these

businesses.

EMEA

was

impacted

by

the

Nordic

sale.

And

the

UK

remained

constrained

largely

due

to

the

decline

in

insurance

revenue.

In

Adviser,

growth

benefited

from

both

the

restructuring

of

the

Phoenix

arrangements

and

strong

underlying

growth of

12%

on

the

lower

base

of

2020,

which

of

course

was

during

the

height

of

the

pandemic.

Within

Personal,

abrdn

discretion

reported

its

best

every

year.

Higher

levels

of

revenue

growth

in

the

Adviser

and

Personal

vectors

are

delivering

the

diversification

benefits

we

are

seeking.

Together,

these

represent

18%

of

group

revenue

compared

with

15%

in

2020.

We've

also

been

working

hard

to

improve

our

operating

leverage, and

we

delivered

a

6

percentage

points'

improvement

in

our

cost/income

ratio

to

79%.

Again,

the

improvement

is

evident

in

all

three

vectors.

The

benefit

from

both

increased

revenue

and

lower

costs

results

in

an

increase

of

47%

in

adjusted

% operating

profit

to

£323

million

compared

to

2020.

This

result

is

also

7%

higher

than

2019,

the

last

full-year

period

of

reference

before

the

impacts

of

COVID.

AUM

may

have

increased

by

1%

to

£542

billion

with

the

strongest

growth

recorded

in

the

Adviser

vector,

which

saw

a

benefit

of

8%

from

markets

and

6%

from

positive

flows.

Overall,

the

net

outflows

excluding

Lloyds

and

liquidity

are

£3.2

billion,

which

is

a

significant

improvement

compared

with

net

outflows

of

£12.3

billion

in

2020.

So, 2021

was

a

period

of

reset,

as

Stephen

has

outlined.

Arresting

the

decline

in

revenue

was

key,

and

this

is

the

first

time

in

five

years

that

revenue

has

increased.

Markets

were

positive

through

2021,

which

benefited

growth

of

AUMA

and

revenue.

Now,

an

important

contributing

factor

for

revenue

growth

in

2021

is

the

diminishing

drag

on

revenue

from

both

the

impact

of

prior-year

outflows

and

in-year

outflows.

The

impact

on

revenue

of

net

outflows

arising

in

the

current

year

has

encouragingly

now

reduced

to

less

than

0.5%

of

annual

revenue.

It

is

worth

reflecting

overall

that

by

comparison,

the

impact

of

net

outflows

in

2021

is

4

times

less

than in

2020,

and

6

times

less

than

the

impact

in

2019.

So,

this

is

a

helpful

tailwind

now

for

revenue

growth.

And

importantly,

current

year

inflows

are

into

higher-margin

assets,

with

gross

flows

into

equities

and

real

assets

increasing

by

7%

and

43%,

respectively.

Revenue

from

acquisitions,

primarily

through

Tritax,

was

broadly

offset

by

revenue

foregone

through

disposals,

of

which

the

largest

were

Parmenion

and

our

Nordics

real

assets

business.

Overall,

total

revenue

yield

improved

slightly

to

27.3

basis

points.

We

also

generated

an

increase

in

performance

fees,

a

total

of

£46

million

in

total

for

2021.

Now,

in

terms

of

flows,

excluding

liquidity,

the

positive

trend

that

we

reported

in

the

first

half

of

2021

pleasingly

has

continued

in

the

second

half

of

the

year.

In

quarter

four,

total

flows

excluding

liquidity

were

positive.

The

improvement

in

flows

was

seen

in

all

vectors.

Now,

within

Investments,

it

was

really

pleasing

that

flows

in

Asia,

EMEA,

and

the

US

all

move

to

positive

net

flows

this

year.

In

Investments,

while

Institutional

and Wholesale

remained

the

net

outflows

for

the

full

year

at

£2.1

billion,

the

improvement

of

£6.8

billion

excluding

liquidity

creates

a

stronger

position

entering

2022.

This

improvement

was

most

evident

in

private

markets

and

fixed

income,

with

good

progress

also

in

equities

and

multi-asset.

An

improvement

of

14%

in

the

level

of

redemptions

excluding

liquidity

was

a

significant

contributing

factor.

Now,

turning

to

Adviser

and

Personal

vectors.

Here,

net

inflows

more

than

doubled

in

2021,

driven

by

higher

gross

flows

in

both

vectors,

44%

and

55%,

respectively.

Adviser

delivered

the

highest

net

flows

in

three

years,

and

Personal

generated

record

flows

from

abrdn

discretionary.

Now,

turning

to

costs.

As

I

highlighted

last

year,

our

planned

reduce

costs

in

the

near

term

and

focuses

on

improving

the

split

between

fixed

and

variable

costs

in

our

business,

so

that

costs

can

track

performance

in

the

medium

term.

It

is essential

that

we

take

costs

out

of

our

existing

structural

cost

base,

thereby

creating

capacity

for

investing

in

the

business

and

our

ability

to

pay

for

performance

as

the

business

delivers

that

performance.

This

greater

efficiency

ensures

delivery

of

our

target

operating

margin

and

builds

protection

from

market

volatility

given

our

reliance

on ad

valorem fee

revenues,

and,

of

course,

inflationary

pressures.

So,

let

me explain

about

progress

in

2021

and

looking

forward.

In

2021, our

costs

have

decreased

11%

compared

to

the

2019

pre-COVID

period

and

reduced

by

1%

compared

to

2020.

Now,

while

our

cost/income

ratio

has

improved

to

79%,

we

have

more

work

to

do

as

we

progress

to

our

2023

exit

target,

particularly

on driving

down

the

level

of

our

existing

structural

costs

in

our

Investments

vector.

The

reshaping

of

the

cost

base

undertaken

in

2021

included

£82

million

worth

of

reductions

in

costs,

some

7%

relating

to

legacy

technology

services,

disposals

of

noncore

activities,

and

a

14%

reduction

in

overall

staff

numbers.

This, in

turn,

generated

the

capacity

for

investing

£72

million

into

the

business,

a

6%

increase

relating

to

the

investments

in

Tritax,

ESG,

brand,

and

increased

compensation

levels.

