Aberdeen's shares surge on cost savings, share buyback hopes

[December 02, 2014] By Carolyn Cohn and Nishant Kumar

LONDON (Reuters) - Fund manager Aberdeen Asset Management reported a "transformational" performance by its Scottish Widows Investment Partnership (SWIP) acquisition on Monday and raised hopes of a share buyback, sending its shares to a near 11-month high.

The money manager also said flows into equity funds had improved in the fourth quarter after a companywide net outflow of 20 billion pounds ($31.3 billion) in the year to Sept. 30.

In an analyst call after annual results, the company said it had achieved an operating margin of 55 percent on SWIP business about a year ahead of target and margins could reach 60 percent after full integration.

"SWIP has clearly transformed the business," Finance Director, Bill Rattray, said. The company completed its acquisition of SWIP on April 1.

"We are already ahead of the game on cost synergies, strong cash generation and we expect that to continue."

Aberdeen's shares were up 3.8 percent at 467 pence by 1419 GMT, the best performing constituent of the FTSE 100 index.
 

The company also said it was committed to a share buy back.

"If the cash generation is good in this half there's no reason why we should not see a repurchase of shares in the future, plus of course good dividend growth as well," Chief Executive Martin Gilbert said during the call.

The final dividend was increased by 1.25 pence to 11.25p a share, to give a total payout for the year of 18p, a rise of 12.5 percent.

OUTFLOWS

Aberdeen reported a slightly better than expected full-year profit on Monday and cited weakness in emerging markets for outflows in the year ended Sept. 30.

Emerging market share prices are down a collective 1 percent this year, according to the MSCI emgerging market index, with geopolitical risks from the Ukraine crisis and a drop in oil prices weighing. Emerging market sovereign bond spreads have also widened sharply in recent months.

The majority of Aberdeen's outflows were from equity funds, particularly those investing in Asia-Pacific and global emerging markets. But equity outflows diminished in the final quarter, and that trend continued in October and November, Gilbert said.

Aberdeen's underlying pretax profit was up 2 percent at 490 million pounds, ahead of the average forecast of 457 million pounds, according to Thomson Reuters data.

The emerging markets-focused fund manager's net revenue rose 4 percent to 1.1 billion pounds, largely in line with forecasts.

Its assets under management rose 62 percent to 324 billion pounds, helped by the acquisition of SWIP from Lloyds Banking Group, which reduced its reliance on emerging markets.

(Additional reporting by Tricia Wright; Editing by David Goodman)

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