REG - abrdn PLC - Half-year Report - Part 2 of 3
08/08/2023 07:00
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RNS Number : 5700I abrdn PLC 08 August 2023
abrdn plc
Half year results 2023
Part 2 of 3
8 August 2023
2. Statement of Directors' responsibilities
Each of the Directors, whose names and functions are listed on the abrdn plc
website, www.abrdn.com, confirms to the best of his or her knowledge and
belief that:
· The condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated statement of
changes in equity and the condensed consolidated statement of cash flows and
associated notes, have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted for use in the UK.
· The interim management report includes a fair review of the
information required by:
· DTR 4.2.7R of the FCA's Disclosure Guidance and Transparency
Rules Sourcebook, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed consolidated financial information and a description of the
principal risks and uncertainties for the remaining six months of the year.
· DTR 4.2.8R of the FCA's Disclosure Guidance and Transparency
Rules Sourcebook, being related party transactions that have taken place in
the first six months of the current financial year and that have materially
affected the financial position or performance of the entity during that
period; and any changes in the related party transactions described in the
last annual report that could do so.
· As per principle N of the UK Corporate Governance Code, the Half year
results 2023 taken as a whole, present a fair, balanced and understandable
assessment of the Company's position and prospects.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Changes to Directors during the period
As announced on 28 February and 9 March respectively, Brian McBride and
Stephanie Bruce retired from the Board at the conclusion of the AGM on 10 May.
By order of the Board
Sir Douglas Flint Stephen Bird
Chairman Chief Executive Officer
7 August 2023 7 August 2023
3. Independent review report to abrdn plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the Half year results for the six months ended 30 June 2023
which comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated
statement of financial position, condensed consolidated statement of changes
in equity, condensed consolidated statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half year
results for the six months ended 30 June 2023 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules ('the DTR')
of the UK's Financial Conduct Authority ('the UK FCA').
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ('ISRE (UK) 2410') issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the Half year results and consider whether it contains any
apparent misstatements or material inconsistencies with the information in the
condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
Directors' responsibilities
The Half year results is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half year results
in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with
UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the Half year results in accordance with IAS 34 as
adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the Half year results based on our review. Our
conclusion, including our conclusions relating to going concern, are based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Richard Faulkner
for and on behalf of KPMG LLP
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG
7 August 2023
4. Financial Information
Condensed consolidated income statement
For the six months ended 30 June 2023
6 months 6 months Full Year
2023 2022 2022
restated(1) restated(1)
Notes £m £m £m
Revenue from contracts with customers 4.4(a) 763 731 1,538
Cost of sales 4.4(b) (42) (35) (82)
Net operating revenue 721 696 1,456
Restructuring and corporate transaction expenses 4.6 (113) (88) (214)
Impairment of intangibles acquired in business combinations and through the 4.6 (37) - (369)
purchase of customer contracts
Amortisation of intangibles acquired in business combinations and through the 4.6 (65) (52) (125)
purchase of customer contracts
Staff costs and other employee-related costs 4.6 (275) (266) (549)
Other administrative expenses 4.6 (274) (300) (662)
Total administrative and other expenses (764) (706) (1,919)
Net gains or losses on financial instruments and other income
Fair value movements and dividend income on significant listed investments 4.5 (144) (271) (119)
Other net gains or losses on financial instruments and other income 4.5 26 (27) (3)
Total net gains or losses on financial instruments and other income (118) (298) (122)
Finance costs (12) (15) (29)
Profit on disposal of interests in associates 4.2(b) - 6 6
Loss on impairment of interests in associates 4.13 - (9) (9)
Share of profit or loss from associates and joint ventures 4.13 4 - 5
Loss before tax (169) (326) (612)
Tax credit 4.7 24 31 66
Loss for the period (145) (295) (546)
Attributable to:
Equity shareholders of abrdn plc (151) (302) (558)
Other equity holders 6 6 11
Non-controlling interests - ordinary shares - 1 1
(145) (295) (546)
Earnings per share
Basic (pence per share) 4.8 (7.7) (14.2) (26.6)
Diluted (pence per share) 4.8 (7.7) (14.2) (26.6)
1. Comparatives for the six months ended 30 June 2022 and the 12 months ended
31 December 2022 have been restated for the implementation of IFRS 17. Refer
Note 4.1(a)(i).
The Notes on pages 24 to 52 are an integral part of this condensed
consolidated financial information.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2023
6 months 6 months Full Year
2023 2022 2022
restated(1) restated(1)
Notes £m £m £m
Loss for the period (145) (295) (546)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement losses on defined benefit pension plans 4.16 (81) (386) (793)
Total items that will not be reclassified subsequently to profit or loss (81) (386) (793)
Items that may be reclassified subsequently to profit or loss:
Fair value (losses)/gains on cash flow hedges (13) 61 85
Exchange differences on translating foreign operations (42) 37 36
Share of other comprehensive income of associates and joint ventures 4.13 (18) (21) (57)
Items transferred to the condensed consolidated income statement
Fair value losses/(gains) on cash flow hedges 30 (68) (78)
Equity holder tax effect of items that may be reclassified subsequently to 4.7 (4) 2 (2)
profit or loss
Total items that may be reclassified subsequently to profit or loss (47) 11 (16)
Other comprehensive income for the period (128) (375) (809)
Total comprehensive income for the period (273) (670) (1,355)
Attributable to:
Equity shareholders of abrdn plc (279) (677) (1,367)
Other equity holders 6 6 11
Non-controlling interests - ordinary shares - 1 1
(273) (670) (1,355)
1. Comparatives for the six months ended 30 June 2022 and the 12 months ended
31 December 2022 have been restated for the implementation of IFRS 17. Refer
Note 4.1(a)(i).
The Notes on pages 24 to 52 are an integral part of this condensed
consolidated financial information.
Condensed consolidated statement of financial position
As at 30 June 2023
6 months 6 months Full Year
2023 2022 2022
restated(1) restated(1)
Notes £m £m £m
Assets
Intangible assets 4.12 1,548 2,116 1,619
Pension and other post-retirement benefit assets 4.16 772 1,221 831
Investments in associates and joint ventures accounted for using the equity 4.13 245 253 232
method
Property, plant and equipment 4.11 162 193 201
Deferred tax assets 220 184 212
Financial investments 4.18 2,080 2,940 2,939
Receivables and other financial assets 1,238 1,237 907
Current tax recoverable 11 2 7
Other assets 100 115 92
Assets of operations held for sale 4.14 83 - 87
Cash and cash equivalents 1,407 1,433 1,133
7,866 9,694 8,260
Assets backing unit linked liabilities 4.18
Financial investments 873 1,114 924
Receivables and other unit linked assets 8 17 5
Cash and cash equivalents 13 25 23
894 1,156 952
Total assets 8,760 10,850 9,212
Liabilities
Third party interest in consolidated funds 4.18 212 130 242
Subordinated liabilities 588 707 621
Pension and other post-retirement benefit provisions 4.16 9 17 12
Deferred income 3 6 3
Deferred tax liabilities 145 248 211
Current tax liabilities 6 21 11
Derivative financial liabilities 4.18 2 17 1
Other financial liabilities 1,458 1,507 1,198
Provisions 4.17 58 52 97
Other liabilities 10 11 8
Liabilities of operations held for sale 4.14 6 - 14
2,497 2,716 2,418
Unit linked liabilities 4.18
Investment contract liabilities 724 890 773
Third party interest in consolidated funds 165 256 173
Other unit linked liabilities 5 10 6
894 1,156 952
Total liabilities 3,391 3,872 3,370
Equity
Share capital 4.15(a) 274 305 280
Shares held by trusts 4.15(b) (147) (152) (149)
Share premium reserve 4.15(a) 640 640 640
Retained earnings 4,547 4,877 4,986
Other reserves (159) 1,094 (129)
Equity attributable to equity shareholders of abrdn plc 5,155 6,764 5,628
Other equity 207 207 207
Non-controlling interests - ordinary shares 7 7 7
Total equity 5,369 6,978 5,842
Total equity and liabilities 8,760 10,850 9,212
1. Comparatives for 30 June 2022 and 31 December 2022 have been restated for
the implementation of IFRS 17. Refer Note 4.1(a)(i).
