Aberdeen International Inc.

Good morning, everybody, and thank you very much for joining our Q1 trading call this morning. With me today is Ian Jenkins, our interim CFO. I'm going to focus on Q1, of course, but I'll also make a few comments about April, not least to pre-empt some of your questions. First, starting with the highlights from the quarter. AUMA at the end of Q1 was £500 billion. On the positives, we had strong inflows for Interactive Investor, but this was more than offset by market effects and outflows in Investments and Advisor. Growth in Interactive Investor was strong once again, with total customers up 9% year-on-year, and this includes 29% annual growth in SIPs. Net outflows in Advisor of £0.6 billion were represent an improvement versus prior quarters, driven by restored service, enhanced platform functionality and repricing. In investments, the Q1 outflow of £6.4 billion largely reflects the redemption from the low-margin mandate I mentioned at the full year results. I'm going to add that following a large quant mandate win in April, Net flows within institutional and retail wealth are, in fact, now positive year-to-date. As we set out at the year-end, our strategy is to become the UK's leading wealth business and to reposition our investments business to areas of strength and market growth. We're a long-term player with a long-term focus. Despite the heightened market uncertainty of recent weeks, we've made good progress toward our objectives this year. In fact, we haven't seen any significant client-led effects in investments or advisor. And in II, the only effective note was higher trading volumes in the first half of April. Now, turning to our businesses in a little more detail. Starting with Interactive Investor, which has maintained the strong momentum seen in recent quarters. Total customer numbers are up to 450,000, which now includes 88,000 high-value SIP customers. II achieved strong net flows of 1.6 billion, with AUMA increasing slightly to just under 78 billion. And as a reminder, II was number one in net flows in 2024. During the quarter, we saw record levels of engagement, with an average of 24,000 trades per day on the platform, which is an increase of 19% versus Q1 last year. These trends have continued into April, with II maintaining strong inflows, enhanced daily trading volumes, and sustained its customer growth. Earlier this month, we announced the acquisition of Jarvis Management's direct-to-consumer retail book, This small acquisition is expected to complete in Q3 for a consideration of around £10 million and is expected to bring approximately £1 billion of assets onto our platform. With impressive performance to date, II is on track to meet its 26 growth targets, supported by an enhanced customer offering with the launchers of the managed SIP, II Advice and II360 all soon to come. Turning now to Advisor. AUMA was just under £74 billion at the end of the quarter, down 2% compared to the year end, primarily reflecting lower markets but also net outflows of £0.6 billion. Positively, this is a better quarter than achieved in any of the quarters in 2024. But we aren't where we need to be yet. Following our intense focus in recent months, services are now working well and we had a really good performance through the latest tax year-end. But of course, we have ambition to do even better. Taken together with our enhanced platform functionality and the recent repricing, our target is to have at least £1 billion of net inflows next year. and in investments, which in spite of market headwinds, is delivering on its strategic priorities. AUM was down 3% in the period to just under £360 billion, with movements in the quarter reflecting lower markets and net outflows. Most of the £6.4 billion net outflow was driven by the £4.2 billion mandate redemption I flagged to you all at the year end. This has gone through both our IRW and insurance partners' lines. On the positive side, quarterly gross inflows in IRW, excluding liquidity, were at the highest level for over two years and 30% higher than in Q4 last year. Within this, we saw a strong performance in fixed income, with net inflows of £1.5 billion in the quarter, benefiting from a significant European pension client mandate. However, equities have continued to see elevated net outflows in a challenging market. I would mention that the £3.3 billion net outflow in the quarter included £0.7 billion in relation to a previously announced fund merger, as well as £0.7 billion redemption that will have a negligible revenue impact. And following a £6 billion quant mandate that funded earlier this week, net flows across IRW are now positive year-to-date. And looking ahead, we continue to target a material uplift in profitability with a 2026 target of at least £100 million of adjusted operating profit. At a group level, we've seen encouraging trends since the end of the quarter, with the large quants mandates win and sustained momentum in II. And before you ask, Group AUMA is slightly up compared to the end of March. Looking ahead, we're on track to meet our transformation target of at least 150 million of annualised cost saving by the end of this year. Richard Wilson, our Group COO, is focused on driving further long-term benefits of transformation across our business and for our clients and colleagues. As I said at the full year and at the start of this call, our ambition is to be the UK's leading wealth and investments group. Not only are we committed to delivering on our 26 targets, but also to transforming the group's culture and our clients' experience. And with that, Ian and I are very happy to take your questions.

