Aberdeen Group Plc

The 2022 full year results. Great to see everyone here in the room and also welcome to those of you who are listening remotely. I'm delighted to have our management team here and we'll be taking you through our strategy and our progress. And then Stephanie will walk you through the financials. Then we'll open up to have a conversation. 2022 was one of the hardest investing years in living memory against this backdrop we made good progress in delivering our strategy and creating a stronger business model for aberdeen as we exit year two of our three-year strategy i've now got a team around me that i didn't have two years ago a talented and motivated team of leaders who are focused on transforming this business He's not here today but I'm also pleased to announce that Peter Branner is joining us as CIO in May at the right point in the strategic journey for our investments business. Today you'll hear from me, Stephanie and each of our CEOs in turn about what we're doing individually and collectively to transform Aberdeen into a sector leader with a sustainable growth trajectory. We have defined our business model. The shape of the group is settled in its three vectors. Each of these businesses are at different stages of transformation and all three have clear opportunities to develop and to grow. We're building direct distribution to over 850,000 clients in the high growth, savings and wealth markets. within which the advisor platform market is projected to grow at double-digit rates for the next five years. It's an attractive market and one that we are a leader in. The acquisition of II into the personal vector has delivered £114 million of high-quality, sticky revenues operating within an efficient and scalable business with higher margins. The three businesses, investments, personal and advisor, are complementary to one another and we will show you more on the synergies and joining the dots between the businesses in the second half of this year. To give you a sense of what we're doing, we're developing Aberdeen fixed income propositions for the II customer base and we're designing the right referral processes for those clients into financial planning. In the investments vector, there is further to go. This was always the longest cycle of transformation given the structural challenges and the nature of active asset management. We have taken the hard decisions and we have built the foundations for growth. We're simplifying our product range, getting out of undifferentiated and lower margin areas. We're reducing cost and complexity so that we are focused on delivering higher margin products with the right supporting performance. We are disciplined allocators of capital. We have invested in high-quality businesses that will generate long-term growth. And at the same time, we've made sure that we have delivered sustainable dividends and buybacks in order to drive shareholder returns. In 2022, we invested £1.4 billion in II and the business continues to perform very well under our ownership. It has already exceeded the investment case that we set out when we did the deal and it has much more to deliver. We realised £800 million through dividends and returned £600 million in the form of buybacks and dividends to our shareholders last year. You can expect us to continue this approach as we go through 2023 and beyond. When we feel that we can deliver the right level of value for you as shareholders from bolt-on M&A opportunities, investing in the business in the right way, you can expect us to continue to do that in a disciplined and an effective manner. To illustrate the change we're making to our model, you can see here on the slide that in one of the worst investing years in memory, the contributions from personal, largely thanks to the acquisition of AI, and advisor offset the challenging results within investments. Diversification is helping our margin mix as the platforms have a significantly lower cost to serve than traditional asset managers. Overall, this meant personal and advisor represented 60% of Aberdeen's adjusted operating profits at £158 million. As I said at the start, we're building the foundations for growth, but we still have some way to go. The changes we have made within our investments business started by getting the right leaders at the top and they are now well into reshaping that business for growth. Before we get into our investments business more deeply, let me cover our relationship with Phoenix, our largest single client. Our priority is helping Phoenix achieve their main strategic priorities of growing their open book business and continuing to win bulk purchase annuities. They are operating in a competitive marketplace for pensions and insurance and this has necessitated a reallocation of assets from active equities into lower cost passive strategies and a move from public to private credit. Our joint goal is ensuring that we have the right products at competitive price. These changes, combined with the natural runoff of the closed-end pensions book, results in revenue pressure and the necessity to remove complexity and cost. This programme of work is well underway and will continue throughout the current year. The themes of simplification, reducing cost, and focusing in products that are right for our clients are the core features of our investment strategy. We have concluded a root and branch review of our investments business, and I am confident that we have areas of strength and scale in higher margin products that will be in demand and are in demand from our clients. Chris is going to cover this shortly. It's important to understand how this programme of work and the execution in this