We

have

also

now

achieved

the

£400

million

synergy

target

set

in

the

context

of

the

two

historic

transactions

with

our

large

integration

migration

program

complete

in Investments

and

the

separation

program

from

Phoenix

completing

in

2022.

And

I

am

confident

that

the

reshaping

of

our

cost

base

can

now

move

further

and

faster.

The

key

is

addressing

costs

in

our

largest

vector,

Investments.

Now,

here,

the

cost/income

ratio

improved

in

2021

to

79%,

not

yet

where

it

needs

to

be.

We

have,

however,

shown

really

good

progress

in

Asia,

US,

and

EMEA

to

deliver

the

levels

of

efficiency

required

where

cost/income

ratios

are

already

at

72%

or

below.

However,

costs

remain

too

high

in

the

UK.

The

new

vector

leadership

team

are

focused

on

delivering

growth,

building

on

the

momentum

of

2021

in

the

areas

of

core

strength

that

Stephen

has

just

highlighted.

With

this

very

clear

focus

on

our

growth

priorities,

the

leadership

team

are

also

now

able

to

drive

faster

the

reshaping

of

the

existing

cost

base

in Investments

and

are

doing so

with

our

turnaround

plan

that

is

already

underway.

The

main

focus

is

threefold:

simplifying

the UK

operational

model,

rationalizing

noncore

activities

and

sub-scale

funds,

and

streamlining

the

complexity

of

specific

mandates.

This

will

result

in

further

reductions

in

head

count

and

supporting

operational

costs

to

create

the

efficiency

we're

looking

for.

The

extent

of

future

investment

and

performance-related

costs

will

depend

on

the

achievement

of

this

efficiency.

If

we

perform

well,

I

would

expect

costs

over

the

medium

term

to

track

the

improving

profile

of

performance

of

the

business

as

we

have

increased

our

ability

to

pay

for

performance

and

invest

in

the

business.

If

performance

is

not

delivered,

then

the

absolute

costs

will

have

to decrease

from

the

current

levels

as

a

result

of

our

turnaround

plan.

In

addition,

it's

worth

noting

that

ii

obviously

has

both

revenue

and

cost

to

our

business;

but

at

the

margin

of

34%,

ii

is

already

more

efficient

than

our

overall

group.

Now

turning

to

earnings

per

share.

Adjusted

diluted

EPS

has

increased

to

£0.137,

a

movement

of

£0.049,

reflecting

the

increase

in

adjusted

operating

profit.

Adjusted

capital

generation

benefits

from

the

increased

operating

profit,

increasing

by

40%

to

£366

million

and

creating

a

45%

improvement

on

adjusted

diluted

capital

generation

per

share.

The

dividend

is

retained

at

£0.146

on

a

full

year

basis.

And

on

this

basis,

dividend

cover

improved

to

1.18

times.

We

have

also

continued

to

strengthen

our

balance

sheet

in

terms

of

both

capital

and

liquidity

– sorry,

capital

and

liquidity

with

surplus

regulatory

capital

increasing

by

50%

to

£1.8

billion

on

an

IFPR

basis,

and

cash

and

liquid

resources

of

£3.1

billion

at

year

end.

Overall,

our

disciplined

approach

to

capital

management

generated

£1.6

billion

of

capital

during the

year, which

Stephen

highlighted

earlier.

In

addition

to

the

stake

sales

and

capital

generated

from

the

business

areas,

we

also

issued

an

additional

Tier

1

debt

instrument

of

£0.2

billion,

making

us

the

first

asset

manager

to

offer

this

capital-efficient

security.

Capital

was

deployed

to

support

key

growth

priorities

within

private

markets

and

digital

content

through

the

acquisitions

of

Tritax

and

Finimize,

and

circa

£0.3

billion

was

returned

to

shareholders

through

dividends

and

the

share

buyback,

which

completed

in

February

2021.

For

the

proposed

acquisition

of

ii for

circa

£1.49

billion,

we

will

fund

the

purchase

from

our

existing

strong

capital

resources.

ii

immediately

improves

growth

in

revenues

and

profits,

and

the

acquisition

further

diversifies

our

business

from

ad

valorem

revenue

streams.

Supplementing

our

regulatory

capital,

we

have

significant

further

capital

resources

through

our

stakes

in

our

listed

financial

investments,

and

we

factor

all

these

resources

into

our

disciplined

approach

to

capital

allocation.

Looking

forward

in

2022,

our

pro

forma

surplus

post

the

acquisition

of

ii

is

around

£0.7

billion.

Our

listed

stakes

as

of

last

Friday

are

£1.8

billion

following

our

successful

monetization

in

January

2022

of

a

4%

holding

in

Phoenix,

raising

£0.3

billion.

We

have

no

plans

to

dispose

of

the

remaining

10%

holding

in

Phoenix,

which

remains

our

strategic

partner.

Over

time,

we

plan,

subject

to

market

conditions,

to

monetize

our

Indian

stakes,

releasing

further

funds

for

deployment.

Our

capital

allocation

framework

evaluates

each

opportunity

in

the

context

of

the

generation

of

long-term

sustainable

value

for

shareholders.

We

also

balance

within

our

capital

allocation

an

appropriate

management

buffer

for

the

business

above

the

regulatory

capital

requirement.

Now,

following

the

deployment

of

capital

to

acquire

ii,

we

have

a

clear

view

on

the

management

buffer

over

the

period

to

2023.

Subject

to

the

regulatory

and

market

environment,

we

plan

to

maintain

a

buffer

of £0.5

billion.

Now, we

will

either

invest

our

capital

in

those

areas

which

create

value

for

shareholders

or

deliver

returns

to

shareholders. We

will

invest to

innovate

our

business

and

accelerate

growth

with

inorganic

bolt-on

acquisitions.

This

includes

strengthening

our

wholesale

offering

and

innovating

our

ESG

product

suite,

digital

skills,

and

capabilities.

On

returns

to

shareholders,

we

evaluate

both

dividends

and

other

return

programs.

For

example,

the

buybacks,

the

last

of

which

was

completed

in

February

2021

of

£400 million.

Following

our

recent

monetization

of

the

4%

stake

in

Phoenix

raising

£0.3

billion,

we

announced

our

intention

to

return

this

to

shareholders,

and

the

details

will

follow

as

soon

as

practicable.

