abrdn plc

Half Year Results 2024

Part 3 of 3

5. Supplementary information

5.1 Alternative performance measures   APM

We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named measures used by other companies. We have presented below reconciliations from these APMs to the most appropriate measure prepared in accordance with IFRS. All APMs should be read together with the condensed consolidated income statement, condensed consolidated statement of financial position and condensed consolidated statement of cash flows, which are presented in the Financial information section of this report, and related metrics. Adjusted operating profit excludes certain items which are likely to be recurring such as restructuring costs, amortisation of certain intangibles, dividends from significant listed investments and the share of profit or loss from associates and joint ventures.

5.1.1   Adjusted operating profit and adjusted profit

Reconciliation of adjusted operating profit and adjusted profit to IFRS profit by component

The components of adjusted operating profit are net operating revenue and adjusted operating expenses. These components provide a meaningful analysis of our adjusted results. The table below provides a reconciliation of movements between adjusted operating profit component measures and relevant IFRS terms. A reconciliation of Net operating revenue to the IFRS item Revenue from contracts with customers is provided in Note 4.4 of the Financial information section.

1. Adjusted operating expenses includes staff and other related costs of £276m compared with IFRS staff costs and other employee-related costs of £263m. The difference primarily relates to the inclusion of contractor, temporary agency staff and recruitment and training costs of £8m (IFRS basis: Reported within other administrative expenses) and gains on funds to hedge deferred bonus awards of £2m (IFRS basis: Reported within other net gains on financial instruments and other income) within staff and other related costs. IFRS staff costs and other employee-related costs includes the benefit from the net interest credit relating to the staff pension schemes of £7m (Adjusted profit basis: Reported within adjusted net financing costs and investment return).

Presentation differences primarily relate to amounts presented in a different line item of the condensed consolidated income statement.

5.1.2   Cost/income ratio

5.1.3      Net operating revenue yield (bps)

Analysis of Institutional and Retail Wealth by asset class

1. Net operating revenue for Finimize and our digital innovation group moved from Investments to Other. Comparatives have been restated. Refer Note 4.3 of the Financial information section for further details.

2. Adviser net operating revenue yield excludes revenue of £4m (H1 2023: £3m) for which there are no attributable assets.

3. ii is excluded from the calculation of net operating revenue yield as fees charged for this business are primarily from subscriptions and trading transactions. ii includes financial planning revenue previously classified as Personal Wealth, comparatives also include revenue relating to abrdn Capital. Comparatives, including Eliminations have been restated.

4. Performance fees consist of Institutional and Retail Wealth £3m (H1 2023: £6m) and Insurance Partners £nil (H1 2023: £1m).

5.1.4   Additional ii information

The tables below provide additional detail of ii¹ operational metrics.

1.  Excludes our financial planning business.

2.  Comparative as at 31 December 2023.

5.1.5   Net capital generation

The table below provides a reconciliation of movements between adjusted profit after tax and net capital generation. A reconciliation of adjusted profit after tax to IFRS profit for the period is included earlier in this section.

Net interest credit relating to the staff pension schemes

The net interest credit relating to the staff pension schemes is the contribution to adjusted profit before tax from defined benefit pension schemes which are in surplus.

Dividends received from associates, joint ventures and significant listed investments

An analysis is provided below:

The table below provides detail of dividend coverage on an adjusted capital generation basis.

5.1.6   Net diluted capital generation per share

A reconciliation of net capital generation to adjusted profit after tax is included in 5.1.5 above.

1. In accordance with IAS 33, no share options and awards have been treated as dilutive for the six months ended 30 June 2023 due to the loss attributable to equity holders of abrdn plc in that period. Refer Note 4.8 of the Financial information section for further details.

5.1.7   Cash and liquid resources

The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed capital and co-investments are excluded.

1. Excludes £82m (FY 2023: £86m) relating to seeding.

2. Cash collateral, cash held for charitable funds and cash held in employee benefit trusts are excluded from cash and liquid resources.

5.2     Investment performance

1. The scope of the investment performance calculation has been extended to include index tracker funds which were previously excluded from this metric. 2023 comparatives have been restated. We believe that this approach provides a more representative view of our overall investment performance.

The extension to the scope of the investment performance calculation primarily relates to alternatives and quantitative asset classes; the table below provides additional detail highlighting the change to these asset classes:

5.3     Assets under management and administration and flows

5.3.1   Analysis of AUMA

1. Insurance Partners AUM at 30 June 2024 includes £157.5bn (31 December 2023: £154.4bn, 30 June 2023: £147.5bn) relating to Phoenix and £1.1bn (31 December 2023: £1.1bn, 30 June 2023: £1.1bn) of other AUM.