The Notes on pages 24 to 52 are an integral part of this condensed
consolidated financial information.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2023
Share capital Shares held by trusts Share premium reserve Retained earnings(1) Other reserves Total equity attributable Other equity Non-controlling interests - ordinary shares Total equity(1)
to equity
shareholders of abrdn plc(1)
Notes £m £m £m £m £m £m £m £m £m
31 December 2022 280 (149) 640 4,986 (129) 5,628 207 7 5,842
Effect of application of IFRS 9 on Investments in associates and joint - - - 51 - 51 - - 51
ventures accounted for using the equity method(1)
1 January 2023 280 (149) 640 5,037 (129) 5,679 207 7 5,893
(Loss)/profit for the period - - - (151) - (151) 6 - (145)
Other comprehensive income for the period - - - (99) (29) (128) - - (128)
Total comprehensive income for the period - - - (250) (29) (279) 6 - (273)
Issue of share capital 4.15(a) - - - - - - - - -
Dividends paid on ordinary shares 4.10 - - - (142) - (142) - - (142)
Interest paid on other equity - - - - - - (6) - (6)
Share buyback 4.15(a) (6) - - (98) 6 (98) - - (98)
Reserves credit for employee share-based payments - - - - 13 13 - - 13
Transfer to retained earnings for vested employee share-based payments - - - 20 (20) - - - -
Shares acquired by employee trusts - (19) - - - (19) - - (19)
Shares distributed by employee and other trusts and related dividend - 21 - (22) - (1) - - (1)
equivalents
Aggregate tax effect of items recognised directly in equity 4.7 - - - 2 - 2 - - 2
30 June 2023 274 (147) 640 4,547 (159) 5,155 207 7 5,369
1. The Group implemented IFRS 9 in 2019. However, as permitted under a
temporary exemption granted to insurers in IFRS 4 Insurance Contracts, the
Group's insurance joint venture, Heng An Standard Life Insurance Company
Limited, applied IFRS 9 at 1 January 2023 following the implementation of the
new insurance standard, IFRS 17. Refer Note 4.1(a)(i).
Share capital Shares held by trusts Share premium reserve Retained earnings restated(1, 2) Other reserves(2) Total equity attributable Other equity Non-controlling interests - ordinary shares Total equity restated(1)
to equity
shareholders of abrdn plc restated(1)
Notes £m £m £m £m £m £m £m £m £m
1 January 2022 305 (171) 640 5,766 1,094 7,634 207 6 7,847
(Loss)/profit for the period - - - (302) - (302) 6 1 (295)
Other comprehensive income for the period - - - (407) 32 (375) - - (375)
Total comprehensive income for the period - - - (709) 32 (677) 6 1 (670)
Issue of share capital 4.15(a) - - - - - - - - -
Dividends paid on ordinary shares 4.10 - - - (154) - (154) - - (154)
Interest paid on other equity - - - - - - (6) - (6)
Reserves credit for employee share-based payments - - - - 11 11 - - 11
Transfer to retained earnings for vested employee share-based payments - - - 60 (60) - - - -
Shares acquired by employee trusts - (41) - - - (41) - - (41)
Shares distributed by employee and other trusts and related dividend - 60 - (62) - (2) - - (2)
equivalents
Other movements(2) - - - (23) 17 (6) - - (6)
Aggregate tax effect of items recognised directly in equity 4.7 - - - (1) - (1) - - (1)
30 June 2022 305 (152) 640 4,877 1,094 6,764 207 7 6,978
1. Comparatives for the six months ended 30 June 2022 have been restated for
the implementation of IFRS 17. Refer Note 4.1(a)(i).
2. Other movements for the six months ended 30 June 2022 and the 12 months
ended 31 December 2022 included the transfer of (£17m) previously recognised
in the foreign currency translation reserve (which is part of Other reserves)
to Retained earnings. In prior periods we had considered the functional
currency of an intermediate subsidiary holding the Group's investment in HDFC
Life to be US Dollars. We now consider that the functional currency should
have been GBP, resulting in the transfer between reserves in the six months
ended 30 June 2022. Prior periods were not restated as the impact on prior
periods was not considered material. There was no impact on net assets for any
period presented.
Share capital Shares held by trusts Share premium reserve Retained earnings restated(1, 2) Other reserves(2) Total equity attributable Other equity Non-controlling interests - ordinary shares Total equity restated(1)
to equity
shareholders of abrdn plc restated(1)
Notes £m £m £m £m £m £m £m £m £m
1 January 2022 305 (171) 640 5,766 1,094 7,634 207 6 7,847
(Loss)/profit for the year - - - (558) - (558) 11 1 (546)
Other comprehensive income for the year - - - (850) 41 (809) - - (809)
Total comprehensive income for the year - - - (1,408) 41 (1,367) 11 1 (1,355)
Issue of share capital 4.15(a) - - - - - - - - -
Dividends paid on ordinary shares 4.10 - - - (307) - (307) - - (307)
Interest paid on other equity - - - - - - (11) - (11)
Share buyback 4.15(a) (25) - - (302) 25 (302) - - (302)
Cancellation of capital redemption reserve 4.15(c) - - - 1,059 (1,059) - - - -
Other movements in non-controlling interests in the year - - - - - - - - -
Reserves credit for employee share-based payments - - - - 24 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 4.15(c) - - - 207 (207) - - - -
Shares acquired by employee trusts - (46) - - - (46) - - (46)
Shares distributed by employee and other trusts and related dividend - 68 - (70) - (2) - - (2)
equivalents
Other movements(2) - - - (23) 17 (6) - - (6)
31 December 2022 280 (149) 640 4,986 (129) 5,628 207 7 5,842
1. Comparatives for the 12 months ended 31 December 2022 have been restated
for the implementation of IFRS 17. Refer Note 4.1(a)(i).
2. Other movements for the six months ended 30 June 2022 and the 12 months
ended 31 December 2022 included the transfer of (£17m) previously recognised
in the foreign currency translation reserve (which is part of Other reserves)
to Retained earnings. In prior periods we had considered the functional
currency of an intermediate subsidiary holding the Group's investment in HDFC
Life to be US Dollars. We now consider that the functional currency should
have been GBP, resulting in the transfer between reserves in the 12 months
ended 31 December 2022. Prior periods were not restated as the impact on prior
periods was not considered material. There was no impact on net assets for any
period presented.
The Notes on pages 24 to 52 are an integral part of this condensed
consolidated financial information.
Condensed consolidated statement of cash flows
For the six months ended 30 June 2023
6 months 6 months Full Year
2023 2022 2022
restated(1) restated(1)
Notes £m £m £m
Cash flows from operating activities
Loss before tax (169) (326) (612)
Change in operating assets (86) 581 916
Change in operating liabilities 181 (272) (725)
Adjustment for non-cash movements in investment income (1) (7) -
Other non-cash and non-operating items 175 98 567
Taxation paid(2) (23) (18) (36)
Net cash flows from operating activities 77 56 110
Cash flows from investing activities
Purchase of property, plant and equipment (9) (12) (21)
Acquisition of subsidiaries and unincorporated businesses net of cash acquired - (1,378) (1,378)
Acquisition of investments in associates and joint ventures (2) (2) (20)
Proceeds in relation to contingent consideration 2 - 18
Payments in relation to contingent consideration (4) (4) (7)
Disposal of investments in associates and joint ventures - 6 6
Purchase of financial investments (291) (90) (297)
Proceeds from sale or redemption of financial investments 871 1,151 1,633
Taxation paid on sale or redemption of financial investments(2) (41) - (28)
Prepayment in respect of potential acquisition of customer contracts 4.20(b) 13 5 14
Acquisition of intangible assets (35) (1) (6)
Net cash flows from investing activities 504 (325) (86)
Cash flows from financing activities
Repayment of subordinated liabilities - - (92)
Payment of lease liabilities - principal (13) (15) (46)
Payment of lease liabilities - interest (3) (3) (6)
Shares acquired by trusts (19) (41) (46)
Interest paid on subordinated liabilities and other equity (16) (21) (34)
Other interest paid (2) - (2)
Cash received relating to collateral held in respect of derivatives hedging (11) - 74
subordinated liabilities
Share buyback (98) - (302)
Ordinary dividends paid 4.10 (142) (154) (307)
Net cash flows from financing activities (304) (234) (761)
Net increase/(decrease) in cash and cash equivalents 277 (503) (737)
Cash and cash equivalents at the beginning of the period 1,166 1,875 1,875
Effects of exchange rate changes on cash and cash equivalents (16) 23 28
Cash and cash equivalents at the end of the period(3) 1,427 1,395 1,166
Supplemental disclosures on cash flows from operating activities
Interest paid - 1 -
Interest received 37 16 38
Dividends received 53 61 110
Rental income received on investment property 2 2 2
1. Comparatives for the six months ended 30 June 2022 and the 12 months ended
31 December 2022 have been restated for the implementation of IFRS 17. Refer
Note 4.1(a)(i).