We

will

continue

to

evaluate

opportunities

for

further

returns.

Our

dividend

policy

remains

as

previously

communicated,

set

at

the

level

of

£0.146

per

annum

with

the

objective

of

growing

the

dividend

based

on

our

estimates

of

sustainable

growth

once

the

dividend

is

covered

1.5

times

by

adjusted

capital

generation.

We

are

very

focused

on

delivering

our

pathway

to

achieving

that

cover.

We

expect

the

acquisition

of

ii to

positively

contribute

to

this

objective,

given

its

projected

contribution

to

earnings.

And

I'll

now

hand

you

back

to

Stephen.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you, Stephanie.

To

summarize,

this

was

the

reset

year

for

abrdn.

The

first

year

of

our

three-year

plan,

and

I'm proud

of

how

our

people

have

contributed

to

delivering

a

great

performance.

We

set

out

our

strategy

to

return

the

business

to

long-term

sustainable

client-led

growth.

We

have both

arrested

the

decline

and

indeed

generated

growth

in

revenue

and

profit,

while

improving

our

flow

performance

across

the

board.

I

recognize

that

there

is

still

much

to

do.

I

have

set

out

for

you

my

areas

of

focus

for

years

two

and

three

of

this

strategy.

We

will

continue

to

invest

in

high-growth

areas

in

a

disciplined

manner

and

remain

laser-focused

on

improving

productivity

and

efficiency

across

our

business.

Despite

the

geopolitical

uncertainties,

we

are

positioned

for

both

resilience

and

growth.

We

will

adapt

along

the

way

to

the

challenges

posed

by

the

external

environment.

I'm

confident

that

we

have

the

right

strategy,

the

right

leadership,

and

the

right

focus

to

drive

the

growth

agenda

that

we

have

set

for

this

business.

Taking

account

of

all

the

progress

we

have

made

in

2021

and

our

future

plans,

the

company

that

is

now

emerging

looks

very

different

to

the

one

that

was

created

by

the

merger.

Thank

you,

and

we'll

be

right

back

for

your

questions.

[Break] (00:33:01-00:34:08)

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Welcome

back to

the

Q&A, and

we're

happy

to

open

up

the lines

now

for

your

questions.

[Operator Instructions]

[Operator]

And

question

number

one

is

coming

from

Steven

Haywood

from

HSBC.

Your

line

is

open.

Please

proceed.

[Steven Haywood, Analyst, HSBC Bank Plc]

Good

morning.

Thank

you

for

taking

my

questions.

I've

got

three

questions,

please.

After

the

announcement

of

the

ii

acquisition,

are

there

any

businesses,

portfolios,

or

capabilities,

or

teams

that

you

think

you're

missing

or

would

like

to

have?

Or

if

not,

then

can

we

assume

that

any

further

excess

capital

could

be

returned

to

shareholders?

The

second

question

is

related

to

that.

On

slide

17,

you

show

– sorry,

slide

16,

you

show

£0.8

billion

of

allocated

capital

out

of

the

£2.5

billion

available

capital

resources.

This

is

on

top

of

the

£0.3

billion

already

set

aside

to

be

returned

to

shareholders.

Is

this

£0.8

billion

potentially

returnable to

shareholders

as

further

excess

capital

returns?

And

then

third

question

from

me

is

on

ii.

Is

the

current

market

volatility

do you

think

the

driver

of

new

customers

for

ii?

And

I

always

– I

see

that

the

majority

of

new

ii customers

joined

in

the

first

half

due

to

the

tax

year end,

but

can

you

provide

any

figures

on

customers

leaving

that

were

not

associated

to

acquisitions?

So,

organic

customers

leaving

in

a year

if

you

could

compare

that

to

the

47,000

new

organic

customers

you've

got

in

2021.

That'd

be

very

helpful.

Thank

you.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

So,

first

of

all,

Steven,

thank

you

for

your

questions.

Let

me

talk

a

little

bit

about

capital,

and

I'll

hand

it

over

to

Stephanie

for

a

detailed

answer.

So

after

acquiring

ii,

I

mean,

you

won't –

we

don't

need

to

do

another

deal

of

this

size.

Clearly,

we've

formed

our

business

model

now.

When

I

came

in

to

the

company,

I

said

that

we

would

test

any

acquisition

against

the

ability

to

drive

revenue

growth,

drive

returns

for

shareholders

and

have

relevance

and

scale,

and

ii

is

a

fantastic

fit

for

that

criteria.

Number

two

player

in

a

fast-growing

market

with

a

strong

margin

already

with

its

tech

stack

already

built

out.

We

are

very

confident

that

this

is

a

very,

very

attractive

investment

for

shareholders.

Now,

you

won't

expect

us

to

make

another

acquisition

of

that

scale.

We

will,

and

we

look

at

a

lot

of

deals,

and

we

should.

You

would

expect

us

to

scrutinize

many

opportunities.

And

I

think

in

the

environment

going

forward

in

a

tighter

rate

environment,

I

think

there

will be a lot of

opportunities.

But

they

–

from

our

standpoint,

we

would

be

looking

for

bolt-on

capabilities

like

Tritax,

for

example.

Tritax,

we –

you

saw we

reported

terrific

results,

the

business

is

performing

ahead

of

what

we

modeled

when

we

acquired

it,

and

we

will

invest

in

areas

of

distinctive

investment

capability.

And

we

have

this

high

exogenous

growth

such

as

private

market.

So,

you

can

expect

us

to

look

to

do

that

type

of

transaction,

which,

of

course,

is

not

on

a

scale

of

an

ii.

Let

me

ask

Stephanie

to

comment

a

little

bit

about

– we've

given

a

lot

of

detail

this

morning

on

capital

stack

and

then

the

surplus

that

we

have.

So, it's...

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Absolutely.

And I

think

it

really –

it

follows

on

from

what

you've

just

been

articulating,

Stephen,

in

terms

of

what

we

look

to

understand

is

really

the

value

that

we

can

create

using

that

capital

for

shareholders.

And

the

reason

that

we've

provided

more

clarity

this

morning

is,

having

done

the

ii

acquisition,

we're

very

clear,

therefore,

on

the

buffer

that

we

think

is

appropriate

over

our

regulatory

requirement.

