REG - abrdn PLC - Final Results - Part 7 of 8
28/02/2023 07:16
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RNS Number : 2290R abrdn PLC 28 February 2023
abrdn plc
Full Year Results 2022
Part 7 of 8
8. Company financial statements
Company statement of financial position
As at 31 December 2022
2022 2021
Notes £m £m
Assets
Investments in subsidiaries A 4,482 5,065
Investments in associates and joint ventures B 196 206
Deferred tax assets N 143 113
Loans to subsidiaries C 110 70
Derivative financial assets C 85 8
Equity securities and interests in pooled investment funds C 709 1,187
Debt securities C 211 227
Receivables and other financial assets C 48 30
Other assets F 48 83
Cash and cash equivalents C 27 20
Total assets 6,059 7,009
Equity
Share capital G 280 305
Shares held by trusts H (145) (167)
Share premium reserve G 640 640
Retained earnings I
Brought forward retained earnings 3,301 2,631
(Loss)/profit for the year attributable to equity shareholders of abrdn plc(1) (402) 990
Other movements in retained earnings 766 (320)
Total retained earnings 3,665 3,301
Other reserves J 485 1,856
Equity attributable to equity shareholders of abrdn plc 4,925 5,935
Other equity K 207 207
Total equity 5,132 6,142
Liabilities
Subordinated liabilities L 621 644
Derivative financial liabilities D 1 -
Other financial liabilities L 272 177
Provisions P 33 35
Other liabilities P - 11
Total liabilities 927 867
Total equity and liabilities 6,059 7,009
1. The Company's total loss for the year was £391m (2021: profit of £990m)
of which a profit of £11m was attributable to other equity holders (2021:
£nil).
The financial statements on pages 265 to 278 were approved by the Board and
signed on its behalf by the following Directors:
Sir Douglas Flint Stephanie Bruce
Chairman Chief Financial Officer
28 February 2023 28 February 2023
Company registered number: SC286832
The Notes on pages 268 to 278 are an integral part of these financial
statements.
Company statement of changes in equity
For the year ended 31 December 2022
Share capital Shares held by trusts Share premium Retained earnings Other reserves Total equity attributable to equity shareholders of abrdn plc Other equity Total equity
reserve
2022 Notes £m £m £m £m £m £m £m £m
1 January 305 (167) 640 3,301 1,856 5,935 207 6,142
Loss for the year - - - (402) - (402) 11 (391)
Other comprehensive income for the year - - - - 5 5 - 5
Total comprehensive income for the year - - - (402) 5 (397) 11 (386)
Interest paid on other equity K - - - - - - (11) (11)
Dividends paid on ordinary shares I - - - (307) - (307) - (307)
Share buyback G (25) - - (302) 25 (302) - (302)
Cancellation of the capital redemption reserve J - - - 1,059 (1,059) - - -
Reserves credit for employee share-based payment J - - - - 24 24 - 24
Transfer to retained earnings for vested employee share-based payment J - - - 63 (63) - - -
Transfer between reserves on disposal of subsidiaries J - - - 1 (1) - - -
Transfer between reserves on impairment of subsidiaries J - - - 302 (302) - - -
Shares acquired by employee trusts H - (46) - - - (46) - (46)
Shares distributed by employee and other trusts and related dividend H - 68 - (69) - (1) - (1)
equivalents
Other movements I - - - 19 - 19 - 19
31 December 280 (145) 640 3,665 485 4,925 207 5,132
The Notes on pages 268 to 278 are an integral part of these financial
statements.
Share capital Shares held by trusts Share premium Retained earnings Other reserves Total equity attributable to equity shareholders of abrdn plc Other equity Total equity
reserve
2021 Notes £m £m £m £m £m £m £m £m
1 January 306 (161) 640 2,631 1,842 5,258 - 5,258
Profit for the year - - - 990 - 990 - 990
Other comprehensive income for the year - - - - 6 6 - 6
Total comprehensive income for the year - - - 990 6 996 - 996
Issue of other equity K - - - - - - 207 207
Dividends paid on ordinary shares I - - - (308) - (308) - (308)
Share buyback G (1) - - - 1 - - -
Reserves credit for employee share-based payment J - - - - 43 43 - 43
Transfer to retained earnings for vested employee share-based payment J - - - 36 (36) - - -
Shares acquired by employee trusts H - (52) - - - (52) - (52)
Shares distributed by employee and other trusts and related dividend H - 46 - (48) - (2) - (2)
equivalents
31 December 305 (167) 640 3,301 1,856 5,935 207 6,142
The Notes on pages 268 to 278 are an integral part of these financial
statements.
Company accounting policies
(a) Basis of preparation
These separate financial statements are presented as required by the Companies
Act 2006. The Company meets the definition of a qualifying entity under
Application of Financial Reporting Requirements 100 as issued by the Financial
Reporting Council. Accordingly, the financial statements
for period ended 31 December 2022 have been prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as
issued by the Financial Reporting Council.
The financial statements have been prepared on a going concern basis and under
the historical cost convention, as modified by the revaluation of financial
assets and financial liabilities (including derivative instruments) at fair
value through profit or loss (FVTPL).
As permitted by FRS 101, the Company has taken advantage of the following
disclosure exemptions available under that standard:
- A cash flow statement and related notes.
- Capital management.
- Effect of IFRSs issued but not effective.
- Related party transactions with wholly owned subsidiaries.
As equivalent disclosures are given in the consolidated financial statements,
we have also applied the disclosure exemptions for share based payments and
financial instruments.
The principal accounting policies adopted are the same as those given in the
consolidated financial statements, together with the Company specific policies
set out below. These accounting policies have been consistently applied to all
financial reporting periods presented in these financial statements.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own income statement in these financial
statements. The auditors' remuneration for audit and other services is
disclosed in Note 7 to the consolidated financial statements. The Company has
no employees.
(i) Investment in subsidiaries, associates and joint ventures
The Company has certain subsidiaries which are investment vehicles such as
open-ended investment companies, unit trusts and limited partnerships whose
primary function is to generate capital or income growth through holding
investments. This category of subsidiary is held at FVTPL since they are
managed on a fair value basis.
Investments in subsidiaries (other than those measured at FVTPL), associates
(other than those measured at FVTPL) and joint ventures are initially
recognised at cost and subsequently held at cost less any impairment charge.
An impairment charge is recognised when the carrying amount of the investment
exceeds its recoverable amount. Any gain or loss on disposal of a subsidiary,
associate or joint venture is recognised in profit for the year.
Distributions received of non-cash assets, including investments in
subsidiaries, are recognised at fair value in the balance sheet and as
dividends in specie in the income statement.
(ii) Critical accounting estimates and judgements in applying
accounting policies
The preparation of financial statements requires management to make estimates
and assumptions and exercise judgements in applying the accounting policies
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses arising
during the year. Estimates and judgements are continually evaluated and based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The areas where judgements have the most significant effect on the amounts
recognised in the Company financial statements are as follows:
Financial statement area Critical judgements in applying accounting policies Related notes
Investments in subsidiaries held at cost Given that the net assets attributable to shareholders of abrdn plc at 31 Note A
December 2022 were higher than the market capitalisation of the Company
judgement was required to determine for which subsidiaries this was considered
an indicator of impairment
The areas where assumptions and other sources of estimation uncertainty at the
end of the reporting period have a significant risk of resulting in a material
adjustment to the carrying amount of assets and liabilities within the next
financial year are as follows:
Financial statement area Critical accounting estimates and assumptions Related notes
Investments in subsidiaries held at cost Determination of the recoverable amount Note A
Notes to the Company financial statements
A. Investments in subsidiaries
2022 2021
Notes £m £m
Investments in subsidiaries measured at cost 4,312 3,737
Investments in subsidiaries measured at FVTPL C 170 1,328
Investments in subsidiaries 4,482 5,065
2022 2021
£m £m
At 1 January 5,065 4,013
Investment into existing subsidiaries measured at cost 139 210
Acquisition of subsidiaries at cost 1,380 -
Acquisition of subsidiaries via dividend in specie - 4
Disposal of subsidiaries measured at cost (18) -
Impairment of subsidiaries measured at cost (927) (45)
Acquisition of subsidiaries at FVTPL 2 884
Disposal of subsidiaries at FVTPL (1,158) (2)
Gains/(losses) on subsidiaries at FVTPL (1) 1
At 31 December 4,482 5,065
Details of the Company's subsidiaries are given in Note 45 of the Group
financial statements.
