A global investment management group, managing assets for both institutional and retail clients from offices around the world. I have a holding in my income portfolio (epic code: ADN)
Aberdeen Asset Management released their preliminary results for the year ended 30 September 2013 today and agreement for the acquisition of Scottish Widows Investment Partnership (SWIP).
Net revenue was 24% higher at £1,078.5m, underlying profit before tax increased by 39% to £482.7m and underlying EPS increased by 44% to 32.5p, with statutory EPS increasing by 49.4% to 26.22p. All of this was a little better than was expected by the market.
The final dividend was increased by 40.8% to 10.0p per share, making 16.0p for the full year up 39.1%. I believe the markets were expecting a full year dividend of 15.1p.
AuM were £200.4bn compared to £187.2bn last year, with the greater portion of the increase coming from higher margin pooled funds.
Free cash flow showed a healthy improvement over last year increasing by 31.6% to £457.7m, net cash (here I'm including the Perpetual Capital Notes) improved from £68.3m last year to £105.0m.
Management state that "...investor sentiment may remain volatile for the foreseeable future, we have entered a new financial year in a strong financial position and remain well placed to continue the Group's profitable growth..."
ADN have increased owners' earnings (NBV and dividends) by a CAGR of 16.3% pa over the past 5 years and FCF has increased by a 5 year CAGR of 19.9% pa over the opening NBV. I have held ADN since 2007 and although I sold off half my holding in 2012 to rebalance my portfolio, they have not disappointed and returned a compound 12.8% pa (dividends not reinvested). My current yield on my original cost is 8.1% and with the recent acquisition announcement I feel there is more mileage in this stock.
Commenting on the acquisition - ADN have acquired SWIP from Lloyds Banking Group for 9.9% of ADN's equity plus a potential £100m earn-out. For this ADN receive £136bn of Assets under Management (68% of ADN's AuM) and £234m of sales (21.7% of ADN's sales), this is expected to be materially earnings enhancing by the 2015 financial year. We should expect some reorganisation costs in 2014 as any overlap is eliminated and ADN take action to improve the performance of SWIP. This probably places ADN within the top 30 fund managers in the world and although size is not everything, the increasing cost of regulation creates a substantial barrier to entry within their market with smaller players finding it increasingly difficult to achieve returns on the required investment.
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