That's

why

I

articulated

that's

£0.5

billion

looking

out

in

the

current

conditions.

The

way

we

think

about

the

additional

funds

that

we

have

is

exactly

what

Stephen

has

just

said,

it's

about

how

we

create

that

value.

Tritax

is

a

fantastic

example,

but

we

will

also

do

other

innovation

within

the

business.

For

example,

putting

more

into

seed

and

co-invest

when

we

can

and

when

those

opportunities

present

themselves.

But

as

I

said

in

my

script

there,

it's

very

much

about

assessing

both

the

opportunities

to

invest.

And

if

that

is

– and if

that's

also

appropriate,

we

will,

of

course,

look

at

alternative

–

sorry,

further

returns

to

shareholders

using

schemes

such

as

buybacks

in

the

future.

So,

it's

very

much

looking

at

all

the

time

doing

that

sort

of

assessment.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

And

let

me

talk

a

little

bit

about

ii.

You've

asked

a

few

detailed

questions

there,

Steven.

And

as

you

can

imagine,

we've

done

a

very

detailed

data

analytic

on

the customer

numbers,

their

trading

volumes.

We've

compared

activities

at

different

periods

of

market

cycles.

It's

true

that

when there

is

higher

volatility,

there

is

more

trading.

So,

the

business

does

benefit

from

the

increased

market

attention

[indiscernible]



(00:39:51)

high

volatility.

I

gave

you

some

numbers,

and

we

included them

in

the

circular,

that

you've

got

to

allow

for

seasonality

because

the

business

picks

a

lot

more

clients

in

the

first

half of

the

year than

the

second

half

of

the

year.

And

we

showed

that

that's

why

I

gave

the

numbers

on

the

second

half

of

2021

versus

the

second

half of

2020,

and

those

17,500

full

12%

higher

than

the

previous

same

season.

We

also

have

been

able

to

demonstrate,

when

we

looked

at

the

numbers,

that

trading

volumes

are

about

3

times

higher

than

the

pre-COVID

level,

so

there's

some

real

underpins

to

our

projections.

I

also

highlighted

when

we

announced

the

deal

that

the

business,

of

course,

benefits

from

a

tightening

cycle,

and

it's

why

our

original

modeling

already

has

been

exceeded

by

the

tightening

cycle

that's

taking

place

because

the

market

has

– rates

have

gone

up

more

quickly.

On

the

low-value

customers,

you

mentioned

about

is

there

from

– ii

has

done

consolidations

of

The Share

Center, EQi,

etcetera.

There

are

low-value

customers

that

leave

when

the

consolidation

takes

place

because

low-balance

customers

don't

fit

the

model

of

a

subscription-based

model.

And

the

evidence

of

that

is

that

ii has

a

far

higher

average

balance

than either

Hargreaves Lansdown or

AJ

Bell. ii

is

£135,000

on

average.

So,

clients

select

that

subscription

model

and

have

higher

balances.

And

that's

a

great

proxy

for

sophistication

and

need

of

financial

planning,

a

need

of

discretionary

fund

management,

and

that's

actually

why

Richard

and

team

feel

so

good

about

abrdn

ownership

because

we

already

have

those

services.

We've

built

them

out

already.

[Operator]

Our

next

question

is

coming

from

Haley

Tam

from

Credit

Suisse.

Please

proceed.

[Haley Tam, Analyst, Credit Suisse Securities (Europe) Ltd.]

Morning,

everyone.

Thank

you

for

the

presentation

and

the opportunity

to

ask

questions. If

I

could

ask

a

couple,

please.

Firstly,

in

terms

of

costs

on

slide

13,

thank

you

very

much

for

the

very

clear

message

that

you

will

be

driving

down

the

level

of

structural

costs

in

the

Investments

sector.

I

wondered,

can

you

talk

to

us

about

the

shape

of

maybe

investment

versus

some

of

the

rationalization

plans

you

have

this

year

rather

than

for

2023?

And

should

we

think

about

the

85%

of

core

structural

costs

in

2021

as

a

proxy

for

fixed

costs?

That's

my

first

question.

Second

question

in

terms

of

a

fund

flow

momentum,

I

think

it

is

– again,

it's

great

that

you

saw

positive

flows

in

Q4

of

£2.2

billion,

which obviously

was

led

by

the

institutional

side.

Could

you

give

us

any

more

color

perhaps

on

what

your

outlook

is

for

other

parts

of the

business, 2022

and

2023?

And

I

guess

I'm

thinking here

in

particular

about

adviser

and

whether

you're

seeing

the

benefits

of

some

of

the

improvements

to

the

technology

that

you

made

last

summer

and

trying

to

get

more

advice

to

use

you

as

the

primary –

as

their

primary

partner.

Thank

you.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Yeah.

Thank

you

very

much,

Haley,

for

those

questions.

Let

me

do

this.

I'd

like

to

bring

in

Chris

Demetriou

to

talk

a

little

bit

about

it

because

Chris

and

his

team

have

already

built

the

turnaround

plan

for

the

Investments

vector.

Chris

and

René,

but

Chris

particularly,

focused

being

here

in

the

UK

on

addressing

our

UK.

And

as

we've

analyzed,

we

gave

you

more

information

today

about

the

Investments

vector in

terms

of

areas

where

we're

already

seeing

growth.

And

we

gave

you

some

detailed

cost/income

ratios

of

those

businesses

because

that's

what

happens

when

you

run

a

three-vector

growth

model.

You

get

management

accountable

for

a

smaller

part

of

the

overall

business,

and

you

get much

more

detailed

analytics

around

what's

going

on,

and

you

can –

your

actions

get

more

traction.

So,

we'll

turn

to

Chris

first,

and

then

we'll

actually

switch

to

Noel

because

he's

got

some

stats

on

how

we

did

in

terms

of

primary

position

and

what

you

can

expect

going

forward.

So,

Chris?

[Christopher Thomas Demetriou]

Yeah. Thank

you, Stephen.

So,

the

starting

point

today

is

that

really

critical

to

our

turnaround plan

is

the

clear

focus

that

we're

articulating

today.

We've

picked

five

key

areas

of

focus for

the

Investment

vector that

Stephen

stepped

through,

the

focus

on

Asia

and

emerging

markets.