2. Includes Platform AUA at 30 June 2024 of £72.3bn (31 December 2023: £70.9bn, 30 June 2023: £69.3bn).

3. Includes financial planning business AUA at 30 June 2024 of £4.1bn (31 December 2023: £4.3bn, 30 June 2023: £4.6bn).

4. Corporate actions in H1 2024 relates to the disposal of our European-headquartered Private Equity business.

5. Eliminations remove the double count reflected in Investments, Adviser and ii.

6. Corporate actions in H1 2023 relates to the transfer of the MPS business from ii to Adviser in May 2023 of £2.5bn and £0.5bn relating to the acquisition of Macquarie closed-end funds in March 2023.

5.3.2   Quarterly net flows

5.4     Public markets and Alternatives investment capability

We have simplified and focused our investment capabilities on areas where we have both the skill and the scale to capitalise on the key themes shaping the market, through either public markets or alternative asset classes. This analysis includes Institutional, Retail Wealth and Insurance Partners.

Analysis of AUM and net operating revenue

1. Total liquidity AUM at 30 June 2024 was £37.0bn (30 June 2023: £38.1bn). Total liquidity net operating revenue was £12m (H1 2023: £12m).

2. Net operating revenue for Finimize and our digital Innovation group moved from Investments to Other. Comparatives have been restated. Refer Note 4.3 of the Financial information section for further details.

5.5     Institutional and Retail Wealth AUM

Detailed asset class split

1. Corporate actions in H1 2024 relate to the disposal of our European-headquartered Private Equity business.

2. Other multi-asset includes opening AUM of £3.4bn, flows of nil, market and other movements of £(0.1)bn and closing AUM of £3.3bn relating to assets previously classified as Absolute return.

1. Corporate actions of £0.5bn in H1 2023 relates to the acquisition of Macquarie closed-end funds in March 2023.

2. Other multi-asset includes opening AUM of £4.3bn, net outflows of £0.3bn, market and other movements of £(0.2)bn and closing AUM of £3.8bn relating to assets previously classified as Absolute return.

5.6     Investments AUM by geography

5.7     Surplus regulatory capital

The £1,544m indicative CET1 capital resources below includes a deduction to allow for the declared interim dividend which will be paid in September 2024.

1.  56% of total regulatory capital requirement.

6. Glossary

Adjusted capital generation

Adjusted capital generation is part of the analysis of movements in IFPR regulatory capital. Adjusted capital generation is calculated as adjusted profit after tax less returns relating to pension schemes in surplus and interest paid on other equity which do not benefit regulatory capital. It also includes dividends from associates, joint ventures and significant listed investments.

Adjusted net financing costs and investment return

Adjusted net financing costs and investment return is a component of adjusted profit and relates to the return from the net assets of the shareholder business, net of costs of financing. This includes the net assets in defined benefit staff pension plans and net assets relating to the financing of subordinated liabilities.

Adjusted operating expenses

Adjusted operating expenses is a component of adjusted operating profit and relates to the day-to-day expenses of managing our business.

Adjusted operating profit

Adjusted operating profit before tax is the Group's key APM. Adjusted operating profit includes the results of the Group's three businesses: Investments, Adviser and ii, along with Other business operations and corporate costs.

It excludes the Group's adjusted net financing costs and investment return.

Adjusted operating profit also excludes the impact of the following items:

-    Restructuring and corporate transaction expenses. Restructuring includes the impact of major regulatory change.

-    Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts.

-    Profit or loss arising on the disposal of a subsidiary, joint venture or equity accounted associate.

-    Change in fair value of/dividends from significant listed investments.

-    Share of profit or loss from associates and joint ventures.

-    Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method.

-    Fair value movements in contingent consideration.

-    Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group.

Adjusted profit before tax

In addition to the results included in adjusted operating profit above, adjusted profit before tax includes adjusted net financing costs and investment return.

Assets under management and administration (AUMA)

AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients. It includes assets under management (AUM), assets under administration (AUA) and assets under advice (AUAdv). AUMA does not include assets for associates and joint ventures.

AUM is a measure of the total assets that we manage on behalf of individual and institutional clients. AUM also includes assets managed for corporate purposes.

AUA is a measure of the total assets we administer for clients through our Platforms.