(a) Acquisitions
During 2022, the Company made the following acquisitions of subsidiaries
measured at cost:
- The Company acquired 100% of the issued share capital of Antler
Holdco Limited (Antler), the parent company for the interactive investor (ii)
group of companies for a cash consideration of £1,380.2m. Further details are
provided in Note 1(b)(i) of the Group financial statements. The Company's
consideration was lower than the £1,485m cash consideration recognised in the
Group financial statements as it did not include funding of £118.8m provided
to Antler to facilitate the acquisition of minority interests in Interactive
Investor Limited (IIL) prior to the acquisition of Antler. The Company's
consideration included transaction costs of £14m which were included in
Restructuring and corporate transaction expenses in the Group Consolidated
income statement.
- The Company subsequently increased its investment in Antler by
£139.2m through the purchase of 139,163,986 ordinary shares.
- The Company then acquired IIL via a dividend in specie from Antler
and recognised IIL at an amount of £1,512m, with the carrying value of Antler
reduced correspondingly to £7m and therefore no impact on investment in
subsidiaries in the Company Statement of financial position. The dividend in
specie was recognised at £nil in the Company's total comprehensive income for
the year due to the reduction in the Antler carrying value.
During 2021, the Company made the following acquisitions of subsidiaries
measured at cost:
- The Company increased its investment in abrdn Financial Planning
Limited (aFPL) through the purchase of 40,000,000 ordinary shares for a cash
consideration of £40m.
- The Company increased its investment in Aberdeen Asset Management
PLC (now renamed abrdn Holdings Limited) by £165.3m through the purchase of
1,031,250 ordinary shares for a cash consideration of £3.3m, the purchase of
21,350,600 ordinary shares for a cash consideration of £68.3m, the purchase
of 1,718,750 ordinary shares for a cash consideration of £5.5m and the
purchase of 27,562,500 ordinary shares for a cash consideration of £88.2m.
- The Company increased its investment in Aberdeen Corporate Services
Limited through the purchase of 3,385 ordinary shares for a cash consideration
of £3.4m.
- The Company acquired Focus Business Solutions (FBS) via a dividend
in specie from Focus Solutions Group Limited and recognised this subsidiary at
an amount of £3.8m. The Company further increased its investment in FBS
through the purchase of 150,000,000 ordinary shares for a cash consideration
of £1.5m.
See Section (d) below for details on investments in subsidiaries at FVTPL.
(b) Disposals
During 2022, the Company made the following disposals of subsidiaries measured
at cost:
- Standard Life Oversea Holding (SLOH) was liquidated. Prior to
liquidation, the carrying value of the Company's interest in SLOH was £18m
and the Company received final liquidation proceeds of £20m in the form of a
distribution in specie of its intercompany balance due to SLOH. Refer Note J
for details of the transfer from the merger reserve to retained earnings in
relation to the disposal of SLOH.
(c) Impairment
The Company's net assets attributable to shareholders of abrdn plc at 31
December 2022 of £4.9bn are higher than the Company's market capitalisation
of £3.8bn. This, together with lower projected future asset management
earnings, was considered to be an indicator of impairment of the Company's
investment in its asset management subsidiaries, abrdn Holdings Limited
(formerly named Aberdeen Asset Management PLC (aHL)) and abrdn Investments
(Holdings) Limited (aIHL)). All other investments in subsidiaries (with the
exception of aFPL and abrdn Client Management Limited (aCM) discussed below)
were supported by financial assets, or other relevant analysis.
Asset management subsidiaries aHL and aIHL
The Company's investment in its subsidiaries, aHL and aIHL were impaired
during 2022 by £847m (2021: £nil) and £51m (2021: £nil) respectively. The
impairments primarily resulted from lower future revenue projections and
further work being required to reduce Investments costs given this level of
revenue. The lower future revenue projections primarily resulted from the
impact of lower equity market levels during 2022 and forecast equity market
falls in 2023 on assets under management, net outflows in 2022 particularly in
the equity asset class and lower forecasts of net inflows in future periods
reflecting both macroeconomic conditions and business performance, and the
expected reduction in Phoenix revenue as a result of certain active equity and
fixed income strategies moving to lower yielding passive quantitative
strategies and related pricing changes. The impairment in aIHL also reflects
the impact of dividends paid to abrdn plc of £286m during 2022 and fair value
movements relating to the interest in HDFC Asset Management held by its
subsidiary, abrdn Investment Management Limited.
The recoverable amount of aHL which is its fair value less costs of disposal
(FVLCD) at 31 December 2022 was £1,258m. The approach and key assumptions in
determining the FVLCD of both aHL and aIHL are primarily the same as used in
the impairment review for asset management goodwill set out in Note 13 of the
Group financial statements. The asset management group of cash generating
units overseas business is performed by entities within the aHL group and the
asset management group of cash generating units UK business is split between
the aHL group and the aIHL group. The recoverable amount for aHL also includes
the value of its subsidiaries, associates and joint ventures not included in
the asset management group of cash generating units. These primarily include
Finimize Limited (Finimize), Archax Holdings Limited and VMUTM. Details of the
valuation of Finimize at 31 December 2022 is set out in Note 13 of the Group
financial statements.
The recoverable amount of aIHL which is its FVLCD at 31 December 2022 was
£988m. The recoverable amount for aIHL also includes the value of its
subsidiaries not included in the asset management group of cash generating
units. These primarily include abrdn Capital Limited (aCL). The valuation of
aCL is based on FVLCD and is based on an estimated price from the current sale
process (refer Note 21 of the Group financial statements). The recoverable
amount also includes the fair value of the interest in HDFC Asset Management,
which was £477m at 31 December 2022 based on the year end share price of this
listed investment.
The recoverable amounts for aHL and aIHL are level 3 measurements as they are
measured using inputs which are not based on observable market data.
Sensitivities of key assumptions
The business plan projections used to determine the future asset management
earnings are based on macroeconomic forecasts including future equity market
and interest rate levels, and forecast levels of net flows, fee revenue yields
by asset class and expenses. For aIHL, fee revenue yield assumptions are
adjusted to take into account an expected contraction in yield on Phoenix
assets. Market assumptions assume equity market falls in 2023 with recovery
during 2024 and 2025. The projections are therefore sensitive to these
assumptions, and in particular future expected market levels. Given current
macroeconomic uncertainties a 25% reduction in forecast asset management cash
flows has been provided as a sensitivity.
A post tax discount rate sensitivity of 2% has been provided taking into
account the impact of these market uncertainties on interest rates.
For aIHL a 25% reduction in the value of HDFC AMC has also been provided as a
sensitivity given the inherent risk of equity market fluctuations.
The following table shows the consequence of these illustrative downside
sensitivities of key assumptions on the carrying amount of the aHL and aIHL at
31 December 2022. As the year end carrying values are the recoverable amount
any downside sensitivity will lead to a further future impairment loss.
aHL aIHL
£m £m
25% reduction in future asset management cash flows (273) (64)
2% increase in post tax discount rate (159) (46)
25% reduction in the value of HDFC Asset Management (aIHL only) N/A (119)
For the year ended 31 December 2021, the recoverable amount of aHL was
determined based on value in use and based on this assessment no impairment of
aHL was required at 31 December 2021. The reason for the change in valuation
approach in 2022 was that, at 31 December 2022, FVLCD was assessed by
management as being higher than VIU. The VIU is significantly reduced by the
IFRS requirement to add back certain staff and property expense savings to
management's expectation of the level of future operating expenses, where
these expense savings require provisions to be made in future years.
aFPL
The Company's investment in its subsidiary aFPL was impaired during 2022 by
£25m (2021: £45m).
The recoverable amount of aFPL which is its FVLCD at 31 December 2022 was
£85m (2021: £110m). The FVLCD considered a number of valuation approaches,
with the primary approach being a multiples approach based on price to revenue
and price to assets under advice (AUAdv). Multiples were based on recent
transactions, adjusted to take into account profitability where appropriate,
and were benchmarked against trading multiples for aFPL's peer companies.