We have

assets

in

private

markets

more

generally,

sustainability

solutions

in

UK

wealth.

And

these

areas

are

[ph]



arrived

at

(00:44:57),because

they

offer

us

the

opportunity

to

– they

are

the

areas

in

our

business

where

we

have

absolutely

credible

credentials

to

go

to

market

with.

We

have

scale,

we

have

investment

performance

that

is

greater

than

our

book coverage,

and

we

are

demonstrating

good

progress

in

the

marketplace

from a

flow

standpoint.

In

addition,

those

are

the

areas

that

we

see

are

most

online.

So,

the

global

megatrends

that

will

provide

the

tailwind

where

investors

are

looking

to

invest

behind

those

key

themes.

This

is

the first

time

since

the

merger

where

we've

been

as

explicit

about

what we're

going

to

focus

on as

an

Investments

vector.

And

that

gives

us

and

creates

the

framework

for

us

to

then

look

at

areas

that

are

not

aligned

to

our

key

areas

of

focus

and

drive

the

rationalization

and

simplification of

the

business

behind

those

areas.

We're

going

to

do this

through

a

deep

look

at our

existing

product

line

up

to

work

out

where

it's

serving

us

in

the

pursuit

of

these

key

areas

of

focus.

And there's

a

number

of

processes

[indiscernible]



(00:45:55) that

we

can

simplify

in

the

UK

that

will

enable

us

to

operate

at

a

more

efficient

level.

The

plans

are

in

place,

as

Stephanie

alluded

to

in

her

comments,

and

those

actions

will

be

undertaken

over

the

course

of

2022

and

the

impact

of

those

will

most

notably

be

felt

from

2023

onwards.

So,

from a

flow

standpoint,

we

are

already

seeing

net

positive

flows

in

the

UK

– sorry,

in

the

US,

in

EMEA

and

in

Asia.

And

the

UK

is

the

one

area

where

we

still

need

to

address

a

negative

flow

situation.

But

we

are

very

optimistic

because

we

have

a

really

strong

relationship

with

Phoenix

here

in

the

UK.

And

the

relationship

that

we

have

with the

other

vectors

is

giving

us

great

insight

to

tighten

the

quality

of

our

investment

solutions

for

the

wealth

and

adviser

channels.

So,

whilst

the

UK

is our

area of

focus

on

both

cost

standpoint

and

a

flow

standpoint,

we've

got

a

lot

of levers

to

fall

on

both the

growth

and

cost

side

to

accelerate

our

journey

towards the

guidance

that's been

issued

at

the

end

of

2023.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you,

Chris.

Stephanie,

do you

want to

add

anything

to

that?

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

No.

The

only

thing

I

would

add,

Haley,

is

in

terms

of

your

question

about

how

it

will

sort

of

evolve

through as

we

go

towards

that

target

is

I

think

it's also

bearing

in

mind

that

we

are

continuing

to

create

the

benefits

coming

through

from

our

synergy

program

as

well.

So,

obviously,

some

of

those

fixed

cost

around

premises,

further

reductions

in

technology,

a

similar

process

that

we

have

already

seen

in

2021

will,

of

course,

start

to

come

through

in 2022

as

well.

And

that

also

starts

to

help

Chris

and

René

and

the

team

start

to

create

some

of

that

capacity

because

we

are

– our

absolute

focus

is

obviously

to

get

from

the

79%

cost-to-income

ratio

to

that

operating

margin

of

30%,

i.e.

the

cost-to-income

ratio

of

70%

by

the

end

of

2023.

So,

we

will

be

stepping

that

down

during

2022.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you,

Stephanie.

Noel, would

you

like

to

talk

about

the

Adviser

vector,

please?

[Noel Thomas Butwell, Chief Executive Officer-Adviser, abrdn Plc]

Yeah. Well, thanks,

Stephen.

And

thanks

for

the

question,

Haley.

So, first

of

all,

just

building

on –

I suppose,

on

what

Stephen

touched

on

earlier.

The

Adviser

vector

is

about

sustaining

and

building

on

what

is

a

leading

position.

So,

throughout

last year,

we

retained

our

position

as

the

number

one

advice

platform

in

the

market

for both

gross

flows

and

AUA

– AUM.

And

so,

from

that

perspective,

we

ended

the

year

in

a

very

strong

position.

And

that

came

through

in

the

numbers,

as

you're

seeing,

because

obviously in

terms

of

the

doubling

our

net

flows.

Particularly

in

Q4,

we

had

a

particularly good

Q4

in terms

of

flows

with

gross

flows

at

£9.1

billion

as

well.

And

I think

the

key

thing

looking

forward

then,

Haley,

is

really

around

how

do

we

build

upon

that

position.

As

you

know,

I

mentioned

before

around

our

Adviser experience

program

and

how

we

will

compete

and differentiate

in

this

market

on

the

quality

of

our

content

and

the

quality

of

our

experience.

So,

Stephen

mentioned

we've

got

a

big

delivery

plan

in

progress

that

we'll

deliver

throughout

2022 into

2023. So,

you'll

see

a

full

range

of

junior

suite

tax

wrappers.

But

in

addition

to

that,

coming

back

to

the

focus

on

being

the

easiest

platform

in

the

market

to

partner

with,

which

is

about

creating

capacity

for

advisers

to

advise

on

more

clients

given

the

capacity

constraints

and

the

adviser

gap

in

the

market,

how

does he

absolutely sort

of

follow

through in

terms

of

user

experience

as

well

as

the

launch

of

simplified

journeys and

the

introduction

of

new

processes

all

designed

to

make

advisers

much

more

efficient

and

allow

them

to

spend

more

time for

their

clients

and,

importantly,

also

new

clients

as

they

want to

bring

those

onboard

as

well.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thanks,

Noel.

[Operator]

Next

question

is

from

Nicholas

Herman

from

Citigroup.

[Nicholas D. Herman, Analyst, Citigroup Global Markets Ltd.]

Yes.

Good

morning.

Thank

you

for

the

presentation

and

for

taking

my

questions.

Three

for

me,

please.

Quick clarification

on

margin.

On

the

surplus capital at the ii

acquisition,

you

noted

that

you

wanted

to

hold –

you

were looking

to

hold

somewhere

between

£0.5 billion

to

£1

billion

depending

on

the

circumstance.

