May 4, 2010 / 6:31 AM / in 8 years

UPDATE 2-Aberdeen profits spike as high-fee funds return

* First half pretax at 92.6 mln stg vs 33 mln last year

* Interim dividend up 14 percent at 3.2 pence

* Shares rise 5.65 percent to 7-month high

(Adds comments from Chief Executive, analysts, share price)

By Raji Menon

LONDON, May 4 (Reuters) - British fund firm Aberdeen ADN.L said its clients moved their funds into higher margin products in the first half, resulting in a forecast-beating tripling in pretax profit, which sent its shares to a seven-month high.

Fund houses have been struggling to recapture pre-crisis profits as clients have proved reluctant to exit the cheap products they had gravitated towards as markets rode the shocks of 2007 and 2008.

However, Aberdeen said on Tuesday clients had taken money out of lower margin fixed income business and moved into better paying products in its first six months, pushing up fee income by an estimated 26 million pounds ($39.66 million) per annum.

At 0900 GMT, Aberdeen shares were up 5.65 percent at 145.8 pence, its highest level in seven months and pushing it to the top of the FTSE 250 .FTMC gainers. The FTSE 250 was up 0.15 percent.

“Aberdeen delivered great interims today with positive news across the board,” said analysts at Noble. “With the key concerns reducing, Aberdeen is running on track to trade at a premium to its peers.”

Aberdeen Chief Executive Martin Gilbert said the firm hit record highs in profits and assets under management, due to a combination of recovering markets and strong inflows into its higher margin products.

“We are seeing strong flows into equities that is paying us two or three times as much as the business going out of the door. Basically, we are putting more revenue through a largely fixed cost base,” Gilbert told reporters in a conference call.

Pretax profits rose 180 percent to 92.6 million pounds beating a consensus of 81 million provided by the company.


Total assets under management rose 77 percent over the year to 170.9 billion at March 31, mainly due to a net 12.1 billion pounds of acquired assets from the recent purchase of RBS’ (RBS.L) non core fund assets in January. [ID:nLDE6070AG]

    Net client inflows in the first six months were 0.1 billion pounds compared to net withdrawals of 8.5 billion last year.

    CEO Gilbert said: “The six months to end March last year was the worst period that I have experienced in the fund management industry. We saw lot of panic and not much money coming in.” “What we are now seeing is fantastic inflows especially into equities with money being switched from lower risk assets such bonds and gilts into equities and property.”

    Gross new inflows for the period totalled 25.1 billion pounds, compared to 5.4 billion in the previous year.

    Following an acquisitions spree, Gilbert said the firm would now concentrate on organic growth, putting on hold its much touted plans to make a purchase in the United States, and focus instead on expanding its distribution in the region. [ID:nL18950]

    Aberdeen has made 17 acquisitions since 2001, the most recent being the RBS asset buy in January.

    “If you look at the history of Aberdeen we have tended to make acquisitions in bear markets and grow organically in a bull market. Maybe this is a sign we are in a bull market,” Gilbert said, when asked if prices were not attractive enough.

    “We just don’t feel comfortable doing anything more at this moment as prices have recovered to the levels that its not particularly attractive for us to make any more acquisitions.”

    Net debt fell to 20 million pounds in March 2010, compared to 178 million in September 2009.

    Analyst Katrina Hart at Canaccord Adams cheered the ramp-up in operating cash flow and near elimination of bank debt.

    “The promise of an `exceptionals-free’ second half should also reassure the market,” she said. (Editing by Joel Dimmock and Karen Foster) ($1=.6556 Pound)

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