Revenue and AUAdv were based on 2022 results. The expected cost of disposal
was based on past experience of previous transactions. This is a level 3
measurement as it is measured using inputs which are not based on observable
market data. The impairment resulted from the impact of macroeconomic
conditions, markets and level of 2022 profitability and outflows on valuation
expectations for the business. As the year end carrying value is the
recoverable amount any downside sensitivity will lead to a further future
impairment loss. A 20% reduction in recurring revenue and AUAdv would result
in a further impairment of £17m. A 20% reduction in market transaction
multiples, adjusted to be appropriate to the abrdn financial planning
business, would result in a further impairment of £17m.
The recoverable amount of aFPL at 31 December 2021 of £110m was also based on
FVLCD which similarly considered a number of valuation approaches, with the
primary approach being a multiples approach based on price to revenue and
price to AUAdv.
aCM
The Company's investment in its subsidiary aCM was impaired during 2022 by
£4m. The impairment resulted from the payment of a dividend from aCM to the
Company. The carrying amount of the Company's investment in aCM is £nil
(2021: £4m).
IIL
No impairment was recognised on the Company's investment in IIL in 2022 and
there were no indicators of impairment at 31 December 2022.
The recoverable amount of IIL was determined at 31 December 2022 based on
FVLCD and used the same approach and key assumptions as used in the impairment
review for interactive investor goodwill set out in Note 13 of the Group
financial statements. The basis for sensitivities of key assumptions is also
set out in Note 13 of the Group financial statements. The impact of these
illustrative sensitivities on the carrying amount of IIL at 31 December 2022
is as follows:
Impact on carrying amount at 31 December 2022 £m
20% reduction in forecast post tax adjusted earnings (127)
25% reduction in market multiple (210)
(d) Investments in subsidiaries at FVTPL
Investments in subsidiaries at FVTPL, valued at £170m (2021: £1,328m),
relate to holdings in funds over which the Company has control. This decrease
primarily relates to lower holdings in a liquidity fund.
B. Investments in associates and joint ventures
2022 2021
£m £m
Investment in associates measured at cost - 10
Investment in joint venture measured at cost 196 196
Investments in associates and joint ventures 196 206
(a) Investment in associates
The Company has an interest of 25.3% (2021: 25.3%) in Tenet Group Limited
(Tenet), a company incorporated in England and Wales which is measured at cost
less impairment. During the year ended 31 December 2022, the Company increased
its interest in Tenet by £3.8m. The Company also recognised an impairment of
£14m in its interest during 2022. The impairment resulted from losses
incurred by the business during the year and the impact of this level of
profitability on valuation expectations. The carrying amount of the Company's
investment in Tenet is £nil (2021: £10m).
During the year ended 31 December 2021, the Company judged its investment in
Phoenix Group Holdings plc (Phoenix) was no longer classified as an associate.
Further details are provided in Note 14 of the Group Financial Statements. The
Company's 14.4% shareholding in Phoenix was therefore reclassified from an
investment in associate measured at cost less impairment to equity securities
and interests in pooled investment funds measured at fair value. The fair
value on 22 February 2021 was £1,023m, which was higher than the previous
carrying value as an associate of £1,010m. A reclassification gain of £13m
was therefore recognised for the year ended 31 December 2021.
(b) Investment in joint ventures
The Company has a 50% (2021: 50%) interest in Heng An Standard Life Insurance
Company Limited (HASL), a company incorporated in China. Further details on
this joint venture are provided in Note 14 of the Group financial statements.
C. Financial investments
Fair value through Derivative financial instruments used for hedging Amortised cost Total
profit or loss
2022 2021 2022 2021 2022 2021 2022 2021
Notes £m £m £m £m £m £m £m £m
Investments in subsidiaries measured at FVTPL A 170 1,328 - - - - 170 1,328
Loan to subsidiaries - - - - 110 70 110 70
Derivative financial assets D - - 85 8 - - 85 8
Equity securities and interests in pooled investment funds 709 1,187 - - - - 709 1,187
Debt securities 1 1 - - 210 226 211 227
Receivables and other financial assets E - - - - 48 30 48 30
Cash and cash equivalents - - - - 27 20 27 20
Total 880 2,516 85 8 395 346 1,360 2,870
The amount of debt securities expected to be recovered or settled after more
than 12 months is £1m (2021: £62m). The amount of loans to subsidiaries
expected to be recovered or settled after more than 12 months is £110m (2021:
£70m). The amount of equity securities and interests in pooled investment
funds expected to be recovered or settled after more than 12 months is £25m
(2021: £708m).
Under IFRS 9 the Company calculates expected credit losses (ECL) on financial
assets which are measured at amortised cost (refer to Note 35 (c) of the Group
financial statements), including loans to subsidiaries (which are unrated). At
31 December 2022 the Company does not hold financial assets at amortised cost
that it regards as credit-impaired or for which it considers the probability
of default would result in material expected credit losses. The expected
credit losses recognised were less than £1m (2021: less than £1m). In making
this assessment the Company has considered if any evidence is available to
indicate the occurrence of an event which would result in a detrimental impact
on the estimated future cash flows of these assets.
D. Derivative financial instruments
The Company uses derivative financial instruments in order to reduce the risk
from potential movements in foreign exchange rates.
2022 2021
Contract Fair value Fair value Contract Fair value Fair value
amount
assets
amount
assets
liabilities liabilities
£m £m £m £m £m £m
Cash flow hedges 623 85 - 554 8 -
Foreign exchange forwards 48 - 1 64 - -
Derivative financial instruments 671 85 1 618 8 -
The derivative asset of £85m (2021: derivative asset of £8m) is expected to
be settled after more than 12 months.
On 18 October 2017, the Company issued subordinated notes with a principal
amount of US $750m. In order to manage the foreign exchange risk relating to
the principal and coupons payable on these notes the Company entered into
a cross-currency swap which is designated as a hedge of future cash flows.
The maturity profile of the contractual undiscounted cash flows in relation to
derivative financial instruments is as follows:
Within 2-5 6-10 11-15 Total
1 year
years
years
years
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m £m £m
Cash inflows
Cash flow hedges 26 24 106 94 637 589 - - 769 707
Foreign exchange forwards 47 55 - - - - - - 47 55
Total 73 79 106 94 637 589 - - 816 762
Cash outflows
Cash flow hedges (18) (18) (91) (73) (578) (596) - - (687) (687)
Foreign exchange forwards (48) (55) - - - - - - (48) (55)
Total (66) (73) (91) (73) (578) (596) - - (735) (742)
Net derivative financial instruments cash flows 7 6 15 21 59 (7) - - 81 20
E. Receivables and other financial assets
2022 2021
£m £m
Amounts due from related parties 45 14
Other financial assets 3 16
Total receivables and other financial assets 48 30
The carrying amounts disclosed above reasonably approximate the fair values at
the year end.
Receivables and other financial assets of £nil (2021: £nil) are expected to
be recovered after more than 12 months.
F. Other assets
2022 2021
£m £m
Prepayments 43 56
Other 5 27
Other assets 48 83
The amount of Other assets which are expected to be recovered after more than
12 months is £20m (2021: £48m).
Prepayments of £43m (2021: £56m) relate to the Group's future purchase of
certain products in the Phoenix Group's savings business offered through
abrdn's Wrap platform together with the Phoenix Group's trustee investment
plan business for UK pension scheme clients (refer Note 1(c)(iii) of the Group
financial statements). Other includes £5m (2021: £27m) in respect of amounts
due from related parties.
G. Share capital and share premium
Details of the Company's share capital and share premium are given in Note 24
of the Group financial statements including details of the share buyback.
H. Shares held by trusts
Shares held by trusts relates to shares in abrdn plc that are held by the
abrdn Employee Benefit Trust (formerly named the Standard Life Aberdeen
Employee Benefit Trust) (abrdn EBT) and Standard Life Employee Trust (ET).
Further details of these trusts are provided in Note 25 of the Group financial
statements.
I. Retained earnings
Details of the dividends paid on the ordinary shares by the Company are
provided in Note 12 of the Group financial statements. Note 12 also includes
information regarding the final dividend proposed by the Directors for the
year ended 31 December 2022.
Refer Note J for details of the transfers from the capital redemption reserve
and the merger reserve to retained earnings during the year ended 31 December
2022.
Retained earnings includes a movement of £19m relating to the interactive
investor employee benefit trust becoming part of the abrdn employee benefit
trust sponsored by the Company.