Now,

you

are

committing

to

£0.5

billion,

so

just

curious

what's

changed.

On

ESG,

you've

invested

into

and

developed

your ESG

[ph]

capital (00:50:24)

quite

notably

in

2021,

including

carbon

footprint

and

transition

assessment in your house score.

I'd be

interested

to know

what

the

next

steps

are

in

the

evolution

of

your

ESG

offering.

And

I also

be

interested, if

possible,

if

you

can

provide

the

volume of

ESG

flows

in

2021,

but

also

what

the

pipeline

looks

like

following

the evolution

of

the offering,

that

would

be

interesting.

And

then

finally,

just

on

the

margin,

just

could

you

clarify

please

what

drove

the

strong

step

up

in

the

Personal margin

in

the

second

half?

But

also

within

Institutional/Wholesale,

there

were

some

notable

decreases

in

private

equity

and

real

assets.

Those are

two

asset

classes

which

would

normally

expect

to

be more

resilient,

so

if

you

could

help

understand

that –

the

drivers

to there,

that

will

be

helpful. Thank

you.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Terrific.

Thank

you

for

your

questions,

Nicholas.

I

think

that

let's

do

this.

So,

question

on

ESG,

the

development of

our

ESG

program,

and

then

a

question

on

margin

within

the

Personal

vector,

and

then

questions

on

where

we're

seeing

flows.

And

so,

let's

do

this.

Let's ask,

I

think,

Chris,

if

Chris

can

talk

a

little

bit

about

the

development

of

our

ESG

offerings

and

flows.

And

also,

I

note

we

recently

appointed

a

new

Head

of

Sustainability

and

we're

accelerating

our

actions

there.

And

then,

we'll

turn

to

Caroline.

Caroline

joined

us

last

year,

maybe

five,

six

months

ago,

and

has

made great

progress

in

the Personal

vector,

and

maybe

she

can

talk

a

little

bit

about

what

we're

doing

there.

So,

Chris,

please?

[Christopher Thomas Demetriou]

Yeah. Thanks.

So, ESG

is

clearly

a

key

part

of

our

growth

projections

going

forward.

What

we've

done

over

the

course

of

2021

is

we've

invested

in

ensuring

that

we

have

the

appropriate

systems

and

tools

in

place

to

make

sure

that

we

can

offer

our

clients

the

appropriate

level

of

transparency

around

what's going

on

[indiscernible]



(00:52:31).

This

is

increasingly important

for

our

client

base. It's

not

enough to

show

[ph]



badge

(00:52:36) or

products

to

be

compliant

with

Article 8

or

Article

9

or

the

equivalent

in

other

regulatory

jurisdictions.

It's

really

important

that we're

able

to

evidence

the

actions

that

we're

taking

in

the

underlying

portfolio.

So,

we've

been

dialing

up

our

investment

to

make

sure

that we

can

offer

that

level

of transparency

and

authenticity

to

our

clients. What

you

also

saw

in

2021

was

the

conversion

of

around

23

funds

to

Article

8

and

Article

9,

and

that

–

we'll do at

least the

same

number again

in

2022, but

we're

expecting

to

do

more than

that.

From

a

flow

standpoint,

most

of

the

AUM

shift

that's

grown

to

around

£29

billion

of

AUM

that's

explicitly

in delivering

sustainable

outcomes

has

come

from

the

conversions

of

strategies

that

already

existed

within

our

suite

rather

than

flows.

We've

launched a

suite

of

climate

transition

funds

over

the

course

of

the

year.

They're

in

the

early

stages, but

we're

really

pleased

with

the

progress

and

the

traction

that

we're

getting

from

consultants.

We've

had consultants

provide

positive

ratings

to

our

sustainability

index,

as

well

as our

Climate

Transition Bond

Fund.

And

so

we

think

the

outlook

for

2022

from

a

flow

generation

standpoint

is

positive.

So

far

in

2021,

it's

largely

been

around

getting

the

appropriate

suite

launched

from

a

new

product

standpoint and

getting

the

existing

capabilities,

which

already

met

very

high

ESG

standards

converted

to

meet

the SFDR

requirements.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you,

Chris. Actually,

I

think

just

before

we

go

to

Caroline,

I'd

like

to

bring

René

in,

because

we

recently

launched

a

sustainability

institute

in

Singapore and

we're

getting

a

lot

of

traction

and a

lot

of

attention

on

our

credentials

in

the

Far

East

on

sustainability.

René,

would

you

like

to talk

a

little

bit

about

that?

[René Buehlmann]

Sure.

Thank

you,

Stephen.

I

think

what

is

quite

clear

is

that

the

demands

and

requirements

that

we

see

actually

from

Asian

investors

are

not

fully

identical

to what

we

see

in

demand

in

Europe.

And

so,

I

think

we

felt

it's

incredibly

important

that

as a

very

large

investor

in

these

regions,

and

we

manage

close

to £100

billion,

as

you

have

seen

from

Stephen's

presentation

in

emerging

market

and

Asian

assets,

that

we

make

sure

we

set

standards

and

help

define

standards here

in

the

region.

So,

one

of

the

goals

of

the

sustainability

institute

is,

A, not

only

to

do

sort of

like

lead

and

walk

the

talk,

but

also

engage

with

regulators,

clients,

and

stakeholders

in

the

region

to

really

accelerate

the

discussion

that

is necessary.

And

as

Chris

earlier

highlighted,

we

have

launched

quite

a

range

of

products

and

quite

a

few

of

them

are

Asia

and

China

related.

So,

we

want

to make

sure

we

really

differentiate

our

offering,

particularly

also in

this

region

around

sustainability.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you,

René.

Caroline,

give

us some

insights

into

the

Personal

vector.

[Caroline Mary Connellan]

Great.

Thanks,

Stephen,

and

hi,

Nicholas.

So,

I

think there's

two

angles

to

this.

One

is, obviously,

we've

had a

great

year

from

a

flows

perspective,

and

that's

record

flows of

£600 million,

getting

to

£14

billion

of

assets

under

advice

and

management.

And

that

has

really

helped

drive

the

revenue

up.

We've

also

seen,

from

a

revenue

yield

perspective,

that

tick

up

very

slightly.