2. Total taxation paid for the six months ended 30 June 2023 was £64m (six
months ended 30 June 2022: £18m, 12 months ended 31 December 2022: £64m).
3. Comprises cash and cash equivalents, including cash and cash equivalents
backing unit linked liabilities, and overdrafts which are reported in other
financial liabilities in the condensed consolidated statement of financial
position. Cash and cash equivalents at 30 June 2023 were £1,427m (30 June
2022: £1,458m, 31 December 2022: £1,169m) of which £7m (30 June 2022:
£nil, 31 December 2022: £13m) is included in assets of operations held for
sale in the condensed consolidated statement of financial position (refer Note
4.14). The Group had no overdrafts at 30 June 2023 (30 June 2022: (£63m), 31
December 2022: (£3m)).
The Notes on pages 24 to 52 are an integral part of this condensed
consolidated financial information.
Notes to the condensed consolidated financial statements
4.1 Presentation of the condensed consolidated financial statements
(a) Basis of preparation
The condensed consolidated half year financial information has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted for use in
the UK and the Disclosure Guidance and Transparency Rules of the UK's
Financial Conduct Authority.
The accounting policies for recognition, measurement, consolidation and
presentation as set out in the Annual report and accounts for the year ended
31 December 2022 have been applied in the preparation of the condensed
consolidated half year financial information except as noted below.
(a)(i) New standards, interpretations and amendments to existing standards that have been adopted by the Group
The Group has adopted the following new International Financial Reporting
Standards (IFRSs), interpretations and amendments to existing standards, which
are effective for annual periods beginning on or after 1 January 2023.
IFRS 17 Insurance Contracts
On 1 January 2023, the Group adopted IFRS 17 Insurance Contracts. IFRS 17
replaces IFRS 4 Insurance Contracts which was an interim standard which
permitted the continued application of accounting policies, for insurance
contracts and contracts with discretionary participation features, which were
being used at transition to IFRS except where a change satisfied criteria set
out in IFRS 4. IFRS 17 introduces new required measurement and presentation
accounting policies for such contracts which reflect the view that these
contracts combine features of a financial instrument and a service contract.
IFRS 17's measurement model, which applies to groups of contracts, combines a
risk-adjusted present value of future cash flows and an amount representing
unearned profit. IFRS 17 introduces a new approach to presentation in the
income statement and statement of comprehensive income in relation to direct
exposure to insurance contracts.
The Group has no material direct exposure to insurance contracts and contracts
with discretionary participating features and the adoption of this standard
has had no significant direct impact on the measurement or presentation of
insurance contracts and therefore no restatement of prior periods was required
in relation to direct exposure.
However, the results of the Group's joint venture Heng An Standard Life
Insurance Company Limited (HASL) have been impacted by the adoption of IFRS 17
on 1 January 2023. HASL has also applied IFRS 9 Financial Instruments on 1
January 2023. While the Group had adopted IFRS 9 on 1 January 2019 following
the sale of its UK and European insurance in 2018, HASL had continued to take
the permitted temporary exemption granted to insurers in IFRS 4 to defer the
implementation of IFRS 9 until the implementation of IFRS 17.
As IFRS 17 is applied retrospectively and IFRS 9 is applied prospectively, the
combined impact of the change of accounting policy comes through at 1 January
2023. The net impact of the changes is an increase in the carrying value of
HASL, the Group's retained earnings and net assets of £16m, comprising a
decrease of £35m for IFRS 17 offset by an increase of £51m for IFRS 9.
IFRS 17 has three main valuation models: the general measurement model; the
variable fee approach and the premium allocation approach. HASL is primarily
using the general measurement model for its traditional insurance business and
the variable fee approach for its direct participating contracts and
investment contracts with direct participation features with some use of the
premium allocation approach. The results reflect the election to take the
other comprehensive income (OCI) options under IFRS 17 to take elements of the
movements in insurance contract valuations through OCI to minimise income
statement volatility.
The impact of the restatement in 2022 below partly reflects that the valuation
of investment contracts under the variable fee approach reflect the fair value
of the underlying assets from 1 January 2022 but a number of these assets were
not accounted for at fair value until 1 January 2023 upon HASL's adoption of
IFRS 9 (see below). The valuation of the insurance contracts is also impacted
by the use of lower discount rates to discount liabilities under IFRS 17 as
compared to those used under IFRS 4 and higher liabilities for financial
related guarantees within some products.
In relation to IFRS 9, the largest impact relates to its debt investments
which were classified as held to maturity under IAS 39 and subsequently
accounted for at amortised cost but are now classified as fair value through
OCI under IFRS 9.
As noted above, IFRS 17 is applied retrospectively. However, it was not
practicable for HASL to apply a full retrospective approach. Depending on the
nature and start date of the insurance contract, HASL has applied either a
modified retrospective approach or a fair value approach. The choice of
transition approach is not expected to have a significant impact on future
periods.
The carrying value of the joint venture and opening retained earnings as at 1
January 2022 have been restated for IFRS 17.
31 December 2021 as previously presented Impact of IFRS 17 1 January 2022 as restated
£m £m £m
Condensed consolidated statement of financial position
Carrying value of HASL 258 (9) 249
Investments in associates and joint ventures accounted for using the equity 274 (9) 265
method
Total assets 11,418 (9) 11,409
Retained earnings 5,775 (9) 5,766
Total equity attributable to equity shareholders of abrdn plc 7,643 (9) 7,634
Total equity 7,856 (9) 7,847
Total equity and liabilities 11,418 (9) 11,409
The carrying value of HASL at 30 June 2022 and 31 December 2022 and the
movements in the carrying value for the six months ended 30 June 2022 and the
12 months ended 31 December 2022 have also been restated.