J. Movements in other reserves
The following tables show the movements in other reserves during the year:
Merger reserve Equity compensation reserve Special reserve Capital redemption reserve Cash flow hedges Total
2022 £m £m £m £m £m £m
At 1 January 578 86 115 1,059 18 1,856
Fair value gains on cash flow hedges - - - - 85 85
Realised gains on cash flow hedges transferred to income statement - - - - (78) (78)
Share buyback - - - 25 - 25
Cancellation of the capital redemption reserve - - - (1,059) - (1,059)
Reserves credit for employee share-based payments - 24 - - - 24
Transfer to retained earnings for vested employee share-based payments - (63) - - - (63)
Transfer between reserves on disposal of subsidiaries (1) - - - - (1)
Transfer between reserves on impairment of subsidiaries (302) - - - - (302)
Tax effect of items that may be reclassified subsequently to profit or loss - - - - (2) (2)
At 31 December 275 47 115 25 23 485
Merger reserve Equity compensation reserve Special reserve Capital redemption reserve Cash flow hedges Total
2021 £m £m £m £m £m £m
At 1 January 578 79 115 1,058 12 1,842
Fair value gains on cash flow hedges - - - - 19 19
Realised gains on cash flow hedges transferred to income statement - - - - (10) (10)
Share buyback - - - 1 - 1
Reserves credit for employee share-based payments - 43 - - - 43
Transfer to retained earnings for vested employee share-based payments - (36) - - - (36)
Tax effect of items that may be reclassified subsequently to profit or loss - - - - (3) (3)
At 31 December 578 86 115 1,059 18 1,856
Following the impairment loss recognised in 2022 on the Company's investments
in aHL and aIHL (refer Note A), £302m (2021: £nil) was transferred from the
merger reserve to retained earnings.
During 2022, £25m (2021: £1m) was recognised in the capital redemption
reserve for the share buyback (refer Note 24 of the Group financial
statements).
On 1 July 2022, the Company's capital redemption reserve at this date was
cancelled in accordance with section 649 of the Companies Act 2006 resulting
in a transfer of £1,059m to retained earnings.
K. Other Equity
5.25 % Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes
During the year ended 31 December 2021, the Company issued £210m of 5.25%
Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes (the
Notes). The Notes were classified as other equity and initially recognised at
£207m (the proceeds received less issuance costs of £3m). Refer Note 28 (a)
of the Group financial statements for further details.
The profit for the year attributable to other equity was £11m (2021: £nil).
L. Financial liabilities
Designated as at fair value through profit or loss Amortised cost Total
2022 2021 2022 2021 2022 2021
Notes £m £m £m £m £m £m
Subordinated liabilities M - - 621 644 621 644
Derivative financial liabilities D 1 - - - 1 -
Other financial liabilities O 14 9 258 168 272 177
Total 15 9 879 812 894 821
M. Subordinated liabilities
2022 2021
Principal Carrying Principal Carrying
value
value
amount amount
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2028 $750m £621m $750m £552m
5.5% Sterling fixed rate due 4 December 2042 - - £92m £92m
Total subordinated liabilities £621m £644m
The principal amount of the subordinated liabilities is expected to be settled
after more than 12 months. There is no accrued interest on the subordinated
liabilities at 31 December 2022 (2021: less than £1m).
The 5.5% Sterling fixed rate due 4 December 2042 subordinated notes were
redeemed during the year ended 31 December 2022.
Further information on the subordinated liabilities including the terms and
conditions and the redemption is given in Note 30 of the Group financial
statements.
N. Deferred tax assets and liabilities
2022 2021
£m £m
Deferred tax assets 143 113
The amount of deferred tax assets expected to be recovered or settled after
more than 12 months are £143m (2021: £113m).
Recognised deferred tax
2022 2021
£m £m
Deferred tax assets comprise:
Losses carried forward 151 120
Unrealised losses on cash flow hedges - -
Gross deferred tax assets 151 120
Less: Offset against deferred tax liabilities (8) (7)
Deferred tax assets 143 113
Deferred tax liabilities comprise:
Unrealised gains on investments - 1
Unrealised gains on cash flow hedges 8 6
Gross deferred tax liabilities 8 7
Less: Offset against deferred tax assets (8) (7)
Deferred tax liabilities - -
Net deferred tax asset at 31 December 143 113
Movements in net deferred tax assets comprise:
At 1 January 113 77
Amounts credited to profit or loss 32 39
Amounts charged to other comprehensive income (2) (3)
At 31 December 143 113
The deferred tax assets and liabilities recognised are in respect of unused
tax losses and unrealised gains on cash flow hedges respectively and include
the impact of the revaluation of these due to the future impact of the
increase in the UK Corporation Tax rate to 25% from 1 April 2023. The deferred
tax assets are recognised to the extent that it is probable that the losses
will be capable of being offset against future taxable profits (refer Note
9(c)(i) of the Group financial statements).
There is no unrecognised deferred tax relating to temporary timing differences
associated with investments in subsidiaries, branches and associates and
interests in joint arrangements (2021: none).
Movements in deferred tax assets and liabilities
Losses carried forward Unrealised gains on investments Unrealised gains or losses on cash flow hedges Net deferred tax asset
£m £m £m £m
At 1 January 2022 120 (1) (6) 113
Amounts credited to the income statement 31 1 - 32
Tax on cash flow hedge - - (2) (2)
At 31 December 2022 151 - (8) 143
Losses carried forward Unrealised gains on investments Unrealised gains or losses on cash flow hedges Net deferred tax asset
£m £m £m £m
At 1 January 2021 80 (1) (2) 77
Amounts credited to the income statement 40 - - 40
Tax on cash flow hedge - - (4) (4)
At 31 December 2021 120 (1) (6) 113
O. Other financial liabilities
2022 2021
£m £m
Outstanding purchase of investment securities - 5
Amounts due to related parties 161 137
Collateral held in respect of derivative contracts 89 15
Contingent consideration liability 14 9
Other 8 11
Other financial liabilities 272 177
Other financial liabilities of £nil (2021: £5m) are expected to be settled
after more than 12 months.
P. Provisions and other liabilities
Of Provisions of £33m (2021: £35m), £nil are expected to be settled after
more than 12 months (2021: £nil).
The provisions in both 2022 and 2021 relate to separation costs. Refer Note 34
of the Group financial statements for further information and details of the
provisions.
Of Other liabilities at 31 December 2021 of £11m, £11m was expected to be
settled within 12 months and was in respect of amounts due to related parties.
Q. Contingent liabilities, contingent assets, indemnities and guarantees
(a) Legal proceedings and regulations
The Company, like other financial organisations, is subject to legal
proceedings and complaints in the normal course of its business. All such
material matters are periodically reassessed, with the assistance of external
professional advisers where appropriate, to determine the likelihood of the
Company incurring a liability. Where it is concluded that it is more likely
than not that a material outflow will be made a provision is established based
on management's best estimate of the amount that will be payable. At 31
December 2022, there are no identified contingent liabilities expected to
lead to a material exposure.
(b) Indemnities and guarantees
Under the trust deed in respect of the abrdn UK Group (SLSPS) plan, ACSL, the
principal employer, must pay contributions to the pension plan as the
trustees' actuary may certify necessary. The Company has guaranteed the
obligations of ACSL in relation to this plan. In addition, the Company has
guaranteed similar obligations in respect of certain other subsidiaries' UK
and Ireland defined benefit pension plans.
None of these guarantees give rise to any liabilities at 31 December 2022
(2021: none).
R. Related party transactions
(a) Key management personnel
The Directors and key management personnel of the Company are considered to be
the same as for the Group.
See Note 42 of the Group financial statements for further information.
9. Supplementary information
9.1 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 consolidated income statement,
consolidated statement of financial position and consolidated statement of
cash flows, which are presented in the Group financial statements 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 joint ventures.
R Metric used for executive remuneration in 2023. See page 107 for more
information.
Definition Purpose
Adjusted operating profit APM R
Adjusted operating profit before tax is the Group's key APM. Adjusted Adjusted operating profit reporting provides further analysis of the results
operating profit includes the results of the Group's three growth vectors: reported under IFRS and the Directors believe it helps to give shareholders a
Investments, Adviser and Personal, along with Corporate/strategic. fuller understanding of the performance of the business by identifying and
analysing adjusting items.