AUAdv is a measure of the total assets we advise our clients on, for which there is an ongoing charge.

Board

The Board of Directors of the Company.

Chief Operating Decision Maker

The executive leadership team.

Common Equity Tier 1 (CET1) Capital Coverage

CET1 capital coverage is calculated as CET1 capital resources as a percentage of total regulatory capital requirement.

Company

abrdn plc.

Cost/income ratio

This is an efficiency measure that is calculated as adjusted operating expenses divided by net operating revenue.

Director

A director of the Company.

Earnings per share (EPS)

EPS is a commonly used financial metric which can be used to measure the profitability and strength of a company over time. EPS is calculated by dividing profit by the number of ordinary shares. Basic EPS uses the weighted average number of ordinary shares outstanding during the year. Diluted EPS adjusts the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares, such as share options awarded to employees.

Effective tax rate

Tax expense/(credit) attributable to equity holders' profit divided by profit before tax attributable to equity holders' profits expressed as a percentage.

Executive leadership team (ELT)

Our ELT leads across our businesses and supporting functions globally and is responsible for executing and monitoring progress on the delivery of our business plans. The ELT also ensures we meet our obligations to our clients, people, shareholders, regulators and partners.

Fair value through profit or loss (FVTPL)

FVTPL is an IFRS measurement basis permitted for assets and liabilities which meet certain criteria. Gains or losses on assets or liabilities measured at FVTPL are recognised directly in the income statement.

FCA

Financial Conduct Authority of the United Kingdom.

Group or abrdn

Relates to the Company and its subsidiaries.

Internal Capital Adequacy and Risk Assessment (ICARA)

The ICARA is the means by which the Group assesses the levels of capital and liquidity that adequately support all of the relevant current and future risks in its business.

International Financial Reporting Standards (IFRS)

International Financial Reporting Standards are accounting standards issued by the International Accounting Standards Board (IASB).

Investment Firms Prudential Regime (IFPR)

The Investment Firms Prudential Regime is the FCA's new prudential regime for MiFID investment firms. The regime came into force on 1 January 2022.

Investment performance

Investment performance is a measure of how investments are performing relative to a benchmark, target, or other comparator. The calculation covers funds that aim to outperform or track a benchmark/target, with certain assets excluded where these measures of performance are not appropriate or expected, such as certain private markets and execution only mandates. Benchmarks and targets differ by fund and are defined in the relevant investment management agreement or prospectus, as appropriate. The investment performance data is calculated internally by abrdn to give users guidance on how we are delivering positive investment outcomes for our clients. It is not intended for clients or potential clients investing in our products as more specific information and reporting is available for this purpose.

Investment performance has been aggregated using a money weighted average of our assets under management. Calculations for investment performance are made gross of fees except for those funds for which the stated comparator is net of fees. The calculation uses a closing AUM weighting basis and is based on AUM data available as at the relevant reporting date. As at 30 June 2024, 77% of AUM is covered by this metric, performance is calculated relative to the relevant comparator for each investment strategy on the basis of:

-    Assets ahead of the benchmark or target defined in the investment management agreement or prospectus, as appropriate. This applies to 61% of the AUM.

-    Assets where the objective is to track an index are assessed based on being within or above an applicable tolerance for the strategy. This applies to 16% of the AUM.

Market Disclosure

This IFPR disclosure complements the Own funds requirement and Own funds threshold requirement with the aim of improving market discipline by requiring companies to publish certain details of their risks, capital and risk management. Relevant disclosures are made in the abrdn plc consolidated annual report and accounts and alongside the accounts of the Group's individual IFPR-regulated entities, all of which can be found on the abrdn plc Group's website.

Net capital generation

Net capital generation is calculated as adjusted capital generation less restructuring and corporate transaction expenses (net of tax).

Net flows

Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients. Redemptions is the money withdrawn by clients during the period. Cash dividends which are retained on the ii platform are included in net flows for the ii business only. Cash dividends are included in market movements for other parts of the group including the Investments and Adviser platform businesses. We consider that this different approach is appropriate for the ii business as cash dividend payments which are retained result in additional income for ii, but are largely revenue neutral for the rest of the group.

Net operating revenue

Net operating revenue is a component of adjusted operating profit and includes revenue we generate from asset management charges (AMCs), platform charges, treasury income and other transactional charges. AMCs are earned on products such as mutual funds, and are calculated as a percentage fee based on the assets held. Investment risk on these products rests principally with the client, with our major indirect exposure to rising or falling markets coming from higher or lower AMCs. Treasury income is the interest earned on cash balances less the interest paid to customers. Net operating revenue is shown net of fees, cost of sales, commissions and similar charges. Cost of sales include revenue from fund platforms which is passed to the product provider.