What

we're

not

seeing is

any

pricing

pressure.

We

are

seeing

a

slight

shift

in

business

mix,

and

we've

had

a

very

small

amount

of

non-AUM

related

income

come

in

this

year

as

well,

which

has

slightly

ticked

that

up

a

bit.

So,

I

would

expect

to

see

that

flat from

a

pricing

perspective.

As

I

say,

we're

not

seeing

any

pricing

pressure

per

se.

But

the

business

mix

may

shift

going

into

next

year,

particularly

as

we

see

MPS

in

line

with

the

broader

market

really

continue

to

drive

sort of

increased

growth

along

with

our

core

offering

and

discretionary.

The

other

point

to

note

is

that

financial

planning

has

been

through

a

year

of cost

reduction

and

transformation,

and

we've

taken

significant

cost

out of

that

business

which

we'll

run

into

next

year

as

well.

But

I

would

like

to

say

that,

actually,

the

cost

reduction

has

now

delivered.

The

focus

on

financial

planning

is

all

about

growth,

and

that's really

what

we're

looking

to

deliver

going

through

2022,

which

obviously

where

it's

appropriate

for

a

client

to

use discretionary

also

flows through

into

that.

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Can

I maybe

just

come

back

to

Nicholas'

point

on

capital?

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Please,

yeah.

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Nick,

you

asked

about

in

terms

of –

previously

we've

talked

about

£0.5

billion

to

£1

billion

in

terms

of

that

overall

buffer

level,

I

would

you take

back

to

when

we

– when

we

talked

about

that,

we

were

still

working

through

exactly

what

we

were

going

to

do

in

terms

of

the

timing

of

monetization

of

the

HDFC

stakes,

and

we've

made

it

clear

today

that

our

intention

is

over

time

to

monetize

those.

We

were

now

very

clear

on

that.

But,

obviously,

the

biggest

piece

that

has

changed

is

actually

very

much

being

understanding

the

size

and

scale

of

the

shape

of

the

inorganic

acquisition

that

we

were

going

to

do

in

personnel.

We're

obviously

very

delighted

that

that

is

ii

and

therefore

we

have

a

very

clear

understanding

of

the

parameters

of

that.

That

allows

us

now

through

our

capital

allocation

framework

to

be

very

clear

that

it's

that

£9.5

billion

in

the

current

conditions.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

And

then, I'm

going

to

turn

to

Devan

to

talk

a

little

bit

about

flows.

But

just

to

put

margins

and

the

impact

of

flows,

but

just

to

put

that

in

context,

we

actually

feel

very,

very

good

about

what

we

just

delivered.

So,

for

an

overall

business,

we

had

a

fee

revenue

yield

of

27.3

bps.

That

was

up

by

0.4

bps

from

26.9 bps.

So,

that was

for

the

overall

business.

Investments,

we

expanded –

sorry,

Adviser,

Noel's

business,

we

expanded

fee

revenue

yield

from

22.3 bps

to

24.9 bps.

And

then

Personal,

Caroline

just

talked

about

the

fact

that

we

had

a

fee

revenue

yield

of

61 bps versus

58.5 bps

in

the

prior

year.

Though

coming

to

Investments,

which

we're

going

to

talk

about this

now,

we

had

a

stable

performance,

actually

slightly

better.

We

were

25.8

bps in

full-year

2020

and

we're

25.9

bps in

full-year

2021.

So,

the

overall

effect

was

positive.

Devan,

would

you

like to

talk

a

little

bit about

flows within

different products?

[Devan Kaloo, Global Head-Equities & Public Markets, abrdn Plc]

So,

absolutely.

So, thanks,

Stephen.

So,

when

we're

looking

at

the

flows,

what

we

see

in –

generally

speaking

with

regard

to

the

equity

book

business, first

and

foremost,

is

that

has

been

strong

flows

into

some

of

the

small

cap product

but

also,

more

broadly,

single

cover

inflows

with

our

EM,

Asia,

and

indeed

European

franchise.

More

generally,

we're

seeing

continued

strong

flows

into

our

fixed

income

business.

Although,

obviously,

one

of

the

elements

there

has

been

the

weaker

than

the expected

performance

in

terms

of

the

insurance

products

flowing

through

to

that.

And

that's also

impacted

the

multi-asset.

I

think,

overall,

we

certainly

see

a

much

better

gross

flow

picture

than

we've

–

we're

anticipating,

and

the

trend

remains

pretty

positive.

I

think

one

of

the

key questions

for

us

going

forward,

obviously, is

what's

going

to happen

in 2022.

And

there, we

still

remain

pretty

positive

about

the

outlook

for

that.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you,

Devan.

So,

it's

9:44.

We

obviously

still have

time

for

one

more

question

if

we

have

any

callers

with

a

pressing

question

on

the

line.

[Operator]

In

this

case,

our

last

question

is

coming

from

Hubert

Lam

from

Bank

of

America.

Please

proceed.

[Hubert Lam, Analyst, BofA Securities]

Hi,

everybody.

Thank

you

for

taking

my

questions.

I've

got

three

from

my

side.

Firstly,

more

on

the

costs,

you

talk

about

cost

being

more

variable

if

performance

is

–

particularly if

performance

is

weaker.

What

is

this

performance

based

on?

Is

it

based

on

markets

or

it's some

internal

targets

you

have?

Just

to better

get

a

sense

of

the

basis

of

this

durability.

And,

I

guess,

related

to

that

also

is

if

performance

is

weaker,

does

this

mean

you're

going to

have

less

investment

going

forward?

That's the

first

question.

The

second

question

is

on

the

revenue

target.

Again,

your

– it

seems

like

you're

reiterating

your

high-single digit

revenue

growth

target.

From

where

you

stand

today,

how

do

you

expect

to achieve

this?

Is

it

through,

I

guess,

markets –

more

markets

or

inflows?

Just

what's

the

breakdown

between

the

two?

Obviously,

markets

are

off

to a bad

start

this

year.

So, I'm

wondering

if

what

your

outlook

is

in

terms

of

achieving

this

target.

And

lastly,

in

terms

of

the

stake

sales,

I

think

Stephanie

mentioned

that

the

Indian

stakes

are

probably

not

strategic

anymore.