It excludes the Group's adjusted net financing costs and investment return,
and discontinued operations. Segment reporting used in management information is reported to the level of
adjusted operating profit.
Adjusted operating profit also excludes the impact of the following items:
- Restructuring costs 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.
Further details are included in Note 11 of the Group financial statements.
Net operating revenue APM
Net operating revenue (previously named fee based revenue) includes revenue we Net operating revenue is a component of adjusted operating profit and provides
generate from asset management charges (AMCs), platform charges, treasury the basis for reporting of the revenue yield financial ratio. Net operating
income and other transactional charges. AMCs are earned on products such as revenue is also used to calculate the cost/income ratio.
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. Net operating revenue is shown net of costs of sale, such as
commissions and similar charges.
The revenue metric included within adjusted operating profit has been renamed
from fee based revenue to net operating revenue. For 2022 this measure is
aligned to net operating revenue as presented in the IFRS consolidated income
statement. For 2021 this measure of segmental revenue excludes £28m of net
operating revenue as presented in the IFRS consolidated income statement which
was classified as adjusting items. See Note 3 of the Group financial
statements for more information.
Adjusted operating expenses APM
Adjusted operating expenses is a component of adjusted operating profit and Adjusted operating expenses is a component of adjusted operating profit and is
relates to the day-to-day expenses of managing our business. Adjusted used to calculate the cost/income ratio.
operating expenses excludes restructuring and corporate transaction expenses.
Adjusted operating expenses also excludes amortisation and impairment of
intangible assets acquired in business combinations and through the purchase
of customer contracts.
Definition Purpose
Adjusted profit before tax APM
In addition to the results included in adjusted operating profit above, Adjusted profit before tax is a key input to the adjusted earnings per share
adjusted profit before tax includes adjusted net financing costs and measure.
investment return.
Adjusted net financing costs and investment return APM
Adjusted net financing costs and investment return relates to the return from Adjusted net financing costs and investment return is a component of adjusted
the net assets of the shareholder business, net of costs of financing. This profit before tax.
includes the net assets in defined benefit staff pension plans and net assets
relating to the financing of subordinated liabilities.
Cost/income ratio APM
This is an efficiency measure that is calculated as adjusted operating This ratio is used by management to assess efficiency and reported to the
expenses divided by net operating revenue in the period. Board and executive leadership team.
Net operating revenue yield (bps) APM
The net operating revenue yield (previously named fee revenue yield) is The net operating revenue yield is a measure that illustrates the average
calculated as annualised net operating revenue (excluding performance fees, margin being earned on the assets that we manage, administer or advise our
interactive investor and revenue for which there are no attributable assets) clients on excluding interactive investor.
divided by monthly average fee based assets. interactive investor is excluded
from the calculation of Personal and total net operating revenue yield as fees
charged for this business are primarily from subscriptions and trading
transactions.
Adjusted diluted earnings per share APM
Adjusted diluted earnings per share is calculated on adjusted profit after Earnings per share is a commonly used financial metric which can be used to
tax. The weighted average number of ordinary shares in issue is adjusted measure the profitability and capital efficiency of a company over time. We
during the period to assume the conversion of all dilutive potential ordinary also calculate adjusted diluted earnings per share to illustrate the impact of
shares, such as share options granted to employees. adjusting items on the metric.
Details on the calculation of adjusted diluted earnings per share are set out This ratio is used by management to assess performance and reported to the
in Note 10 of the Group financial statements. Board and executive leadership team.
Adjusted capital generation APM
Adjusted capital generation is part of the analysis of movements in IFPR This measure aims to show how adjusted profit contributes to regulatory
regulatory capital. Adjusted capital generation is calculated as adjusted capital, and therefore provides insight into our ability to generate capital
profit after tax less returns relating to pension schemes in surplus and that is deployed to support value for shareholders.
interest paid on other equity which do not benefit regulatory capital. It also
includes dividends from associates, joint ventures and significant listed
investments.
Adjusted diluted capital generation per share APM R
Adjusted diluted capital generation per share is calculated as adjusted This ratio is a measure used to assess performance for remuneration purposes.
capital generation divided by the weighted average number of diluted ordinary
shares outstanding.
Cash and liquid resources APM
Cash and liquid resources are IFRS cash and cash equivalents (netted down for The purpose of this measure is to demonstrate how much cash and invested
overdrafts), money market instruments and holdings in money market funds. It assets we hold and can be readily accessed.
also includes surplus cash that has been invested in liquid assets such as
high quality corporate bonds, gilts and pooled investment funds. Seed capital
and co-investments are excluded. Cash collateral, cash held for charitable
funds and cash held in employee benefit trusts are excluded from cash and
liquid resources.
9.1.1 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 Adjusted operating expenses to the IFRS item Total
administrative and other expenses, and a reconciliation of Adjusted net
financing costs and investment return to the IFRS item Net gains on financial
instruments and other income are provided in Note 2b(ii) of the Group
financial statements. A reconciliation of Net operating revenue to the IFRS
item Revenue from contracts with customers is provided in Note 3 of the Group
financial statements.
IFRS term IFRS Presentation differences Adjusting Adjusted Adjusted profit term
items
profit
2022 £m £m £m £m
Net operating revenue 1,456 - - 1,456 Net operating revenue
Total administrative and other expenses (1,919) (35) 761 (1,193) Adjusted operating expenses(1)
(463) (35) 761 263 Adjusted operating profit
Net gains or losses on financial instruments and other income (122) 8 104 (10) Adjusted net financing costs and investment return
Finance costs (29) 27 2 - N/A
Profit on disposal of interests in associates 6 - (6) - N/A
Share of profit or loss from associates and joint ventures 2 - (2) - N/A
Impairment of interests in associates (9) - 9 - N/A
Loss before tax (615) - 868 253 Adjusted profit before tax
Total tax credit 66 - (88) (22) Tax on adjusted profit
Loss for the year (549) - 780 231 Adjusted profit after tax
1. Adjusted operating expenses includes staff and other related costs of
£612m compared with IFRS staff costs and other employee-related costs of
£549m. The difference primarily relates to the inclusion of contractor,
temporary agency staff and recruitment and training costs of £25m (IFRS
basis: Reported within other administrative expenses) and losses on funds to
hedge deferred bonus awards of £9m (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
£29m (Adjusted profit basis: Reported within adjusted net financing costs and
investment return).
IFRS term IFRS Presentation differences Adjusting Adjusted Adjusted profit term
items
profit
2021 £m £m £m £m
Net operating revenue 1,543 - (28) 1,515 Net operating revenue
Total administrative and other expenses (1,556) (9) 373 (1,192) Adjusted operating expenses
(13) (9) 345 323 Adjusted operating profit
Net gains on financial instruments and other income (183) (20) 203 - Adjusted net financing costs and investment return
Finance costs (30) 29 1 - N/A
Profit on disposal of subsidiaries and other operations 127 - (127) - N/A
Profit on disposal of interests in associates 1,236 - (1,236) - N/A
Share of profit or loss from associates and joint ventures (22) - 22 - N/A
Profit before tax 1,115 - (792) 323 Adjusted profit before tax
Total tax expense (120) - 94 (26) Tax on adjusted profit
Profit for the year 995 - (698) 297 Adjusted profit after tax
Presentation differences primarily relate to amounts presented in a different
line item of the consolidated income statement.