Thank you. Ladies and gentlemen, if you would like to ask a question today, please signal by pressing star 1 on your telephone keypad. Ian, that is star 1 for your questions today. And up first, we have a question from Enrico Bolzoni from JP Morgan. Please go ahead. Your line is now open.

Yes, good morning, and thank you for taking my questions. Starting with advisor, you mentioned you made significant progresses. Can you just confirm that now all the clients have been migrated to the new pricing structure? And can you give us some color on how do you see that relative to the street? You think you're very competitive now? or more expensive than others or cheaper than others. So just some color that would be helpful. I also wanted to ask you with respect to the cash balances in AI that increased quite nicely. You are growing penetration in SIP. Is that a contributor of that? Can you remind us if clients that also have a pension typically have higher cash balances relative to clients that don't have a pension, just have ISA and unwrapped accounts? Thank you.

Sure. On the second question first, yes, SIP growth does contribute to part of that. People tend to have, or what we see on our platform, tend to have slightly higher cash balances in SIPs. We have seen a little bit, as you point out, a little bit of a step up. around that level. If you take out the planning business, which we report in II, you're around sort of 9-ish percent of cash in the area, and that's ticked up a little bit as we've grown slightly more in SIPs. So we expect that to continue just to tick up just slightly in line with the growth in the platform as we look forward. On Advisor, yes, the repricing on WRAP went through, which is the major platform, earlier this year. We did the new business repricing about a year ago, and now the whole thing has been washed through. So that's – I was in sort of January time. So that is now in effect. Where does it position us relative to others? I think we are now very competitive. The repricing that has gone through, it's not one price for every customer. There's tiering and there's obviously some degree of commercial deals that we would enter into. So across the piece, I think with an enhanced level of service, improved functionality and an attractive price point, it's a very competitive proposition.

Thank you. And we now take our next question, which comes from Oliver Caruthers from Goldman Sachs. Please go ahead. Your line is open.

Hi there, morning. Oliver Caruthers from Goldman Sachs. Just one question for me on the trading revenues in II. Richard has flagged in the past that FX activity increases with trading volumes and pushes up the average revenue per trade here. There's also been quite a bit of industry narrative of non-U.S. investors repatriating some of their U.S. exposure in the last few weeks. So is it fair to assume that your trading revenues line in I.I. is actually running a bit higher than the plus 19% year-over-year we're seeing in daily average retail trades?

I think, okay, thanks, Oli. I mean, trading in Q1, so the number that we report there is the number of transactions. Yes, FX is a corollary of trading. People would make more, some overseas as a percentage of what we see. We did see a step up, a further step up in trading volumes in early April. Around some of that heightened volatility, I think we had four of our highest trading days ever in the first half of April. That will settle down pretty quickly, but that's... And that wasn't just tilted to sell. There's quite a lot of opportunistic buying going on as retail saw some pretty interesting deals. UK banks, for example, or some of the high-quality names in the UK equity market did see a pickup in interest. So that's settled down a little bit, as you might imagine, as markets have returned to whatever normal might look like. Who knows? But the FX would have been equally a bit higher during that period. That's right.

Okay. Thank you.

Thank you. Hubert Lam from Bank of America has our next question. Please go ahead.

Hi, guys. Good morning. I've just got three quick questions. Firstly, can you give us an update on fund performance? I'm just wondering how much of this could be driving the equity outflows you saw in the quarter. Second question is on the fee margin. Any update on that? Just given the mix appears to be more negative with the larger equity outflows and also the quant win that you had coming in April. Just wondering what your guidance is around that. And lastly, on I.I., yeah, you mentioned that you did a small deal for Jarvis. Just wondering if you think you'll probably do more within the I.I. space going forward. Thank you.