6 months 2022 as previously presented Impact of IFRS 17 6 months 2022 as restated
£m £m £m
Condensed consolidated income statement
Share of profit or loss from associates and joint ventures 6 (6) -
Loss before tax (320) (6) (326)
Loss for the period (289) (6) (295)
Attributable to:
Equity shareholders of abrdn plc (296) (6) (302)
Earnings per share
Basic (pence per share) (13.9) (0.3) (14.2)
Diluted (pence per share) (13.9) (0.3) (14.2)
Condensed consolidated statement of comprehensive income
Loss for the period (289) (6) (295)
Share of other comprehensive income of associates and joint ventures (7) (14) (21)
Total items that may be reclassified subsequently to profit or loss 25 (14) 11
Other comprehensive income for the period (361) (14) (375)
Total comprehensive income for the period (650) (20) (670)
Attributable to:
Equity shareholders of abrdn plc (657) (20) (677)
Analysis of adjusted profit
Adjusted for the following items
Share of profit or loss from associates and joint ventures 6 (6) -
Total adjusting items including results of associates and joint ventures (419) (6) (425)
Loss for the period attributable to equity shareholders of abrdn plc (296) (6) (302)
Loss for the period (289) (6) (295)
30 June 2022 as previously presented Impact of IFRS 17 30 June 2022 as restated
£m £m £m
Condensed consolidated statement of financial position
Carrying value of HASL 275 (29) 246
Investments in associates and joint ventures accounted for using the equity 282 (29) 253
method
Total assets 10,879 (29) 10,850
Retained earnings 4,906 (29) 4,877
Total equity attributable to equity shareholders of abrdn plc 6,793 (29) 6,764
Total equity 7,007 (29) 6,978
Total equity and liabilities 10,879 (29) 10,850
Condensed consolidated statement of changes in equity
Opening retained earnings 5,775 (9) 5,766
Loss for the period (296) (6) (302)
Other comprehensive income for the period (393) (14) (407)
Total comprehensive income for the period (689) (20) (709)
Closing retained earnings 4,906 (29) 4,877
Opening total equity attributable to equity shareholders of abrdn plc 7,643 (9) 7,634
Loss for the period (296) (6) (302)
Other comprehensive income for the period (361) (14) (375)
Total comprehensive income for the period (657) (20) (677)
Closing total equity attributable to equity shareholders of abrdn plc 6,793 (29) 6,764
Opening total equity 7,856 (9) 7,847
Loss for the period (289) (6) (295)
Other comprehensive income for the period (361) (14) (375)
Total comprehensive income for the period (650) (20) (670)
Closing total equity 7,007 (29) 6,978
Full Year 2022 as previously presented Impact of IFRS 17 Full Year 2022 as restated
£m £m £m
Condensed consolidated income statement
Share of profit or loss from associates and joint ventures 2 3 5
Loss before tax (615) 3 (612)
Loss for the year (549) 3 (546)
Attributable to:
Equity shareholders of abrdn plc (561) 3 (558)
Earnings per share
Basic (pence per share) (26.8) 0.2 (26.6)
Diluted (pence per share) (26.8) 0.2 (26.6)
Condensed consolidated statement of comprehensive income
Loss for the year (549) 3 (546)
Share of other comprehensive income of associates and joint ventures (28) (29) (57)
Total items that may be reclassified subsequently to profit or loss 13 (29) (16)
Other comprehensive income for the year (780) (29) (809)
Total comprehensive income for the year (1,329) (26) (1,355)
Attributable to:
Equity shareholders of abrdn plc (1,341) (26) (1,367)
Analysis of adjusted profit
Adjusted for the following items
Share of profit or loss from associates and joint ventures 2 3 5
Total adjusting items including results of associates and joint ventures (868) 3 (865)
Loss for the year attributable to equity shareholders of abrdn plc (561) 3 (558)
Loss for the year (549) 3 (546)
31 December 2022 as previously presented Impact of IFRS 17 31 December 2022 as restated
£m £m £m
Condensed consolidated statement of financial position
Carrying value of HASL 245 (35) 210
Investments in associates and joint ventures accounted for using the equity 267 (35) 232
method
Total assets 9,247 (35) 9,212
Retained earnings 5,021 (35) 4,986
Total equity attributable to equity shareholders of abrdn plc 5,663 (35) 5,628
Total equity 5,877 (35) 5,842
Total equity and liabilities 9,247 (35) 9,212
Condensed consolidated statement of changes in equity
Opening retained earnings 5,775 (9) 5,766
Loss for the year (561) 3 (558)
Other comprehensive income for the year (821) (29) (850)
Total comprehensive income for the year (1,382) (26) (1,408)
Closing retained earnings 5,021 (35) 4,986
Opening total equity attributable to equity shareholders of abrdn plc 7,643 (9) 7,634
Loss for the year (561) 3 (558)
Other comprehensive income for the year (780) (29) (809)
Total comprehensive income for the year (1,341) (26) (1,367)
Closing total equity attributable to equity shareholders of abrdn plc 5,663 (35) 5,628
Opening total equity 7,856 (9) 7,847
Loss for the year (549) 3 (546)
Other comprehensive income for the year (780) (29) (809)
Total comprehensive income for the year (1,329) (26) (1,355)
Closing total equity 5,877 (35) 5,842
The restatement has no overall impact on the cash flows of the Group but does
impact certain line items in the condensed consolidated statement of cash
flows:
30 June 2022 as previously presented Impact of IFRS 17 30 June 2022 as restated
£m £m £m
Condensed consolidated statement of cash flows
Loss before tax (320) (6) (326)
Other non-cash and non-operating items 92 6 98
31 December 2022 as previously presented Impact of IFRS 17 31 December 2022 as restated
£m £m £m
Condensed consolidated statement of cash flows
Loss before tax (615) 3 (612)
Other non-cash and non-operating items 570 (3) 567
In line with the approach adopted by the Group on its implementation of IFRS 9
on 1 January 2019, the comparatives have not been restated for HASL's adoption
of IFRS 9. The impact of HASL adopting IFRS 9 is recognised in retained
earnings at 1 January 2023.
31 December 2022 as restated for IFRS 17 Impact of IFRS 9 1 January 2023
£m £m £m
Condensed consolidated statement of financial position
Carrying value of HASL 210 51 261
Investments in associates and joint ventures accounted for using the equity 232 51 283
method
Total assets 9,212 51 9,263
Retained earnings 4,986 51 5,037
Total equity attributable to equity shareholders of abrdn plc 5,628 51 5,679
Total equity 5,842 51 5,893
Total equity and liabilities 9,212 51 9,263
Amendments to existing standards
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2.
· Definition of Accounting Estimates - Amendments to IAS 8.
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12.
The Group's accounting policies have been updated to reflect these amendments.
Management considers the implementation of the above amendments to have no
significant impact on the Group's financial statements.
(b) Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and financial position, are set out in the
Management report and in the Annual report and accounts 2022 Strategic report.
This includes details on our liquidity and capital positions and our principal
risks, including the impacts of the macroeconomic environment and rising
inflation and the Ukraine conflict on these principal risks.
In preparing these half year results on a going concern basis, the Directors
have considered the following matters and have taken into account market
uncertainty.
· The Group has cash and liquid resources of £1.9bn at 30 June 2023.
In addition, the Company has a revolving credit facility of £400m as part of
our contingency funding plans which is due to mature in 2026 and remains
undrawn.
· The Group's indicative regulatory capital surplus on an IFPR basis
was £1bn in excess of capital requirements at 30 June 2023. The regulatory
capital surplus does not include the value of the Group's significant listed
investment in Phoenix.
· The Group performs regular stress and scenario analysis as described
in the Annual report and accounts 2022 Viability statement. The diverse range
of management actions available meant the Group was able to withstand these
extreme stresses.
· The Group's operational resilience processes have operated
effectively during the period including the provision of services by key
outsource providers.
Based on a review of the above factors the Directors are satisfied that the
Group and Company have and will maintain sufficient resources to enable them
to continue operating for at least 12 months from the date of approval of the
condensed consolidated financial statements. Accordingly, the financial
statements have been prepared on a going concern basis. There were no material
uncertainties relating to this going concern conclusion.
(c) Condensed consolidated half year financial information
This condensed consolidated half year financial information does not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Additionally, the comparative figures for the financial year ended 31
December 2022 are not the Company's statutory accounts for that financial
year. The statutory accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006. The condensed consolidated half year financial information
has been reviewed, not audited.
4.2 Acquisitions and disposals
(a) Acquisitions
(a)(i) Prior period acquisitions of subsidiaries
Interactive Investor (ii)
On 27 May 2022, abrdn plc purchased 100% of the issued share capital of Antler
Holdco Limited (Antler), the parent company for the Interactive Investor group
of companies. The cash outflow at the completion of the acquisition was
£1,496m, which comprised consideration of £1,485m and payments of £11m made
by abrdn to fund the settlement of ii transaction liabilities as part of the
transaction. The acquisition of ii provides abrdn with direct entry to the
high-growth digitally enabled direct investing market, accessing new customer
segments and capabilities. This allows abrdn customers to choose from a wide
spectrum of wealth services, spanning self-directed investing through to
high-touch financial advice, depending on their specific needs over their
financial life.
On 1 September 2022, Antler made a dividend in specie to abrdn plc of its
investment in Interactive Investor Limited which is now a direct subsidiary of
abrdn plc.
(b) Disposals
(b)(i) Prior period disposal of associates
Profit on disposal of interests in associates for the six months ended 30 June
2022 and the 12 months ended 31 December 2022 of £6m related to the sale of
the Group's interest in Origo Services Limited in May 2022.
4.3 Segmental analysis
The Group's reportable segments have been identified in accordance with the
way in which the Group is structured and managed. IFRS 8 Operating Segments
requires that the information presented in the financial statements is based
on information provided to the 'Chief Operating Decision Maker' which for the
Group is the executive leadership team.