Analysis of adjusting items
The table below provides detail of the adjusting items made in the calculation
of adjusted profit before tax:
2022 2021
£m £m
Restructuring and corporate transaction expenses (214) (259)
Amortisation and impairment of intangible assets acquired in business (494) (99)
combinations and through the purchase of customer contracts
Profit on disposal of subsidiaries and other operations - 127
Profit on disposal of interests in associates 6 1,236
Change in fair value of significant listed investments (187) (298)
Dividends from significant listed investments 68 71
Share of profit or loss from associates and joint ventures 2 (22)
Impairment of interests in joint ventures (9) -
Other (40) 36
Total adjusting items including results of associates and joint ventures (868) 792
An explanation for why individual items are excluded from adjusted profit is
set out below:
- Restructuring and corporate transaction expenses are excluded
from adjusted profit. Restructuring includes the impact of major regulatory
change. By highlighting and excluding these costs we aim to give shareholders
a fuller understanding of the performance of the business. Restructuring and
corporate transaction expenses include costs relating to the integration of
businesses acquired and our transformation programme. Other restructuring
costs excluded from adjusted profit relate to projects which have a
significant impact on the way the Group operates. Costs are only excluded from
adjusted profit where they are outwith business as usual activities and the
costs would not have been incurred had the restructuring project not taken
place. For headcount related costs, where duplicate posts are identified as a
result of an integration or transformation plan, the duplicated cost will be
treated as a restructuring cost from the beginning of the process which
eliminates the duplicate cost. The 2022 expenses mainly comprised of costs of
£43m (2021: £35m) in respect of specific costs to effect savings in
investments, investments re-platforming, and integration, £51m (2021: £64m)
of other transformation costs such as finance and platform transformation,
£66m (2021: £65m) of other headcount reduction related costs and property
restructuring, £7m (2021: £27m) in respect of Phoenix separation costs, and
£45m (2021: £35m) of corporate transaction costs primarily related to the
acquisition of interactive investor. Platform transformation and Investment
vector restructuring are significant multi-year programmes that are included
in the restructuring expenses noted above, with further costs expected to be
incurred in future periods. Total restructuring expenses (excluding corporate
transaction costs) are expected to be £0.2bn in 2023, primarily relating to
the Investments vector restructuring which is expected to complete in 2023.
Restructuring expenses in 2023 will also include costs of c£0.05bn relating
to Platform transformation which is expected to complete in 2024.
- Amortisation and impairment of intangible assets acquired in
business combinations and through the purchase of customer contracts is
included as an adjusting item. This is consistent with peers and therefore
excluding these items aids comparability. Highlighting this as an adjusting
item aims to give a fuller understanding of these accounting impacts which
arise where businesses have been acquired but do not arise where businesses
have grown organically. Further details are provided in Note 13 of the Group
financial statements.
- Profit on disposal of subsidiaries and other operations in 2021
primarily related to the sales of Parmenion and Bonaccord. These items are
excluded from adjusted profit as they are non-recurring in nature.
- Profit on disposal of interests in associates of £6m (2021:
£1,236m) relates to the sale of our stake in Origo Services Limited in May
2022. The 2021 figure included the one-off accounting gains following the
reclassification of HDFC Asset Management (£897m) and Phoenix (£68m) from
investment in associates accounted for using the equity method to equity
securities measured at fair value and £271m from the sale of 5% of shares in
HDFC Asset Management. Details are provided in Note 14 of the Group financial
statements. These items are excluded from adjusted profit as they are volatile
and the accounting gains are non-recurring in nature.
- The change in fair value of significant listed investments was
negative £187m (2021: negative £298m) and represents the impact of market
movements on our holdings in HDFC Life (£38m reduction in value including
impact of stake sale in September 2022), in Phoenix (£44m reduction in value
including impact of stake sale in January 2022) and in HDFC Asset Management
(£105m reduction in value including impact of stake sale in August 2022).
Excluding fair value movements on significant listed investments for the
purposes of adjusted profit is aligned with our treatment of gains on disposal
for these holdings when they were classified as an associate, and reflects
that the fair value movements are not indicative of the long-term operating
performance of the Group.
- Dividends from significant listed investments relates to our
shareholdings in HDFC Life, Phoenix and HDFC Asset Management that were
previously associates and were reclassified on 3 December 2020, 23 February
2021 and 29 September 2021 respectively. Following the reclassification,
dividends received are now recognised as income within our financial
statements. The £68m in 2022 relates to dividends received from Phoenix
(£52m), HDFC Asset Management (£15m) and HDFC Life (£1m). Dividends from
significant listed investments are included in adjusting items, as such
dividends result in fair value movements.
- Share of profit or loss from associates and joint ventures was a
profit of £2m (2021: loss £22m). In 2022, this mainly comprises of the share
of profit or loss from our holdings in HASL, Virgin Money UTM and Tenet. In
2021, prior to the reclassification noted above, share of profit or loss from
associates and joint ventures also included Phoenix and HDFC Asset Management.
Associate and joint venture results are excluded from adjusted profit to help
in understanding the performance of our core business separately from these
holdings.
- The impairment of associates and joint ventures in 2022 of £9m
relates to our associate holding in Tenet.
- Details on items classified as 'Other' in the table above are
provided in Note 11 of the Group financial statements. Other adjusting items
in 2022 primarily relates to a single process execution event provision of
£41m. 2022 also includes a net gain on fair value movements in contingent
consideration of £35m primarily in relation to Tritax, fair value loss of
£11m on a financial instrument liability related to a prior period
acquisition, and a loss of £13m in relation to market losses on the
investments held by the abrdn Financial Fairness Trust which is consolidated
by the Group.
9.1.2 Cost/income ratio
2022 2021
Adjusted operating expenses (£m) (1,193) (1,192)
Net operating revenue (£m) 1,456 1,515
Cost/income ratio (%) 82 79
9.1.3 Net operating revenue yield (bps)(1)
Average AUMA (£bn) Net operating revenue (£m)(1) Net operating revenue yield (bps) (1)
2022 2021 2022 2021 2022 2021
Institutional and Wholesale(2) 236.2 250.1 861 979 36.1 38.8
Insurance 169.5 205.0 179 206 10.5 10.0
Investments(2) 405.7 455.1 1,040 1,185 25.4 25.9
Adviser(2) 70.8 71.5 185 178 26.1 24.9
Personal Wealth(2) 13.5 14.0 87 92 59.2 61.0
Parmenion(3) - 3.9 - 14 - 38.1
Eliminations (11.8) (11.3) N/A N/A N/A N/A
Net operating revenue yield(1,2) 478.2 533.2 1,312 1,469 27.1 27.3
interactive investor(4) 114 -
Performance fees 30 46
Net operating revenue(1) 1,456 1,515
Analysis of Institutional and Wholesale by asset class(2)
Average AUM (£bn) Net operating revenue (£m) Net operating revenue yield (bps)
2022 2021 2022 2021 2022 2021
Equities 57.3 69.5 357 449 62.5 64.5
Fixed income 41.2 46.6 115 132 27.9 28.3
Multi-asset 31.5 35.1 93 118 29.4 33.7
Private equity 12.4 11.2 52 58 42.2 51.8
Real assets 42.0 36.1 187 170 44.4 47.2
Alternatives 22.1 20.4 29 25 12.9 12.3
Quantitative 9.7 5.8 5 4 5.0 6.8
Liquidity 20.0 25.4 13 15 6.7 6.0
Institutional and Wholesale 236.2 250.1 851 971 36.1 38.8
1. Previously fee based revenue/yield. The Group's measure of segmental
revenue has been renamed from fee based revenue to net operating revenue, with
a corresponding change in name of the yield measure.
2. Institutional and Wholesale net operating revenue yield excludes revenue
of £10m (2021: £8m) and Personal Wealth net operating revenue yield excludes
revenue of £7m (2021: £7m) for which there are no attributable assets.
3. Parmenion was included in the Corporate/strategic vector. The sale of
Parmenion completed on 30 June 2021 and the net operating revenue yield
reflects the position as at the date of disposal.
4. interactive investor is excluded from the calculation of Personal and
total net operating revenue yield as fees charged for this business are
primarily from subscriptions and trading transactions.
9.1.4 Additional ii information
The results for ii are included in the Group's results following the
completion of the acquisition on 27 May 2022. The adjusted operating profit
for ii for the seven months to 31 December 2022 of £67m is included in our
overall 2022 adjusted operating profit of £263m.
The tables below provide detail of the performance of ii for the 7 months
ended 31 December 2022 and the full 12 months ended 31 December for 2022 and
2021 to provide a fuller understanding of the performance of this business.
Adjusted operating profit has also been presented excluding losses relating to
Share Limited to provide a more meaningful comparison to the go-forward
position.
Analysis of ii profit 2022 2022 2021 2021
7 months
12 months 12 months 12 months
£m
£m
£m
£m
Excl Share(1)
Incl Share(1)
Net operating revenue 114 176 128 135
Adjusted operating expenses (47) (82) (83) (99)
Adjusted operating profit 67 94 45 36
The 2021 adjusted operating profit of £36m included losses relating to Share
Limited of £9m while part of this business was wound down. Excluding losses
from Share Limited, the 2021 adjusted operating profit was £45m. The 2022
impact was £nil.