Okay, thanks, Hubert. On the deals, we've got some appetite to add clean books of business. We don't want complex integrations in I.I. and that was an attractive deal. Jarvis needed a solution, and we have got the muscle to do that in a very attractive way to us, and it provided a solution to the Jarvis customers. So that was a pretty straightforward one. I think if there's more of the same, we certainly would be keen to allocate more capital to growing AI. So wherever there's a value opportunity, we would look at that very hard. On... B margins, the redemption that we had and the win that we had in quant broadly offset each other. So there's not a huge impact of the two there. As the book continues to move away from what active equity is just on balance and more toward fixed income and quant and liquidity, you are seeing margin decline. We're still creating value, but it's a lower headline figure. So I think at the full year, we said below 21 overall for investments. I think I can reiterate that. By the end of the year, we'll probably be closer to 20. We'll continue to see a little bit of margin pressure in the book overall. Fund performance, I think overall our total fund performance in the quarter was 69% of our funds performing. I think, obviously, I'm not going to go through each one of them, but there is some better than others. We had a better April, actually, than we had Q1, which I think plays well to our style. So we continue to be vigilant on that, and Peter Branner and the whole of the investments team are continuing to look for opportunities to improve performance. But there's so many different funds, I can't generalize. But overall, you know, there's still further work that we can do to improve performance, and we're continuing to focus on that because we think that's just the right thing to be doing.

Thanks. Any improvement on the equity funds performance?

I think overall... Q1 had some challenges for some of the bigger emerging market Asia funds. I think it had some very strong performance of some of the smaller company and dividend income funds. I can't generalize, but in April... they actually reversed quite materially and performed much better. So I haven't got the latest stats in front of me, but overall we continue to be confident in our style, confident in what we're doing, and we do, as you say, not just look at one quarter.

Cool, thanks.

Thank you. And up next we have Greg Simpsons from BNP. Please go ahead, your line is open.

Hi there, morning. Thanks for taking my questions. Two quick ones. Firstly, just on the advisor business, it's good to see some improvement in the outflows, but I am aware it's tax year end period and a number of peers have strong inflows at the quarter. So what are you looking for to kind of get flows positive by 26? And how do you see the path from here? Is it linear improvement? Is it quite skewed towards next year? And then secondly, just on the investments, 100 million operating profit target, how comfortable are you feeling with that, given markets have maybe been a bit weaker relative to your business plan? Do you think there's a lot more you could do on the cost, say, if markets remain quite soft? Thank you.

Okay. Well, thanks, Greg. On Advisor, I don't want to be celebrating an outflow, but it is better than... You know, we saw throughout the last, frankly, six quarters or so. So there is a shift in momentum. We are seeing a much better pipeline and much better inflows. And I think it's about. rebuilding confidence in our phase to come back to the platform. And we now, as I said a moment ago, we've got the proposition now. We're where we want to be in terms of service and platform functionality, but we want to do better. So I'm pushing our guys to improve. timeliness, improve advisor experience. That's the source of competitive advantage, and we are going to continue to push ourselves to do better. In terms of the flow outlook, Would it be linear? I think we've seen improvement throughout Q1. We've seen actually pretty decent April, which you would expect because of some of the seasonal effects. So April's probably our best month in... Two years. I don't know what it was like before then. So, again, I'm not celebrating this, but signs are better and we are improving. So, you know, the pressure is on us to continue to get that to positive flows, which we are targeting for next year. On the advice, I'm sorry, on the investments profit forecast, yeah, look, Some headwinds from markets, not huge. AUMA, as I just said, is actually up now in April compared to where we were at the end of March. March was, of course, down. We saw a bit of FX in market movements, particularly in the second part of March, everybody knows. That's the 26 target for a reason. It wasn't this year. We're still going through a transition and we're taking out some costs this year. We do see 26 as being a bit of a clearer air as we look to trade through that. We probably lost a little bit of the headroom that we had, but we're continuing to work very much towards that target and that's the one that we've got.

Thank you. And from Citi, we have Nicholas Herman with our next question. Please go ahead. Your line is open.