current year builds on the work we did in our first two years of our strategy. We've made hard choices to become focused. We had to identify what we're not going to do as well as what we would invest in. We've exited non-core geographies and we've divested of non-core businesses and you can expect us to do more of that. I'm pleased to inform you that today we have agreed to sell our traditional discretionary fund management business, which is a further simplification, allowing us to focus on the more scalable and efficient model portfolio services. We've also closed or merged about half of the 120 funds that I told you were subscale and not aligned with our client demands. The remaining funds targeted for rationalisation will complete this year. Overall, we're reducing costs. Headcount and costs are down and we're accelerating the 75 million that we committed to in the summer within the investments business to be delivered as a save in 2023. Now you can see here that our organisation has fundamentally changed. We are often asked what the new Aberdeen looks like for investments. The answer is two distinct pillars, public markets and alternatives. And the specialist areas within these reflect how governments want to work with us and how we can be most successful. This chosen business mix is supported by the long-term market trends, the growth and development of Asia, the anticipation of peak rates in fixed income, and the faster growth of alternative asset classes. All of these trends are supportive of this business mix through time. We've created a business model to deliver growth by focusing on areas where we have scale, a distinctive client offering and supportive performance. We're at the point now where preparation meets opportunity. Today we'll be hearing from Chris. Chris is going to talk about investments business. Then Noel is going to walk through progress that we've made in Advisor. And Richard will talk about our personal business, which he now runs, including Interactive Investor. Then Stephanie is going to walk you through the financials and then we'll do a Q&A. But first, let me hand over to Chris.

Thanks, Stephen. I'd like to start by sharing our view of the growth opportunity for investments. For clarity, any flow figures I reference will be excluding Lloyds and liquidity assets. Gross flows were £49.1 billion in 2022. And at 12% of opening AUM, this is consistent with 2021 and compares favourably with industry figures. Net outflows did remain negative, but at 3% of opening AUM, we're in line with industry average, which is an improvement over recent years. We make progress in the UK, which has been our most challenged distribution market for some time. Broaderage data on mutual funds showed Aberdeen improving to 10th in the market, having not made the top 100 in 2021. So when we have the right proposition and the right performance, we have the client relationships to open up the door to return to growth. As we look ahead, there are three areas in particular where we believe we can create positive value for our clients and for the firm. Firstly, at 120 billion of assets, fixed income is our largest business. It's a core competency from our standard life heritage. And for an asset class that's been out of favor for many years due to the low yield environment, it is now trending strongly to one where industry data and our own opportunity pipeline shows great potential. This potential is underpinned by performance, with 72% of our fixed income assets outperforming over three years. In credit, where we have particular strength, 92% of our assets are outperforming over three years. Second, with 87 billion of assets under management, our larger than six alternatives franchise is reaping the benefits of a recent repositioning. It is a growth business with net positive flows over the past three years, which have driven double digit revenue growth over that period, including 2% revenue growth in 2022. In order to further capitalise on the opportunity, we're reorganising our alternatives capabilities to allow greater specialism in distribution and operations to accelerate profitable growth. We will report on alternatives separately from 2023 onwards to do a later analysis of this business area. Third is our considerable experience of investing in Asia and emerging markets, a business that celebrated its 30th year on the ground in Asia just last year. The structural growth opportunity in Asia is well understood, and we as a firm and our product lineup are well positioned. Our performance in Asian equities is strong, with 78% of our AUM outperforming over three years. This includes top decile performance in our sustainable China A strategy, which is growing again, benefiting from the renewed client interest following China's reopening. These examples illustrate the strength of foundations in place in product and performance, and we are working hard to capitalise on the opportunities that are in front of us. Equally, we are very clear that there remains meaningful work to do to address the parts of our business that face headwinds on performance or a subscale. And we are acting accordingly. Let me expand on two examples. We're consolidating our developed market equity strategies to focus on three distinct client outcomes, sustainability, income, and small cap. This aligns our teams to the equity outcomes where our clients continue to see value in taking an active approach. We're refocusing multi-asset, which is an area of significant historical strength for Aberdeen. We see outcome-oriented model portfolios. as a key offering in a world where more responsibilities for saving and wealth is delegated to private individuals or