Net operating revenue yield (bps)

The net operating revenue yield is a measure that illustrates the average margin being earned on the assets that we manage, or administer and excludes the ii business. It is calculated as annualised net operating revenue (excluding performance fees, ii and revenue for which there are no attributable assets) divided by monthly average fee based assets. The ii business is excluded from the calculation of net operating revenue yield as fees charged for this business are primarily from subscriptions and trading transactions.

Own Funds Requirement

Under IFPR, the Own Funds Requirement is the higher of the permanent minimum capital requirement, the fixed overhead requirements, and the K-factor requirement. The K-factor requirement is the sum of: Risk-to-Client, Risk-to-Market, and Risk-to-Firm K-factors. 

Own Funds Threshold Requirement

Under IFPR, the Own Funds Threshold Requirement is the higher of Own funds required on an ongoing basis and Own funds required on a wind-down basis. The firm identifies and measures risks of harm and determines the degree to which systems and controls alone mitigate those risks of harm (or risks of disorderly wind-down). Any additional own funds needed, over and above the Own funds requirement, to cover this identified residual risk is held under the Own Funds Threshold Requirement.

Phoenix or Phoenix Group

Phoenix Group Holdings plc or Phoenix Group Holdings plc and its subsidiaries.

Significant listed investments

At 30 June 2024, Phoenix is the only significant listed investment. Our remaining stakes in HDFC Asset Management and HDFC Life were sold during H1 2023. Fair value movements and dividend income relating to these investments are treated as adjusting items for the purpose of determining the Group's adjusted profit.

Subordinated liabilities

Subordinated liabilities are debts of a company which, in the event of liquidation, rank below its other debts but above share capital. The 5.25% Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes issued by the Company in December 2021 are classified as other equity as no contractual obligation to deliver cash exists.

7. Shareholder information

Registered office

1 George Street
Edinburgh
EH2 2LL

Scotland

Company registration number: SC286832

Secretary: Paul McKenna

Registrar: Equiniti

Auditors: KPMG LLP

Solicitors: Slaughter and May

Brokers: JP Morgan Cazenove, Goldman Sachs

Shareholder services

We offer a wide range of shareholder services. For more information, please:

-    Contact our registrar, Equiniti, who manage this service for us. Their full details can be found on the inside back cover.

-    For shareholder services call: +44 (0)371 384 2464*

-    Visit our share portal at www.abrdnshares.com

*   Calls are monitored/recorded to meet regulatory obligations and for training and quality purposes. Call charges will vary.

Dividends
The Board has declared an interim dividend for 2024 of 7.3 pence per share which will be paid on 24 September 2024.

A Dividend Reinvestment Plan (DRIP) is provided by Equiniti Financial Services Limited. The DRIP enables the Company's shareholders to elect to have their cash dividend payments used to purchase the Company's shares. More information can be found at www.abrdnshares.com

Sign up for Ecommunications

Signing up means:

-    You'll receive an email when documents like the annual report and accounts, Half year results and AGM guide are available on our website.

-    Voting instructions for the Annual General Meeting will be sent to you electronically.

Set up a share portal account

Having a share portal account means you can:

-    Manage your account at a time that suits you.

-    Download your documents when you need them. 

To find out how to sign up, visit www.abrdnshares.com

Preventing unsolicited mail

By law, the Company has to make certain details from its share register publicly available. As a result it is possible that some registered shareholders could receive unsolicited mail, emails or phone calls. You could also be targeted by fraudulent 'investment specialists', clone firms or scammers posing as government bodies e.g. HMRC, FCA. Frauds are becoming much more sophisticated and may use real company branding, the names of real employees or email addresses that appear to come from the company. If you get a social or email message and you're unsure if it is from us, you can send it to [email protected] and we'll let you know.