(a) Basis of segmentation
(a)(i) Current reportable segments
Investments
Our global asset management business which provides investment solutions for
Institutional, Retail Wealth (previously named Wholesale) and Insurance
Partners (previously named Insurance) clients.
Adviser
Our UK financial adviser business which provides platform services to wealth
managers and advisers and from January 2023 and May 2023 respectively,
threesixty and our Managed Portfolio Service business, both of which were
previously reported within the Personal segment.
Personal
Our Personal business comprises Personal Wealth which combines our financial
planning business abrdn Financial Planning, our digital direct-to-consumer
services and discretionary fund management services provided by abrdn Capital
and ii following the completion of the acquisition in 2022. Refer Note
4.2(a)(i) for further details. abrdn Capital is currently held for sale -
refer Note 4.14.
In addition to the Group reportable segments above, the analysis of adjusted
profit in Section 4.3(b)(i) below also reports the following:
Corporate/strategic
Corporate/strategic mainly comprises certain corporate costs.
The segments are reported to the level of adjusted operating profit.
(b) Reportable segments - adjusted profit and revenue information
(b)(i) Analysis of adjusted profit
Adjusted operating profit is presented by reportable segment in the table
below.
Investments Adviser Personal Corporate/ Total
strategic
6 months 2023 Notes £m £m £m £m £m
Net operating revenue 466 103 152 - 721
Adjusted operating expenses (440) (54) (91) (9) (594)
Adjusted operating profit 26 49 61 (9) 127
Adjusted net financing costs and investment return 24
Adjusted profit before tax 151
Tax on adjusted profit (24)
Adjusted profit after tax 127
Adjusted for the following items
Restructuring and corporate transaction expenses 4.6 (113)
Amortisation and impairment of intangible assets acquired in business 4.6 (102)
combinations and through the purchase of customer contracts
Change in fair value of significant listed investments 4.5 (181)
Dividends from significant listed investments 4.5 37
Share of profit or loss from associates and joint ventures(1) 4
Other 4.9 35
Total adjusting items including results of associates and joint ventures (320)
Tax on adjusting items 48
Profit attributable to other equity holders (6)
Profit attributable to non-controlling interests - ordinary shares -
Loss for the period attributable to equity shareholders of abrdn plc (151)
Profit attributable to other equity holders 6
Profit attributable to non-controlling interests - ordinary shares -
Loss for the period (145)
1. Share of profit or loss from associates and joint ventures primarily
comprises the Group's share of results of HASL, Virgin Money Unit Trust
Managers (Virgin Money UTM), Tenet and Archax.
Net operating revenue is reported as the measure of revenue in the analysis of
adjusted operating profit and relates to revenues generated from external
customers.
Investments Adviser Personal Corporate/ Total
strategic restated(1)
6 months 2022 Notes £m £m £m £m £m
Net operating revenue(2) 546 92 58 - 696
Adjusted operating expenses (470) (54) (51) (6) (581)
Adjusted operating profit 76 38 7 (6) 115
Adjusted net financing costs and investment return (16)
Adjusted profit before tax 99
Tax on adjusted profit (13)
Adjusted profit after tax 86
Adjusted for the following items
Restructuring and corporate transaction expenses 4.6 (88)
Amortisation and impairment of intangible assets acquired in business 4.6 (52)
combinations and through the purchase of customer contracts
Profit on disposal of interests in associates 4.2(b) 6
Change in fair value of significant listed investments 4.5 (313)
Dividends from significant listed investments 4.5 42
Share of profit or loss from associates and joint ventures(1,3) -
Impairment of interests in associates 4.13 (9)
Other 4.9 (11)
Total adjusting items including results of associates and joint ventures (425)
Tax on adjusting items 44
Profit attributable to other equity holders (6)
Profit attributable to non-controlling interests - ordinary shares (1)
Loss for the period attributable to equity shareholders of abrdn plc (302)
Profit attributable to other equity holders 6
Profit attributable to non-controlling interests - ordinary shares 1
Loss for the period (295)
1. Comparatives for the six months ended 30 June 2022 have been restated for
the implementation of IFRS 17. Refer Note 4.1(a)(i).
2. The Group's measure of segmental revenue was renamed from fee based revenue
to net operating revenue during 2022.
3. Share of profit or loss from associates and joint ventures primarily
comprises the Group's share of results of HASL and Virgin Money UTM.
Investments Adviser Personal Corporate/ Total
strategic restated(1)
Full Year 2022 Notes £m £m £m £m £m
Net operating revenue 1,070 185 201 - 1,456
Adjusted operating expenses (956) (99) (129) (9) (1,193)
Adjusted operating profit 114 86 72 (9) 263
Adjusted net financing costs and investment return (10)
Adjusted profit before tax 253
Tax on adjusted profit (22)
Adjusted profit after tax 231
Adjusted for the following items
Restructuring and corporate transaction expenses 4.6 (214)
Amortisation and impairment of intangible assets acquired in business 4.6 (494)
combinations and through the purchase of customer contracts
Profit on disposal of interests in associates 4.2(b) 6
Change in fair value of significant listed investments 4.5 (187)
Dividends from significant listed investments 4.5 68
Share of profit or loss from associates and joint ventures(1,2) 5
Impairment of interests in associates 4.13 (9)
Other 4.9 (40)
Total adjusting items including results of associates and joint ventures (865)
Tax on adjusting items 88
Profit attributable to other equity holders (11)
Profit attributable to non-controlling interests - ordinary shares (1)
Loss for the year attributable to equity shareholders of abrdn plc (558)
Profit attributable to other equity holders 11
Profit attributable to non-controlling interests - ordinary shares 1
Loss for the year (546)
1. Comparatives for the 12 months ended 31 December 2022 have been restated
for the implementation of IFRS 17. Refer Note 4.1(a)(i).
2. Share of profit or loss from associates and joint ventures primarily
comprises the Group's share of results of HASL, Virgin Money UTM and Tenet.
4.4 Net operating revenue
(a) Revenue from contracts with customers
The following table provides a breakdown of total revenue from contracts with
customers.
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Investments
Management fee income - Institutional and Retail Wealth(1,2) 399 463 901
Management fee income - Insurance Partners(1,3) 75 89 167
Performance fees and carried interest 12 12 41
Other revenue from contracts with customers 18 16 38
Revenue from contracts with customers for the Investments segment 504 580 1,147
Adviser
Platform charges 85 90 176
Treasury income 15 3 11
Other revenue from contracts with customers 4 - -
Revenue from contracts with customers for the Adviser segment 104 93 187
Personal
Fee income - Advice and Discretionary 37 45 87
Account fees 27 4 32
Trading transactions 25 4 27
Treasury income 66 5 58
Revenue from contracts with customers for the Personal segment 155 58 204
Total revenue from contracts with customers 763 731 1,538
1. In addition to revenues earned as a percentage of AUM, management fee
income includes certain other revenues such as registration fees.
2. Previously named Institutional and Wholesale.
3. Previously named Insurance.
(b) Cost of sales
The following table provides a breakdown of total cost of sales.
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Cost of sales
Commission expenses 33 32 66
Other cost of sales 9 3 16
Total cost of sales 42 35 82
Other cost of sales includes amounts payable to employees and others relating
to carried interest and performance fee revenue.
(c) Reconciliation of revenue from contracts with customers to net operating revenue as presented in the analysis of adjusted operating profit
The following table provides a reconciliation of revenue from contracts with
customers as presented in the condensed consolidated income statement to net
operating revenue, as presented in the analysis of adjusted operating profit
(refer Note 4.3(b)(i) for each of the Group's reportable segments).
Investments Adviser Personal Total
30 Jun 2023 30 Jun 2022 31 Dec 2022 30 Jun 2023 30 Jun 2022 31 Dec 2022 30 Jun 2023 30 Jun 2022 31 Dec 2022 30 Jun 2023 30 Jun 2022 31 Dec 2022
£m £m £m £m £m £m £m £m £m £m £m £m
Revenue from contracts with customers 504 580 1,147 104 93 187 155 58 204 763 731 1,538
Cost of sales (38) (34) (77) (1) (1) (2) (3) - (3) (42) (35) (82)
Net operating revenue 466 546 1,070 103 92 185 152 58 201 721 696 1,456
There are no differences between net operating revenue as presented in the
condensed consolidated income statement and the analysis of Group adjusted
profit by segment.