Analysis of ii net operating revenue 2022 2022 2021 2021
7 months
12 months 12 months 12 months
£m
£m
£m
£m
Excl Share(1)
Incl Share(1)
Trading transactions 27 55 79 84
Subscription/account fees 32 56 48 50
Treasury income 58 71 9 9
Less: Cost of sales (3) (6) (8) (8)
Net operating revenue 114 176 128 135
1. Losses were incurred in Share Limited and its subsidiaries (Share) as
part of this business was wound down.
9.1.5 Adjusted capital generation
The table below provides a reconciliation of movements between adjusted profit
after tax and adjusted capital generation. A reconciliation of adjusted profit
after tax to IFRS loss for the year is included earlier in this section.
2022 2021
£m £m
Adjusted profit after tax 231 297
Less net interest credit relating to the staff pension schemes (29) (17)
Less interest paid on other equity (11) -
Add dividends received from associates, joint ventures and significant listed 68 86
investments
Adjusted capital generation 259 366
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:
2022 2021
£m £m
Phoenix 52 69
HDFC Life 1 2
HDFC Asset Management 15 15
Dividends received from associates, joint ventures and significant listed 68 86
investments
The table below provides detail of dividend coverage on an adjusted capital
generation basis.
2022 2021
Adjusted capital generation (£m) 259 366
Full year dividend (£m) 295 309
Dividend cover on an adjusted capital generation basis (times) 0.88 1.18
9.1.6 Adjusted diluted capital generation per share
A reconciliation of adjusted capital generation to adjusted profit after tax
is included in 9.1.5 above.
2022 2021
Adjusted capital generation (£m) 259 366
Weighted average number of diluted ordinary shares outstanding (millions)(1) - 2,094 2,159
Note 10
Adjusted diluted capital generation per share (pence) 12.4 17.0
1. In accordance with IAS 33, no share options and awards have been treated
as dilutive for the twelve months ended 31 December 2022 due to the loss
attributable to equity holders of abrdn plc in that period. See Note 10 for
further details.
9.1.7 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. Details of seed capital and co-investments are provided in Note 35
(b) in the Group financial statements.
2022 2021
£bn £bn
Cash and cash equivalents per Note 22 of the Group financial statements 1.1 1.9
Bank overdrafts - Note 22 - (0.1)
Debt securities excluding third party interests(2) - Note35 (c)(i) 0.7 1.1
Corporate funds held in absolute return funds - Note35 (b)(i)(i) 0.1 0.2
Other(3) (0.2) -
Cash and liquid resources 1.7 3.1
2. Excludes £76m (2021: £76m) relating to seeding.
3. Cash collateral, cash held for charitable funds and cash held in employee
benefit trusts are excluded from cash and liquid resources.
9.2 Investment performance
Definition Purpose
Investment performance
Investment performance has been aggregated using a money weighted average of As an asset managing business this measure demonstrates our ability to
our assets under management which are outperforming their respective generate investment returns for our clients.
benchmark. The calculation of investment performance has been revised to use a
closing AUM weighting basis. In prior periods investment performance was
weighted based on AUM at the start of the performance period. 2021
comparatives have been restated. We believe that this approach provides a more
representative view of current investment performance, given the significant
changes to business mix over the investment timeframe, and provides investment
performance data which is more comparable with peers. Calculations for
investment performance are made gross of fees with the exception of those for
which the stated comparator is net of fees. Benchmarks differ by fund and are
defined in the relevant investment management agreement or prospectus, as
appropriate. The investment performance calculation covers all funds that aim
to outperform a benchmark, with certain assets excluded where this measure of
performance is not appropriate or expected, such as private markets and
execution only mandates, as well as replication tracker funds which aim to
perform in line with a given index
( ) 1 year 3 years 5 years
% of AUM ahead of benchmark 2022 2021 2021 2022 2021 2021 2022 2021 2021
restated(1) reported restated(1) reported restated(1) reported
Equities 30 37 36 63 74 72 65 65 61
Fixed income 65 58 59 72 79 82 79 81 87
Multi-asset 13 72 41 50 73 39 22 70 44
Real assets 57 86 83 63 58 52 52 62 50
Alternatives 88 87 87 100 98 98 100 98 98
Quantitative 17 99 98 27 15 44 29 42 68
Liquidity 84 89 88 97 92 87 97 92 84
Total 41 66 57 65 78 67 58 77 67
1. The calculation of investment performance has been revised to use a
closing AUM weighting basis. In prior periods investment performance was
weighted based on AUM at the start of the performance period. 2021
comparatives have been restated. We believe that this approach provides a more
representative view of current investment performance.
9.3 Assets under management and administration and flows
Definition Purpose
AUMA
AUMA is a measure of the total assets we manage, administer or advise on The amount of funds that we manage, administer or advise directly impacts the
behalf of our clients. It includes assets under management (AUM), assets under level of net operating revenue that we receive.
administration (AUA) and assets under advice (AUAdv).
AUM is a measure of the total assets that we manage on behalf of individual
and institutional clients. AUM also includes fee generating assets managed for
corporate purposes.
AUA is a measure of the total assets we administer for clients through
platform products such as ISAs, SIPPs and general trading accounts.
AUAdv is a measure of the total assets we advise our clients on, for which
there is an ongoing charge.
Net flows
Net flows represent gross inflows less gross outflows or redemptions. Gross The level of net flows that we generate directly impacts the level of net
inflows are new funds from clients. Redemptions is the money withdrawn by operating revenue that we receive.
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.
9.3.1 Analysis of AUMA
Opening Gross inflows Redemptions Net flows Market Corporate Closing
AUMA at
and other movements
actions(2)
AUMA at
1 Jan 2022
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Institutional 174.0 20.1 (27.3) (7.2) (12.4) 7.5 161.9
Wholesale 79.1 16.4 (20.8) (4.4) (5.4) - 69.3
Insurance 210.5 22.8 (52.2) (29.4) (28.7) (7.5) 144.9
Investments 463.6 59.3 (100.3) (41.0) (46.5) - 376.1
Adviser 76.2 6.6 (5.0) 1.6 (9.3) - 68.5
interactive investor - 4.1 (2.5) 1.6 (3.0) 55.4 54.0
Personal Wealth 14.4 1.5 (1.2) 0.3 (1.6) - 13.1
Personal(1) 14.4 5.6 (3.7) 1.9 (4.6) 55.4 67.1
Eliminations(1) (12.1) (2.5) 2.1 (0.4) 1.7 (0.9) (11.7)
Total AUMA 542.1 69.0 (106.9) (37.9) (58.7) 54.5 500.0
Opening Gross inflows Redemptions Net flows Market Corporate Closing
AUMA at
and other movements
actions(3)
AUMA at
1 Jan 2021
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Institutional 171.7 22.5 (25.4) (2.9) 5.4 (0.2) 174.0
Wholesale 80.0 19.4 (21.6) (2.2) 1.3 - 79.1
Insurance 205.2 21.5 (27.0) (5.5) 10.8 - 210.5
Investments 456.9 63.4 (74.0) (10.6) 17.5 (0.2) 463.6
Adviser 67.0 9.1 (5.2) 3.9 5.3 - 76.2
interactive investor - - - - - - -
Personal Wealth 13.3 1.7 (1.1) 0.6 0.5 - 14.4
Personal(1) 13.3 1.7 (1.1) 0.6 0.5 - 14.4
Parmenion 8.1 0.7 (0.4) 0.3 0.3 (8.7) -
Eliminations(1) (10.7) (2.6) 2.2 (0.4) (1.0) - (12.1)
Total AUMA 534.6 72.3 (78.5) (6.2) 22.6 (8.9) 542.1
1. Eliminations remove the double count reflected in Investments, Adviser and
Personal. The Personal vector includes assets that are reflected in both the
discretionary investment management and financial planning businesses. This
double count is also removed within Eliminations.
2. Corporate actions in 2022 relate to the acquisition of interactive investor
on 27 May 2022 and also reflect the transfer of retained LBG AUM of c£7.5bn
from Insurance into Institutional (quantitatives), to better reflect how the
relationship is being managed. The eliminations are to remove the double count
for the assets that are reflected in both interactive investor and
Investments.