Just

wondering

if

you

can

also

confirm

that

the

HDFC

Asset

Management

stake

is

one

that

you

would

monetize?

You

currently have 16%

of

that

company.

Do

you

expect

it

to

go

down

to

zero

over

time

or

do

you

expect

the

level

that

you're

going

to

hold

going

forward?

Thank

you.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

Thank

you

for

your

questions,

Hubert.

So,

first

of

all,

in

terms

of

our cost

base,

of

course

when

–

if

markets

aren't

there

and

the

revenue

isn't

there,

there

is

a

natural

offset

in

variable

compensation.

That's

standard

across

the

industry.

So,

you

do

get

a

bit

of

a

natural

variation.

But

we're

working

– we've

been working very,

very

hard

to

reduce

our

fixed

costs

and

variabilize our

structure

in

a

way

that

we

actually

are

more

effective,

dynamically

adjusting

in

a

different

environment.

We've

actually

made

some

good

progress

on

that.

Could

I

ask

Stephanie

to

talk

a little

bit

about

that?

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Yeah.

I

think,

Hubert,

the

way

I

think

about

it

is

it's

about

creating

that

capacity

so

that

we

can

continue

to

invest,

being

able

to

have

clarity

for

the

business

as

to

how

in

particular

vectors

will

they

actually

manage

that.

So,

Investments

as

we've

said

is

very

clearly

focused

on

its

turnaround

plan.

They've

got

very

clear

steps

to

take

the

– to

change

that

structural

cost

but

in

order

to

therefore

that

they

can

reinvest

into

the

business.

And

that

is

precisely

the

process

that

they

will

be

going

through.

Even

once

we

get

through

into

2023

in

terms

of

our

operating

margin

at

70% –

sorry,

30%

with

a

cost

income

ratio

of

70%,

we

will

still

have

that

ethos

because it's

about

the

business

continuing

to

evolve,

creating

the

capacity

to

reinvest

in

the

future,

to

reinvest

in

innovation

and to

also

pay

for

performance.

So,

that's

very

much

the

dynamic

that

the

team

are

working

on.

But

that

would

be

the

same

in

all

of

our

vectors.

And

we

are

particularly

drawing

out

the

focus

in

the

UK

investments

this

period.

But

let's

bear

in

mind

the

Adviser

vector,

the

Personal

vector,

once

we've

completed

the

acquisition

of

ii

and

the

regional

parts

of

the

Investments

business

are

already

working

to

the

cost

income

ratios

that

we

want.

So,

they're

already

using

that

ethos

to

create

the

capacity

to

reward,

and

to

pay

for

performance,

and

to

make

sure

that

they

have

those

investments.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

And

let

me

talk

a

little

bit

about

revenue,

Hubert,

because

we

said

that

we

would

really

expand

our

margin.

So,

when

I

joined

the

business

with

a

margin

of

about 15%,

we

have

just

reported

a

margin

of

21%,

and

I've

made

a

commitment

to

get

to

an

exit

margin

of

30% in

2023.

And

if

you

look

at

the

way

the

shape

of

the

business

is

changing,

so,

we

delivered

for

you

6%

revenue

growth

this

year

in

2021,

last

year,

and

that

was

5%

came

from

the Investments

business.

We had 30%

growth

in

our

Adviser

business,

but

underlying

revenue

growth

of

12%,

double

digits.

Our

Personal

business

had

15%

revenue

growth.

Now,

if

you

look at

the

composition

of

our

revenues,

our

whole

strategy

has

been

increasing

the

quantum

of

revenue

that

comes

from

platform

sustainable,

recurring

earnings. Now,

when

we

complete

the

acquisition

of

ii,

you're going

to

have

the

best

part

of

£400

million

across

two

large

platform

businesses

that

are

operating

in

markets

that

have

between

12%

and

15%

growth.

So,

that really

is

what –

how

you

have

to

model

this.

As

we

– as

you

grow

the

business

and

you have

an

increasing

quantum

of

revenue

coming

from

those

businesses,

you

can

easily

see

how

we

can

deliver

a

CAGR

through

time

in

the

high-single digits.

And

I

was

asked

last

year,

what

does

high-single digits

mean,

anything

above

6%.

We

just

delivered

one,

which

was

6%

for

last

year.

So,

that's

the

way

we

think

about

it.

Stephanie?

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

And

Stephen,

just

to

add

to

that,

I

mean,

I

said

earlier

on,

Hubert,

that

our

diversification

that

we're

now

getting

in

our

revenue

stream

from

Adviser

and

Personal

has

now

gone

from

15%

to

18%.

With

ii,

that

goes

to

26%.

So,

you

can

see

all

the

time,

as

Stephen

saying,

we're

changing

the

makeup

of

the

revenue

so

that

it's

not

just

about

market.

Clearly,

it's

a

huge

driver

as

well,

but

it's

not

just

about

that.

So,

that's

how

we're

thinking

about

different

components

that

will

help

us

grow

our

revenue.

[Stephen Bird, Chief Executive Officer & Director, abrdn Plc]

And

I'll

end

the

call

here.

But

it's

important

to

recognize

and

leave

with

you

the

commitment

that

our

job

is

to

get

this

business

to

a

30%

margin.

We've

now

peeled

the

onion

and

you

can

see

we've

shown

you

for

the

first

time,

three

businesses

with

three

P&Ls.

And

then

we've

also

explained

that

within

our

biggest

business,

where

I

spend

most

of

my

time,

we

now

have

got

Asia

growing,

the

US

growing,

Europe

growing,

and

we've

got

a

very

strong

Chief

Executive

in

Chris

focused

here, he's

in

London

with

us

today,

on

addressing

the

challenges

within

the

UK

business.

And

we

will

do

that.

The

business

is

becoming

much

clearer

in

terms

of

how

you

drive

a

three-vector

model,

where

you

derive

growth,

and

how

you address

the

remaining

challenges

that

we

have.

There's

much

still

to

do

and

we

delivered

a

lot

last

year

and

we're

going to

deliver

a

lot

this

year

too.

Thank

you

very

much

for

joining

us

this

morning.

Thank

you.

[Stephanie Bruce, Chief Financial Officer & Director, abrdn Plc]

Thank

you.