4.5 Net gains or losses on financial instruments and other income
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Fair value movements and dividend income on significant listed investments
Fair value movements on significant listed investments (other than dividend (181) (313) (187)
income)
Dividend income from significant listed investments 37 42 68
Total fair value movements and dividend income on significant listed (144) (271) (119)
investments
Non-unit linked business - excluding significant listed investments
Net gains or losses on financial instruments at fair value through profit or (11) (54) (83)
loss
Interest and similar income from financial instruments at amortised cost 30 8 25
Foreign exchange gain or losses on financial instruments at amortised cost (5) 10 9
Other income 9 6 41
Net gains or losses on financial instruments and other income - non-unit 23 (30) (8)
linked business - excluding significant listed investments
Unit linked business
Net gains or losses on financial instruments at fair value through profit or
loss
Net gains or losses on financial assets at fair value through profit or loss 44 (156) (130)
Change in non-participating investment contract financial liabilities (36) 129 112
Change in liability for third party interests in consolidated funds (6) 30 23
Total net gains or losses on financial instruments at fair value through 2 3 5
profit or loss
Interest and similar income from financial instruments at amortised cost 1 - -
Net gains or losses on financial instruments and other income - unit linked 3 3 5
business(1)
Total other net gains or losses on financial instruments and other income 26 (27) (3)
Total net gains or losses on financial instruments and other income (118) (298) (122)
1. In addition to the Net gains or losses on financial instruments and other
income - unit linked business of £3m (six months ended 30 June 2022: £3m, 12
months ended 31 December 2022: £5m), there are administrative expenses and
policyholder tax of less than £1m (six months ended 30 June 2022: £1m, 12
months ended 31 December 2022: £1m) and £3m (six months ended 30 June 2022:
£2m, 12 months ended 31 December 2022: £4m) respectively. The result
attributable to unit linked business for the period is therefore £nil (six
months ended 30 June 2022: £nil, 12 months ended 31 December 2022: £nil).
4.6 Administrative and other expenses
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Restructuring and corporate transaction expenses 113 88 214
Impairment of intangibles acquired in business combinations and through the
purchase of customer contracts
Impairment of intangibles acquired in business combinations 37 - 368
Impairment of intangibles acquired through the purchase of customer contracts - - 1
Total impairment of intangibles acquired in business combinations and through 37 - 369
the purchase of customer contracts
Amortisation of intangibles acquired in business combinations and through the
purchase of customer contracts
Amortisation of intangibles acquired in business combinations 59 47 115
Amortisation of intangibles acquired through the purchase of customer 6 5 10
contracts
Total amortisation of intangibles acquired in business combinations and 65 52 125
through the purchase of customer contracts
Staff costs and other employee-related costs 275 266 549
Other administrative expenses 274 300 662
Total administrative and other expenses(1) 764 706 1,919
1. Total administrative and other expenses includes less than £1m (six months
ended 30 June 2022: £1m, 12 months ended 31 December 2022: £1m) relating to
unit linked business.
There were restructuring expenses of £90m (six months ended 30 June 2022:
£70m, 12 months ended 31 December 2022: £169m), mainly consisting of
property related impairments, severance, platform transformation and specific
costs to effect savings in Investments. Corporate transaction expenses were
£23m (six months ended 30 June 2022: £18m, 12 months ended 31 December 2022:
£45m). Corporate transaction expenses for the six months ended 30 June 2022
and the 12 months ended 31 December 2022 included £13m and £14m respectively
of deal costs relating to acquisitions, primarily for ii.
4.7 Tax expense
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Current tax:
UK 8 2 5
Overseas 47 11 45
Adjustment to tax expense in respect of prior years - (3) (8)
Total current tax 55 10 42
Deferred tax:
Deferred tax credit arising from the current period (65) (42) (104)
Adjustment to deferred tax in respect of prior years (14) 1 (4)
Total deferred tax (79) (41) (108)
Total tax credit(1) (24) (31) (66)
1. The tax credit of £24m (six months ended 30 June 2022: tax credit of
£31m, 12 months ended 31 December 2022: tax credit of £66m) includes a tax
expense of £3m (six months ended 30 June 2022: £2m, 12 months ended 31
December 2022: £4m) relating to unit linked business.
Tax relating to components of other comprehensive income is as follows:
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Tax relating to fair value gains and losses recognised on cash flow hedges (3) 15 21
Tax relating to cash flow hedge gains and losses transferred to condensed 7 (17) (19)
consolidated income statement
Equity holder tax effect relating to items that may be reclassified 4 (2) 2
subsequently to
profit or loss
Tax relating to other comprehensive income 4 (2) 2
All of the amounts presented above are in respect of equity holders of abrdn
plc.
Tax relating to items taken directly to equity is as follows:
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Tax relating to share-based payments (2) 1 -
Tax relating to items taken directly to equity (2) 1 -
4.8 Earnings per share
Basic earnings per share is calculated by dividing profit or loss attributable
to ordinary equity holders by the weighted average number of ordinary shares
in issue during the period excluding shares owned by the employee trusts that
have not vested unconditionally to employees.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue during the period to assume the conversion
of all dilutive potential ordinary shares, such as share options granted to
employees.
Adjusted earnings per share is calculated on adjusted profit after tax
attributable to ordinary equity holders of the Company.
The following table shows details of basic, diluted and adjusted earnings per
share.
6 months 6 months Full Year
2023
2022 2022
restated(1) restated(1)
£m £m £m
Adjusted profit before tax 151 99 253
Tax on adjusted profit (24) (13) (22)
Adjusted profit after tax 127 86 231
Attributable to:
Other equity holders (6) (6) (11)
Non-controlling interests - ordinary shares - (1) (1)
Adjusted profit after tax attributable to equity shareholders of abrdn plc 121 79 219
Total adjusting items including results of associates and joint ventures (320) (425) (865)
Tax on adjusting items 48 44 88
Loss attributable to equity shareholders of abrdn plc (151) (302) (558)
6 months 6 months Full Year
2023
2022 2022
Millions Millions Millions
Weighted average number of ordinary shares outstanding 1,949 2,130 2,094
Dilutive effect of share options and awards 25 17 16
Weighted average number of diluted ordinary shares outstanding 1,974 2,147 2,110
In accordance with IAS 33, no share options and awards were treated as
dilutive for the six months ended 30 June 2023, the six months ended 30 June
2022 and the 12 months ended 31 December 2022 due to the loss attributable to
equity holders of abrdn plc in those periods. This resulted in the adjusted
diluted earnings per share for the six months ended 30 June 2023 being
calculated using a weighted average number of ordinary shares of 1,949 million
(six months ended 30 June 2022: 2,130 million, 12 months ended 31 December
2022: 2,094 million).
6 months 6 months Full Year
2023
2022 2022
restated(1) restated(1)
Pence Pence Pence
Basic earnings per share (7.7) (14.2) (26.6)
Diluted earnings per share (7.7) (14.2) (26.6)
Adjusted earnings per share 6.2 3.7 10.5
Adjusted diluted earnings per share 6.2 3.7 10.5
1. Comparatives for the six months ended 30 June 2022 and the 12 months ended
31 December 2022 have been restated for the implementation of IFRS 17. Refer
Note 4.1(a)(i).
4.9 Adjusted profit and adjusting items
Adjusted profit 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
(refer Section 4.9(a) below).
· 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.
The tax charge or credit allocated to adjusting items is based on the tax
treatment of each adjusting item.
The operating, investing and financing cash flows presented in the condensed
consolidated statement of cash flows are for both adjusting and non-adjusting
items.
(a) Significant listed investments
During 2020 and 2021, the Group's investments in HDFC Life, Phoenix and HDFC
Asset Management were reclassified from associates to equity securities and
considered significant listed investments of the Group. Fair value movements
on these investments are included as adjusting items, which is aligned with
our treatment of gains on disposal for these holdings when they were
classified as associates. Dividends from significant listed investments are
also included as adjusting items, as these result in fair value movements.
