BREAKINGVIEWS-Abrdn finds its missing vowels but not value

By Neil Unmack

LONDON, March 4 (Reuters Breakingviews) - Abrdn’s ABDN.L revamp is a good day for shareholders, and a bad one for branding experts. Having removed the vowels of its name under CEO Stephen Bird, the British fund group will now call itself Aberdeen and has pledged new targets. Its lacklustre valuation shows new CEO Jason Windsor has a lot of work ahead of him.

The new name is a reminder of easier times. When Aberdeen Asset Management merged with Standard Life in 2017, the two businesses were worth some 11 billion pounds. Since then, asset sales and shrinking profit from years of clients pulling funds have seen the company lose more than half of its value. That’s despite its attempt to diversify. Bird’s 2021 acquisition of Interactive Investor (II) for 1.5 billion pounds created a group with three distinct units, a stock-picking business, a technology platform for money managers called Adviser and II, which handles individual savers’ funds.

Along with the name change, Bird’s successor Windsor is pledging to boost efficiency. He is now targeting 100 million pounds of operating profit in the stock-picking unit, a 50% increase on the 2024 result. On top of that, he wants to keep growing Interactive Investor and revive the Adviser unit. He reckons the plan will deliver more than 300 million pounds in operating profit by 2026, up by nearly a fifth on 2024.

Hitting those targets will require some heavy lifting. The stock-picking business may continue to be eroded by falling fees as clients gravitate towards index trackers from the likes of BlackRock. And much may also depend on factors beyond Windsor’s control. If the Bank of England cuts rates more quickly than expected, the income Aberdeen makes by channelling idle cash from clients’ accounts into higher yielding bank deposits could fall.

Windsor’s plan sent Aberdeen’s shares up around 11%. Yet it still trades at a discount to the sum of its parts. That cheap valuation may reflect the challenges ahead, but also doubts over the group’s unorthodox model.

Factor in cash, and Aberdeen’s enterprise value is some 2.7 billion pounds. Take off a stake in insurer Phoenix, and the core three businesses are implicitly valued at just 2.2 billion pounds. If the Adviser and Interactive Investor businesses are worth 11 and 12 times 2026 EBIT, in line with peers, then they could be worth 2.5 billion pounds alone, using Panmure Gordon’s forecasts. By that analysis, the market is assigning little worth to the core stock-picking business. Changing a name is one thing, but Windsor will need to pull off a turnaround to convince investors that Aberdeen’s parts all belong together.

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CONTEXT NEWS

UK fund group Aberdeen on March 4 announced a plan to rebrand the business and new operational targets.

The group, formerly known as Abrdn, said it would generate more than 300 million pounds of operating profit in 2026, of which 100 million pounds would come from the stock-picking division. That unit generated just 61 million pounds of operating profit in 2024.

Aberdeen shares rose around 11% by 1023 GMT on March 4, and were trading at 179.35 pence.