You can also check the FCA warning list and warning from overseas regulators, however, please note that this is not an exhaustive list and do not assume that a firm is legitimate just because it does not appear on the list as fraudsters frequently change their name and it may not have been reported yet.

www.fca.org.uk/consumers/unauthorised-firms-individuals

www.iosco.org/investor_protection/?subsection=investor_alerts_portal

You can find more information about share scams at the Financial Conduct Authority website www.fca.org.uk/consumers/scams

If you are a certificated shareholder, your name and address may appear on a public register. Using a nominee company to hold your shares can help protect your privacy. You can transfer your shares into the Company-sponsored nominee - the abrdn Share Account - by contacting Equiniti, or you could get in touch with your broker to find out about their nominee services. If you want to limit the amount of unsolicited mail you receive generally, please visit www.mpsonline.org.uk

Financial calendar

Analysis of registered shareholdings at 30 June 2024

#   These figures include the Company-sponsored nominee - the abrdn Share Account - which had 853,071 participants holding 621,626,110 shares.

8. Forward-looking statements

This document may contain certain 'forward-looking statements' with respect to the financial condition, performance, results, strategies, targets (including ESG targets), objectives, plans, goals and expectations of the Company and its affiliates. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.

Forward-looking statements are prospective in nature and are not based on historical or current facts, but rather on current expectations, assumptions and projections of management of the abrdn Group about future events, and are therefore subject to known and unknown risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

For example but without limitation, statements containing words such as 'may', 'will', 'should', 'could', 'continues', 'aims', 'estimates', 'projects', 'believes', 'intends', 'expects', 'hopes', 'plans', 'pursues', 'ensure', 'seeks', 'targets' and 'anticipates', and words of similar meaning (including the negative of these terms), may be forward-looking. These statements are based on assumptions and assessments made by the Company in light of its experience and its perception of historical trends, current conditions, future developments and other factors it believes appropriate.

By their nature, all forward-looking statements involve risk and uncertainty because they are based on information available at the time they are made, including current expectations and assumptions, and relate to future events and/or depend on circumstances which may be or are beyond the Group's control, including, among other things: UK domestic and global political, economic and business conditions (such as the UK's exit from the EU, the ongoing conflict between Russia and Ukraine and the ongoing conflicts in the Middle East); market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the impact of inflation and deflation; the impact of competition; the timing, impact and other uncertainties associated with future acquisitions, disposals or combinations undertaken by the Company or its affiliates and/or within relevant industries; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the value of and earnings from the Group's strategic investments and ongoing commercial relationships; default by counterparties; information technology or data security breaches (including the Group being subject to cyberattacks); operational information technology risks, including the Group's operations being highly dependent on its information technology systems (both internal and outsourced); natural or man-made catastrophic events; the impact of pandemics; climate change and a transition to a low-carbon economy (including the risk that the Group may not achieve its relevant ESG targets); exposure to third-party risks including as a result of outsourcing; the failure to attract or retain necessary key personnel; the policies and actions of regulatory authorities and the impact of changes in capital, solvency or accounting standards, ESG disclosure and reporting requirements, and tax and other legislation and regulations (including changes to the regulatory capital requirements) that the Group is subject to in the jurisdictions in which the Company and its affiliates operate. As a result, the Group's actual future financial condition, performance and results may differ materially from the plans, goals, objectives and expectations set forth in the forward-looking statements.

Neither the Company, nor any of its associates, directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. Persons receiving this document should not place reliance on forward-looking statements. All forward-looking statements contained in this document are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Each forward-looking statement speaks only as at the date of the particular statement. Neither the Company nor its affiliates assume any obligation to update or correct any of the forward-looking statements contained in this document or any other forward-looking statements it or they may make (whether as a result of new information, future events or otherwise), except as required by law. Past performance is not an indicator of future results and the results of the Company and its affiliates in this document may not be indicative of, and are not an estimate, forecast or projection of, the Company's or its affiliates' future results.

Contact us

Got a shareholder question? Contact our shareholder services team.

UK and overseas

phone                              +44 (0)371 384 2464*

email                                [email protected]

visit                                    www.abrdnshares.com

mail                                   abrdn Shareholder Services

                                             Aspect House

                                             Spencer Road

                                             Lancing, West Sussex

                                             BN99 6DA, United Kingdom

* Calls are monitored/recorded to meet regulatory obligations and for training and quality purposes. Call charges will vary.

Extensive information, including many answers to frequently asked questions, can also be found online at www.abrdnshares.com

Please remember that the value of shares can go down as well as up and you may not get back the full amount invested or any income from it. All figures and share price information have been calculated
as at 30 June 2024 (unless otherwise indicated).

This document has been published by abrdn plc for information only. It is based on our understanding as at August 2024 and does not provide financial or legal advice.

abrdn plc is registered in Scotland (SC286832) at 1 George Street, Edinburgh EH2 2LL.

www.abrdn.com © 2024 abrdn, images reproduced under licence. All rights reserved.

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