...or apparently another marketing opportunity in something called cyber Monday. Ah well only 24 days to shop before Christmas which reminds me of the old tradition of Advent Calendars, I'll come back to that later.
So today after St Andrews day yesterday we have Aberdeen Asset Management (ADN) reporting final results for the year to 30 September 2014. The highlights from the statement were:
· Net revenue 4% higher at £1,117.6 million (2013: £1,078.5 million)
· Underlying profit before tax increased by 2% to £490.3 million (2013: £482.7 million)
· 4% decrease in underlying diluted earnings per share to 31.1p (2013: 32.5p), but slightly ahead of consensus
· Final dividend of 11.25p per share (2013: 10.0p), making 18.0p for the full year (2013: 16.0p), 0.5p better than forecasts.
· Cash increased by 53% to £653.9 million (2013: £426.6 million)
· Assets under management (AuM) increased by 62% to £324.4 billion (2013: £200.4 billion) following acquisition of SWIP
Obviously the SWIP acquisition was the main event of the year and they pointed out that this has helped to diversify the business away from its dependence on far eastern and emerging markets, which was just as well as these markets saw some poor sentiment earlier in the year. This also led to net outflows of £16 billion at the original Aberdeen business so the SWIP assets and initial cost savings helped to offset the effects of this. They also said that the cost cutting or synergies from the acquisition were running on schedule and delivering ahead of expectations, but they say these will be more fully reflected in the next financial year which is encouraging.
There has, again, been strong conversion of operating profits to cash, with core operating cash flow of £543.8 million (2013: £529.1 million). As a result the balance sheet has been strengthened further with a year end cash position of £653.9 million (2013: £426.6 million), and they have generated healthy headroom over the regulatory capital requirement which is now apparently around £100 million (Source: Martin Gilbert CEO quoted on Investment Week)and means they can stick with their progressive dividend policy and .."do not expect to hoard vast amounts of cash in the business." He is also talking about share buy backs if markets remain as they are which could also support the price.
On the outlook the Chairman was realistic when he said:
"At the time of writing, the world is facing a series of political and economic uncertainties so that, looking ahead, we expect economies and markets to remain susceptible to periods of volatility. However, we enter the new year in a strong financial position, with a broadened and enhanced range of products an increasingly diversified global client base. We remain committed to our bottom up, fundamental style of investing for the longer term with which we have built our reputation over more than a quarter of a century. Our priorities remain focused on ensuring the efficient integration of SWIP as well as the continuity of high quality client service. We remain confident that, over the longer term, we will be able to deliver attractive returns, both for our investment clients and our shareholders."
Summary & Conclusion
I continue to like this one as a play on continued strength in global asset markets on the back of Central banks providing liquidity. In addition they should stand to benefit from private investors hunting for better returns as interest rates remain nailed to the floor and banks widen their margins at the expense of savers to offer more competitive mortgages.
In terms of valuation, before any changes on the back of today's numbers, it looks reasonable on just over 13x next years earnings with a 4.3% yield 1.7x covered. Momentum wise given where markets are it is surprising to see that this one has under performed over the last 12 months, but if you are a bear of the market then this obviously it wouldn't be one for you. However, with a following wind and maybe a strong seasonal period and a Christmas rally I wouldn't be surprised to see this one challenging its 12 month highs around 500 pence which were made at the time the SWIP deal was first announced. Plus the final dividend of 11.25 pence is itself worth about 2.5% net at this mornings price of 457 pence up 1.7% in a weak market so the results seem to have been taken positively.
Talking of Christmas I promised to return to the subject of Advent calendars. So see below the Aberdeen chart for the first window to open in this years Compound Income Advent Calendar. It comes with no recommendation, it may be be an interesting stock to research and seems appropriate after St. Andrews day yesterday and Aberdeen today, Slainte.