3. Corporate actions in 2021 relate to the acquisition of a majority interest
in Tritax on 1 April 2021 (£5.8bn) and the disposals of our domestic real
estate business in the Nordics region on 31 May 2021 (£3.3bn) and
Bonaccord/Hark on 30 September 2021 (£1.5bn). Corporate actions also include
the impact of the decision to exit the Total Return Bond strategy of £1.2bn.
The sale of Parmenion completed on 30 June 2021.
9.3.2 Quarterly net flows
3 months to 3 months to 3 months to 3 months to 3 months to
31 Dec 22
30 Sep 22
30 Jun 22
31 Mar 22
31 Dec 21
15 months ended 31 December 2022 £bn £bn £bn £bn £bn
Institutional 2.2 (0.3) (7.8) (1.3) 2.5
Wholesale (2.0) (0.5) - (1.9) (0.8)
Insurance (6.3) 3.2 (4.6) (21.7) (0.4)
Investments (6.1) 2.4 (12.4) (24.9) 1.3
Adviser - 0.2 0.5 0.9 1.1
interactive investor 0.6 0.8 0.2 - -
Personal Wealth 0.2 - - 0.1 -
Personal 0.8 0.8 0.2 0.1 -
Eliminations (0.1) - (0.1) (0.2) (0.2)
Total net flows (5.4) 3.4 (11.8) (24.1) 2.2
9.4 Institutional and Wholesale AUM
Detailed asset class split
Opening Gross inflows Redemptions Net flows Market Corporate actions Closing
AUM at
and other movements
AUM at
1 Jan 2022
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 17.0 2.1 (3.4) (1.3) (4.6) - 11.1
Emerging markets equities 16.4 1.9 (2.9) (1.0) (2.9) - 12.5
Asia Pacific equities 25.3 2.5 (4.8) (2.3) (2.5) - 20.5
Global equities 10.3 1.2 (1.6) (0.4) (1.7) - 8.2
Total equities 69.0 7.7 (12.7) (5.0) (11.7) - 52.3
Developed markets credit 28.3 3.8 (5.8) (2.0) (3.8) - 22.5
Developed markets rates 2.9 0.3 (0.6) (0.3) (0.6) - 2.0
Emerging markets fixed income 12.2 2.4 (2.4) - (0.9) - 11.3
Private credit 2.4 0.2 (0.1) 0.1 (0.7) - 1.8
Total fixed income 45.8 6.7 (8.9) (2.2) (6.0) - 37.6
Absolute return 10.0 0.4 (1.9) (1.5) (2.8) - 5.7
Diversified growth/income 0.5 0.1 (0.2) (0.1) (0.1) - 0.3
MyFolio 17.7 1.7 (2.0) (0.3) (1.8) - 15.6
Other multi-asset 7.8 1.7 (1.1) 0.6 (1.7) - 6.7
Total multi-asset 36.0 3.9 (5.2) (1.3) (6.4) - 28.3
Total private equity 12.3 0.5 (1.1) (0.6) 0.6 - 12.3
UK real estate 19.9 0.4 (1.7) (1.3) 0.7 - 19.3
European real estate 10.3 0.8 (0.4) 0.4 3.6 - 14.3
Global real estate 1.8 0.3 (0.3) - (0.2) - 1.6
Real estate multi-manager 1.2 0.2 (0.2) - 0.2 - 1.4
Infrastructure equity 6.2 0.4 (0.9) (0.5) 0.4 - 6.1
Total real assets 39.4 2.1 (3.5) (1.4) 4.7 - 42.7
Total alternatives 20.8 2.2 (1.6) 0.6 0.8 - 22.2
Total quantitative(1) 5.5 3.2 (1.7) 1.5 0.5 7.5 15.0
Total liquidity 24.3 10.2 (13.4) (3.2) (0.3) - 20.8
Total(1) 253.1 36.5 (48.1) (11.6) (17.8) 7.5 231.2
1. Corporate actions include the transfer of retained LBG AUM of c£7.5bn
from Insurance into Institutional (quantitatives), to better reflect how the
relationship is being managed.
Opening Gross inflows Redemptions Net flows Market Corporate actions Closing
AUM at
and other movements
AUM at
1 Jan 2021
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 14.7 3.0 (3.6) (0.6) 2.9 - 17.0
Emerging markets equities 19.0 2.0 (3.7) (1.7) (0.9) - 16.4
Asia Pacific equities 26.6 4.8 (5.7) (0.9) (0.4) - 25.3
Global equities 8.9 1.8 (1.6) 0.2 1.2 - 10.3
Total equities 69.2 11.6 (14.6) (3.0) 2.8 - 69.0
Developed markets credit 32.2 5.9 (6.6) (0.7) (2.0) (1.2) 28.3
Developed markets rates 2.8 0.6 (0.6) - 0.1 - 2.9
Emerging markets fixed income 12.2 3.5 (3.1) 0.4 (0.4) - 12.2
Private credit 1.0 1.5 - 1.5 0.8 (0.9) 2.4
Total fixed income 48.2 11.5 (10.3) 1.2 (1.5) (2.1) 45.8
Absolute return 11.5 0.8 (2.0) (1.2) (0.3) - 10.0
Diversified growth/income 0.6 0.1 (0.2) (0.1) - - 0.5
MyFolio 15.6 2.1 (2.5) (0.4) 2.5 - 17.7
Other multi-asset 10.0 1.2 (1.4) (0.2) (2.0) - 7.8
Total multi-asset 37.7 4.2 (6.1) (1.9) 0.2 - 36.0
Total private equity 10.9 1.5 (1.2) 0.3 1.7 (0.6) 12.3
UK real estate 9.2 0.9 (0.8) 0.1 4.8 5.8 19.9
European real estate 12.1 1.0 (0.4) 0.6 0.9 (3.3) 10.3
Global real estate 1.8 0.3 (0.4) (0.1) 0.1 - 1.8
Real estate multi-manager 1.6 0.1 (0.1) - (0.4) - 1.2
Infrastructure equity 5.3 1.0 (0.4) 0.6 0.3 - 6.2
Total real assets 30.0 3.3 (2.1) 1.2 5.7 2.5 39.4
Total alternatives 19.5 2.0 (1.9) 0.1 1.2 - 20.8
Total quantitative 6.4 1.2 (1.2) - (0.9) - 5.5
Total liquidity 29.8 6.6 (9.6) (3.0) (2.5) - 24.3
Total 251.7 41.9 (47.0) (5.1) 6.7 (0.2) 253.1
9.5 Analysis of Insurance
Opening Gross inflows Redemptions Net Market Corporate Closing
AUM at
flows
and other movements
actions
AUM at
1 Jan 2022
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Phoenix 175.5 22.5 (26.6) (4.1) (27.7) - 143.7
Lloyds(1) 33.6 0.3 (25.5) (25.2) (0.9) (7.5) -
Other 1.4 - (0.1) (0.1) (0.1) - 1.2
Total(1) 210.5 22.8 (52.2) (29.4) (28.7) (7.5) 144.9
Opening Gross inflows Redemptions Net Market Corporate Closing
AUM at
flows
and other movements
actions
AUM at
1 Jan 2021
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Phoenix 171.5 17.1 (20.3) (3.2) 7.2 - 175.5
Lloyds 31.8 4.4 (6.3) (1.9) 3.7 - 33.6
Other 1.9 - (0.4) (0.4) (0.1) - 1.4
Total 205.2 21.5 (27.0) (5.5) 10.8 - 210.5
1. Following completion of the LBG tranche withdrawals in H1 2022, the
remaining retained LBG AUM of c£7.5bn was reallocated to quantitatives in
Institutional and is included in corporate actions in the table above.
9.6 Investments AUM by geography
31 Dec 2022 31 Dec 2021
Institutional and Wholesale Insurance Total Institutional Insurance Total
and Wholesale
£bn £bn £bn £bn £bn £bn
UK 111.2 144.9 256.1 120.3 210.5 330.8
Europe, Middle East and Africa (EMEA) 57.5 - 57.5 62.5 - 62.5
Asia Pacific (APAC) 16.4 - 16.4 19.2 - 19.2
Americas 46.1 - 46.1 51.1 - 51.1
Total AUM 231.2 144.9 376.1 253.1 210.5 463.6
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