During the six months ended 30 June 2023:
· The Group's holding in HDFC Life reduced by 1.7% following the sale
of 35,694,105 equity shares through a Bulk Sale on 31 May 2023 and the Group
now has no remaining shareholding in HDFC Life. The total consideration net of
taxes, expenses and related foreign exchange hedging was £198m.
· The Group's holding in HDFC Asset Management reduced by 10.2%
following the sale of 21,778, 305 equity shares through a Bulk Sale on 20 June
2023 and the Group now has no remaining shareholding in HDFC Asset Management.
The total consideration net of taxes, expenses and related foreign exchange
hedging was £337m.
Following the sales, the Group has one remaining significant listed
investment, Phoenix.
(b) Other
Other adjusting items for the six months ended 30 June 2023 primarily relates
to the insurance liability recovery of £36m in relation to a single process
execution event in 2022 (refer Note 4.17). The £41m provision expense was
included in other adjusting items for the 12 months ended 31 December 2022
(£nil for the six months ended 30 June 2022).
Other adjusting items for the six months ended 30 June 2023 includes a gain of
£5m (six months ended 30 June 2022: gain of £6m, 12 months ended 31 December
2022: gain of £35m) for net fair value movements in contingent consideration
and a fair value loss of £5m (six months ended 30 June 2022: loss of £nil,
12 months ended 31 December 2022: loss of £11m) on a financial instrument
liability related to a prior period acquisition. Further information on the
valuation of the contingent consideration and related sensitivities is
included in Note 4.18.
Other adjusting items for the six months ended 30 June 2022 and 12 months
ended 31 December 2022 also included a loss of £12m and £13m respectively
(six months ended 30 June 2023: £nil) in relation to market losses on the
investments held by the abrdn Financial Fairness Trust which is consolidated
by the Group. The assets of the abrdn Financial Fairness Trust are restricted
to be used for charitable purposes.
4.10 Dividends on ordinary shares
6 months 2023 6 months 2022 Full Year 2022
Pence per £m(1) Pence per £m Pence per £m
share
share
share
Dividends paid in reporting period
Current year interim dividend - - - - 7.30 153
Final dividend for prior year 7.30 142 7.30 154 7.30 154
Total dividends paid in reporting period 142 154 307
Dividends relating to reporting period
Interim dividend 7.30 137 7.30 153 7.30 153
Final dividend - - - - 7.30 142
Total dividends relating to reporting period 137 153 295
1. Estimated for the current period interim recommended dividend.
Subsequent to 30 June 2023, the Board has declared an interim dividend for
2023 of 7.30 pence per ordinary share (interim 2022: 7.30 pence), an estimated
£137m in total (interim 2022: £153m). The dividend is expected to be paid on
26 September 2023 and will be recorded as an appropriation of retained
earnings in the financial statements for the year ended 31 December 2023.
4.11 Property, plant and equipment
30 Jun 30 Jun 31 Dec
2023 2022 2022
£m £m £m
Owner occupied property 1 1 1
Equipment 45 56 55
Right-of-use assets - property 115 135 144
Right-of-use assets - equipment 1 1 1
Total property, plant and equipment 162 193 201
Impairments of right-of-use assets for property of £35m have been recognised
in the six months ended 30 June 2023 (six months ended 30 June 2022: £2m, 12
months ended 31 December 2022: £7m). The impairments relate to a number of
properties in the UK and the US that will no longer be used operationally by
the Group. The right-of-use assets are related to the Investments segment
(£27m impairment), Personal segment (£1m impairment) and Corporate/strategic
(£7m impairment).
The recoverable amount for the properties in the UK, which was based on value
in use, was £26m using a pre-tax discount rate of 7.01%. The recoverable
amount for the properties in the US, which was based on value in use, was £6m
using a pre-tax discount rate of 6.81%. The cash flows were based on the
rental income expected to be received under subleases during the term of the
lease and the direct expenses expected to be incurred in managing the leased
property, discounted using a discount rate that reflects the risks inherent in
the cash flow estimates. It is not based on valuations by an independent
valuer.
The Group has also recognised a reversal of impairment of £3m in the six
months ended 30 June 2023 (six months ended 30 June 2022: £nil, 12 months
ended 31 December 2022: £nil) in relation to a property in the UK which was
not being used operationally but following the review of properties in the UK
is being brought back into operational use. The recoverable amount for this
property was its carrying value at 30 June 2023 if it had not previously been
impaired. The right-of-use asset is also related to the Investments segment.
4.12 Intangible assets
30 Jun 30 Jun 31 Dec
2023 2022 2022
£m £m £m
Acquired through business combinations
Goodwill 898 1,324 935
Brand 12 18 14
Customer relationships and investment management contracts 555 701 609
Technology and other 20 36 27
Internally developed software 12 3 7
Purchased software and other - 1 -
Cost of obtaining customer contracts 51 33 27
Total intangible assets 1,548 2,116 1,619
Goodwill at 30 June 2023 comprises a gross carrying value of £4,665m (30 June
2022: £4,714m, 31 December 2022: £4,665m) and accumulated impairment of
£3,767m (30 June 2022: £3,390m, 31 December 2022: £3,730m).
There were no additions to goodwill in the six months ended 30 June 2023.
Impairments of goodwill of £37m have been recognised in this period. The
goodwill impairment comprises £23m relating to the abrdn Financial Planning
Limited (aFPL) cash-generating unit which is included in the Personal segment
and £14m relating to the Finimize cash-generating unit which is included in
the Investments segment. The impairments are included within Impairment of
intangibles acquired in business combinations and through the purchase of
customer contracts in the condensed consolidated income statement.
The impairment of goodwill allocated to the aFPL cash-generating unit, which
comprises the Group's financial planning business, was £23m. The impairment
resulted from lower projected revenues as a result of lower markets and
macroeconomic conditions and the impact of business restructuring. Following
the impairment, the goodwill allocated to the aFPL cash-generating unit was
£37m (30 June 2022: £60m, 31 December 2022: £60m).
The recoverable amount of the aFPL cash-generating unit which is its fair
value less cost of disposal (FVLCD) at 30 June 2023 was £68m. This was also
the carrying value of the cash-generating unit at 30 June 2023. 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 was based on forecast 2023
revenue and AUAdv were based on current AUAdv. The expected cost of disposal
was based on past experience of previous transactions.
As the carrying value of the cash-generating unit is now equal to 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 £14m. A 20% reduction in market transaction
multiples, adjusted to be appropriate to the Group's financial planning
business, would result in a further impairment of £14m.
The impairment of goodwill allocated to the Finimize cash-generating unit,
which comprises the Finimize business, was £14m. The impairment resulted from
lower short-term projected growth following a strategic shift that prioritises
profitability over revenue growth in the pursuit of a sustainable, resilient
if lower growing business in the short term and broader market conditions.
Following the impairment, the goodwill allocated to the Finimize
cash-generating unit was £17m (30 June 2022: £72m, 31 December 2022: £31m).
The recoverable amount of the Finimize cash-generating unit at 30 June 2023
was £23m which was based on FVLCD. This was also the carrying value of the
cash-generating unit at 30 June 2023. The FVLCD considered a number of
valuation approaches, with the primary approach being a revenue multiple
approach. The key assumptions used in determining the revenue multiple
valuation were future revenue projections, which were based on management
forecasts and assumed a continued level of revenue growth, and market
multiples. Market multiples were based on broadly comparable listed companies,
with appropriate discounts applied to take into account profitability, track
record, revenue growth potential, and net premiums for control.
The residual goodwill allocated to the Finimize cash-generating unit is not
significant in comparison to the total carrying amount of goodwill.
These are level 3 measurements as they are measured using inputs which are not
based on observable market data.
During the six months ended 30 June 2022 and the 12 months ended 31 December
2022, there were additions to goodwill of £993m. The additions in intangible
assets acquired through business combinations in the six months ended 30 June
2022 predominately related to the acquisition of ii. Refer Note 4.2(a)(i) for
further details. In addition, during the 12 months ended 31 December 2022,
there was an impairment of the Group's goodwill of £340m of which £299m
related to the asset management group of cash-generating units and £41m
related to the Finimize cash-generating unit. There was also goodwill of £49m
relating to the Personal segment which was classified as held for sale (refer
Note 4.14).