their advisors. So we're organizing ourselves to align to our clients' priorities, and I look forward to providing you with further clarity on the implementation of these initiatives at the interim results. In building a sustainable investments business, we're focused on three key areas. First, our work to drive efficiency proceeds at pace. We reduced cost and headcount in 2022 as our program of simplification moved into its implementation phase, which will continue into 2023. We continue to adjust our geographic footprint, entering into distribution arrangements where on-the-ground presence is too costly. In alternatives, we're pursuing divestment of certain non-core assets and hope to provide updates on progress during this year. The work to rationalize products is well underway. We designated 120 funds for closure or merger and we're now halfway through that program. The remainder will be complete in 2023. The overall program drives efficiency whilst impacting only 2% of our AUM. We will deliver our targeted 75 million of cost savings in 2023 by accelerating the implementation of all these changes. And Stephanie will have more on this shortly. Second, while performance is good in key areas, we want it to be better and we want more consistency. Having settled on the shape of our business, we have decided that Peter Branner, currently CIO of one of Europe's largest pension providers, is joining to lead our talented group of investment professionals. He brings considerable experience in our key areas of focus and will have responsibility for the oversight of investment process and performance. Thirdly, driving increased revenue yield is of particular importance. Our overall margin of 25 basis points, which is lower than most peers, is heavily influenced by low margin insurance assets. This is a material contributor to our cost income ratio challenge. We're working closely with Phoenix to simplify existing business and expand into new areas of mutual benefit. And we are confident that our key areas of focus discussed earlier include particularly Asia and alternatives, will drive a more favourable mix over time, building on the 36 basis points revenue margin currently generated by our institutional and wholesale activities. Furthermore, our significant position in listed closed-end funds with £23 billion in AUM generates perpetual higher margin fees. We're the third largest player globally, up from fourth largest this time last year. Overall, significant work remains to improve efficiency, address remaining areas of performance weakness, and improve our revenue yield. But clear plans are in place to achieve those goals. We truly believe that through this work, a highly capable and relevant Aberdeen Investments business is beginning to emerge. With that, I'll hand over to Noel to discuss advising.

Thanks very much, Chris, and morning, everybody. So against the market backdrop that Stephen outlined earlier, we've delivered another year of growth for the business through disciplined cost management and increasing cash margin. And at the same time, we've retained our number one position as the largest advice platform by AUA. And we also remain to be the only AKG A-rated platform for financial strength in the market. But the key focus in 22 was in the delivery of the next phase of our advisor experience program. And this lays the foundations for our strategy and the growth ambitions we've got for the business. I'm delighted to be able to announce that we've successfully gone live with our most significant technology development as part of our advisor experience program. And a new functionality delivered under phase two of this programme amplifies our market-leading position, marking a step change in our overall proposition. And crucially, this enables us and our advisory partners to be more productive, delivering increased capacity for those businesses. And the capacity creation benefits us, it benefits the client, but it also benefits the end customer, and ultimately contributes towards reducing the advice gap that continues to persist in the UK. So using phase two of our advisor experience program as a catalyst, we now move from a transformation phase into a growth phase with growth delivered through three key pillars. Firstly, our existing customers. Now we have 430,000 customers with an average wrappers per customers of 1.66. However, over 50% of these customers do not have a pension with us. So we see that as a huge consolidation opportunity going forward with potentially up to £50 billion worth of assets based on current SIP case sizes. And that's just from the advised customers that sit on our platform today. With our existing clients, we partner with, as you know, 2,600 firms in the UK, with 46% of our assets under administration coming from firms that use Aberdeen as their primary platform, meaning that we can expect to receive over 70% of their new business every year. So our focus is on leveraging the Advisor Experience Programme to increase the number of existing firms that use us as their primary platform, converging from secondary or tertiary into their primary platform of choice. Finally, engaging with new clients. Well, as we said, we currently partner with over 50% of the UK advice firms. However, we do have ambitions to work with some of the other 50% that we currently don't. So unlocking this relationship, one of the key drivers is advocacy. 40% of advisors actively recommend their primary platform to peers. Therefore, through delivering an excellent service to our existing clients and encouraging them to be advocates for Aberdeen, we will grow our business. And with that, I'll now pass over to Richard. Thank you, Noel.