Yes, good morning. Thank you for my questions. It's very good to be able to call UK banks high quality these days. Just on two questions, please. One on your, firstly, also just in terms of institutional, sorry, institutional retail wealth flows or to be institutional. I guess your April guidance suggests that institutional clients didn't really react to the recent market volatility. I guess my question is, what are institutional clients telling you? What made them just kind of just sit on their hands and kind of see how this played out? And is this just a delayed reaction? Or is this kind of just people just rigging this out and then the pipeline looks pretty good from here? Secondly, The second one is on equity flows. Did those outflows come before or after the full year update? I suspect they came towards the end of the first quarter. And then just to follow up on the investments targets, I don't want to get into the usual endless trap of getting overly carried away by a quarter. And I appreciate there's still a way to go to the end of 2026. While it's great to see the flow being positive, equally the mix shift towards low margin assets is pretty significant. So I guess what level of mix shift or market drawdown would you need to see in order to be kind of incrementally more cautious in your targets? Or as I guess the prior question kind of intimated, what level of additional cost effects do you have to kind of offset that? Thank you.

Okay. Hi, Nicholas. I think institutionally, we set ourselves up, people would invest typically with us for three years, and that would be the minimum time horizon. It would be very reactive in the constructs of what happened in early April for major institutions to start to redeem. We've seen a few little things around the edges. People aren't inert to events, and we saw a few of the wealth players redeem a little bit. It's not like there's no activity at all, but we certainly didn't see any major redemptions from institutional clients. I think it's part and parcel of their process and their investment objectives and the market that we seek to serve. I don't see a queue of redemptions, but I do see uncertainty on the horizon as well. So it's hard to be hugely forward-thinking about that, but there's certainly no distress signals that we're flagging at this point. On the equity, I actually can't remember when they were. I mean, the fund merger we knew because it happened in September and it just took time for it to process. So that was a known. I think there was some before and some after. The results I can't remember precisely. And on the – I don't answer the third question. I think we do have cost levers, and we've pressed a number of those, and we've continued to seek efficiency and opportunities for us to be – more automated to provide better service and to cut through some of the structural costs that we have, whether it's in platforms or whether it's with third-party providers or, frankly, in some of the functional areas. We've made good progress on that. We were over 100 million of run rate saves last year. That's obviously ticking up. We'll give a more formal update of that at the half year that we are. very much on track for our 150 of run rate of costs out in the group, of which 120 at least will be in investments. So that's the – but there's further we can go. And I sort of touched on that briefly with Richard's appointment as COO. We are continuing to seek that reengineering of the organization to just be more automated and to find more efficiency at the same time. We want to grow the place, and hence we've got the strategy and we've got the product mix. And under Xavier's leadership, we do believe that we can grow the organization. It will take time as we tilt towards our go-forward, go-to-market product suite, but that's also part and parcel of the way that we see the business and hence the financials progressing.

Got it. So to paraphrase it, you kind of need to see a lot of significant deterioration, a much greater significant deterioration in order to kind of therefore become more cautious because you have further levers is basically the answer.

Yeah, I think that's sort of fair. I mean, your word's not mine, but I'll leave it there. Got it. Thank you.

Thank you. And up next now, we move on to a question from Mandeep Jackpal from RBC Capital Markets. Please go ahead. Your line is open.

Hey, good morning. Thank you for taking my questions. A couple from me, please. The first one, just on the insurance mandate loss, only 4.2 billion redeemed compared to the guidance of 5 billion. Is there any details of when the balance will be redeemed and which asset classes it will come from? And then the second question is on the pension scheme. We'll see significant market volatility in April. And I wondered what kind of hedging and other protections you have in place that underpin that £35 million random cash flow that comes out of the scheme. And is there a realistic economic scenario where the scheme is unable to support that payment? Thank you.

Yeah. So on the first one, I think there's a little bit of catch up. £5 billion was an estimate. Anyway, there might be a little bit of catch up through Q2, but nothing. Nothing major. I think anything residual would go through insurance. It might be a few hundred million. It's not huge. In the context of what Phoenix do, it probably wouldn't spot it. On the... Pension scheme is pretty well protected. It's quite conservatively invested. I think we will probably increase the investment risk a little bit. We haven't done anything of late to do that, and it's still likely to be more credit than more volatile sources. The benefit I talked about at the full year results is a relatively small percentage of the economic surplus and I think is very well protected from market events and it's a combination of the total level of surplus and also the quality of the assets and some of the interest rate hedging that's in place on the scheme.

Well, thank you.

Thank you. And from HSBC, we now have Stephen Hayward with our next question. Please go ahead.

Thank you. Good morning. I think you may have already answered one of these questions, but do you foresee any large mandates coming up for redemption in the next quarter or rest of the year? I think you may have already flagged that you didn't see anything in the pipeline here. And then secondly, on I.I., can you give us a number of gross new customers added in the quarter? I think you have previously given that figure. And then it would be helpful in terms of marked marketing, I.I., if you give us some sort of asset mix split as well between sort of U.S. equities, other equities, a fixed income, et cetera. Thank you.

Okay, I think I did answer the first question. And the answer is no, there's nothing looming on the horizon in that regard. I mean, we expect about 15% of the book to redeem each year. So we're a bit above trend in Q1 because of the insurance mandate. which I mentioned, but I think that's broadly the guidance that I would give you. Do I have to hand the gross customer growth in I.I.? He says we think it's 16,000. Just backing it out. So I think it was 11,000 growth net, 16,000 gross. On the asset split within II, that might be after one we get back to you with. I don't think we'll have got that to hand. That's something we can provide in due course, if that's okay. Okay. Thank you very much.

Our next question now comes from Bruce Hamilton from Morgan Stanley. Please go ahead. Your line is open.

Morning. Thanks for taking my questions. In terms of the – just to clarify, the April being slightly up on March, I assume that's including the quant win, just to check. And then secondly, on the sort of equities – I wondered, is there any indication of client sentiment perhaps actually improving as people get a bit less keen on the U.S.? I suspect you're not seeing that, but I just wanted to check whether you're seeing anything on that side. And then on the service improvements in Advisor, can you be a bit more precise? What's the key change that you've made that's really sort of driving that improvement, just to help us understand? And then final one, just on the I guess sort of market and FX moves were a bit more negative in Q1 than I expected. Is that mainly FX, I'm assuming, or, you know, is there a big FX component, I'm guessing? Thank you.

Okay. So, yes, the number I gave you for AUMA for April did include the quant win. So we saw there's a little bit of negative demand. negativity from uh markets not huge some of that's fx you know the dollar and the asian currencies are weaker relative to sterling euro is a tiny bit stronger um so a bit of a mixed bag there but that's uh you know we're up just slightly up you know across the uh across the month um On sentiment to equities, look, we've got the same sort of, I guess, we've got the same question, you know, as to what should be the movement. And we have seen more interest in global emerging markets in the last month. And we do see, you know, it's been out of favor for some period of time. And I think there's the logical answer that you see the valuation opportunity there, you see the quality of the companies, and you see the absolute opportunity in the market. We've not seen that. We do anticipate, with significant change to the way markets have been configured, a more balanced approach to invest across different geographies and different sectors. So I'm not calling that we're seeing a pipeline building, but I'm certainly saying that we're seeing increased interest in those areas. On the third question, service improvement, I think the key thing is the amount of time it takes people to get their money. So there's answering calls, hygiene factor, that's sorted. It's working really well. Frankly, we spend a significant amount of time on phones, but the call answering time is actually excellent. The amount of time it takes people to get their money, it's not all within our control. but often it involves in-species transfers from third parties, but we've sorted out that process so that everything that is within our control and within the control of FNZ, there are no gaps in that process. So it's as automated as it can be. There were some glitches, frankly, requiring manual interventions. We've tried to engineer those out. There's still a little bit to do. It's not completely – I'm not saying it's perfect in all regards, but we're continuing to seek just a better service experience for all those. And we continue – whilst we'll always present the averages – It's important that the problems are in the tail. So it's to try and maintain that everybody gets a good experience. The averages are probably where we want them to be. I want everybody to be at the average, if that makes any sense. So that's continuing to push harder to be better across the board there. On the Q1, yes, there was some FX jumping around, both in terms of the Asia currencies and, I think, FX. There was a market movement of 6.1. I think FX was about 20% of that, markets were the rest of that. So that might have been why we're slightly below. But there's nothing else that we can signal to you. But the slight weakness in some of the Asian currencies perhaps we didn't pick up.

Great. Very helpful. Thank you.

And if there are currently no further questions in the queue, I'd like to hand the call back over to you, Mr. Windsor, for any additional or closing remarks.

Great. Well, look, Saskia, thank you so much. Thank you all very much for your questions. Really appreciate it. IR and myself are here if you've got any follow-up questions during the course of the day. But thank you for dialing in.