4.13 Investments in associates and joint ventures accounted for using the
equity method
30 Jun 30 Jun 31 Dec
2023 2022 2022
restated(1) restated(1)
£m £m £m
Associates
Other 15 - 14
Joint ventures
HASL 223 246 210
Other 7 7 8
Total investments in associates and joint ventures accounted for using the 245 253 232
equity method
1. Comparatives for 30 June 2022 and 31 December 2022 have been restated for
the implementation of IFRS 17. Refer Note 4.1(a)(i).
During the six months ended 30 June 2023, the Group made additions to Other
associates accounted for using the equity method of £2m (six months ended 30
June 2022: £nil, 12 months ended 31 December 2022: £18m). There were no
additions to joint ventures accounted for using the equity method (six months
ended 30 June 2022: £2m, 12 months ended 31 December 2022: £2m).
There were no impairments of associates or joint ventures during the six
months ended 30 June 2023. During the six months ended 30 June 2022 and the 12
months ended 31 December 2022, the Group recognised an impairment of £9m in
relation to its interest in Tenet Group Limited which is included in Other
associates accounted for using the equity method.
4.14 Assets and liabilities held for sale
On 26 February 2023, the Group agreed the sale of abrdn Capital Limited (aCL),
its discretionary fund management business, to LGT UK Holdings Limited. aCL,
which is in the Personal segment, was classified as an operation held for sale
at 31 December 2022 as a sale of the business was considered highly probable
at this date. The sale is expected to complete in H2 2023, following
satisfaction of certain conditions so aCL was still classified as an operation
held for sale at 30 June 2023.
30 Jun 2023 31 Dec 2022
£m £m
Assets of operations held for sale
Intangible assets 58 58
Property, plant and equipment 1 -
Receivables and other financial assets 16 15
Other assets 1 1
Cash and cash equivalents 7 13
Total assets of operations held for sale 83 87
Liabilities of operations held for sale
Other financial liabilities 6 14
Total liabilities of operations held for sale 6 14
Net assets of operations held for sale 77 73
Net assets of operations held for sale are net of intercompany balances
between aCL and other group entities, the net assets of aCL on a gross basis
as at 30 June 2023 are £75m (31 December 2022: £70m).
4.15 Issued share capital and share premium, shares held by trusts, retained earnings and other reserves
(a) Issued share capital and share premium
The movement in the issued ordinary share capital and share premium of the
Company was:
6 months 2023 6 months 2022 Full Year 2022
Ordinary share capital Share premium Ordinary share capital Share premium Ordinary share capital Share premium
Issued shares fully paid 13 61/63p each £m £m 13 61/63p each £m £m 13 61/63p each £m £m
At start of period 2,001,891,899 280 640 2,180,724,786 305 640 2,180,724,786 305 640
Shares issued in respect of share incentive plans 1,023 - - 1,174 - - 2,381 - -
Shares bought back on-market and cancelled (39,587,562) (6) - - - - (178,835,268) (25) -
At end of period 1,962,305,360 274 640 2,180,725,960 305 640 2,001,891,899 280 640
All ordinary shares in issue in the Company rank pari passu and carry the same
voting rights and entitlement to receive dividends and other distributions
declared or paid by the Company.
On 5 June 2023, the Company announced that it would initiate a £150m return
to shareholders. This commenced on 5 June 2023. As at 30 June 2023, the
Company had bought back and cancelled 39,587,562 shares as part of this
programme. The total consideration for the six months ended 30 June 2023 was
£98m which includes transaction costs and any unsettled purchases. At 30 June
2023, there were unsettled purchases for 6,138,236 shares.
During the 12 months ended 31 December 2022, the Company bought back and
cancelled 178,835,268 shares. The total consideration was £302m which
included transaction costs. No shares were bought back during the six months
ended 30 June 2022.
The share buyback has resulted in a reduction in retained earnings of £98m
(six months ended 30 June 2022: £nil, 12 months ended 31 December 2022:
£302m).
An amount of £6m has been credited to the capital redemption reserve relating
to the nominal value of the shares cancelled (six months ended 30 June 2022:
£nil, 12 months ended 31 December 2022: £25m).
The Company can issue shares to satisfy awards granted under employee
incentive plans which have been approved by shareholders.
(b) Shares held by trusts
Shares held by trusts relates to shares in abrdn plc that are held by the
abrdn Employee Benefit Trust (abrdn EBT), Standard Life Employee Trust (ET)
and the Aberdeen Asset Management Employee Benefit Trust 2003 (AAM EBT).
The abrdn EBT, ET and AAM EBT purchase shares in the Company for delivery to
employees under employee incentive plans. Purchased shares are recognised as a
deduction from equity at the price paid for them. Where new shares are issued
to the arbdn EBT, ET or AAM EBT the price paid is the nominal value of the
shares. When shares are distributed from the trust their corresponding value
is released to retained earnings.
The number of shares held by trusts was as follows:
6 months 6 months Full Year
2023
2022 2022
Number of shares held by trusts
abrdn Employee Benefit Trust 35,540,771 36,702,940 36,112,240
Standard Life Employee Trust 22,270,081 22,635,206 22,629,035
Aberdeen Asset Management Employee Benefit Trust 2003 2,194,934 2,316,847 2,264,591
(c) Retained earnings and other reserves
The merger reserve includes £263m (30 June 2022: £470m, 31 December 2022:
£263m) in relation to the Group's asset management businesses. Following the
impairment of the Company's investments in abrdn Holdings Limited and abrdn
Investments (Holdings) Limited, £207m was transferred from the merger reserve
to retained earnings during the 12 months ended 31 December 2022.
In addition, 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 during the 12 months
ended 31 December 2022.
There were no transfers from these reserves to retained earnings during the
six months ended 30 June 2022 and 2023.
4.16 Pension and other post-retirement benefit provisions
The Group operates a number of defined benefit pension plans, the largest of
which is the abrdn UK Group plan (principal plan) which is closed to future
accrual. The Group also operates two other UK defined benefit plans, which are
closed to future accrual, the abrdn ROI plan, which has fewer than 10
employees accruing future benefits, and a number of smaller funded and
unfunded defined benefit plans in other countries.
For the UK plans, the trustees set the plan investment strategies to protect
the ratio of plan assets to the trustees' measure of the value of assets
needed to meet the trustees' objectives. The investment strategies do not aim
to protect an IAS 19 surplus or ratio of plan assets to the IAS 19 measure of
liabilities.
(a) Analysis of amounts recognised in the condensed consolidated income statement
The amounts recognised in the condensed consolidated income statement for
defined contribution and defined benefit plans are as follows:
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Current service cost 28 26 56
Past service cost (5) - -
Net interest income (18) (16) (32)
Administrative expenses 2 2 3
Expense recognised in the condensed consolidated income statement 7 12 27
In addition, for the six months ended 30 June 2023, losses of £81m (six
months ended 30 June 2022: losses of £386m, 12 months ended 31 December 2022:
losses of £793m) have been recognised in other comprehensive income in the
condensed consolidated statement of comprehensive income in relation to
remeasurement of the defined benefit plans.
(b) Analysis of amounts recognised in the condensed consolidated statement of financial position
Pension and other post-retirement benefit assets at 30 June 2023 of £772m (30
June 2022: £1,221m, 31 December 2022: £831m) includes the following amounts
in relation to the principal plan:
6 months 6 months Full Year
2023
2022 2022
£m £m £m
Present value of funded obligation (1,664) (1,932) (1,755)
Fair value of plan assets 2,819 3,763 3,001
Net asset before the limit on plan surplus 1,155 1,831 1,246
Effect of limit on plan surplus(1) (404) (641) (436)
Net asset 751 1,190 810
1. UK recoverable surpluses are reduced to reflect an authorised surplus
payments charge of 35% that would arise on a refund.
A pension plan surplus is considered to be recoverable where an unconditional
right to a refund exists. The principal plan surplus had reduced significantly
in 2022 due to market movements, primarily driven by the increase in UK high
quality bond yields with a smaller impact from UK inflation changes during
2022. There was further impact from these in the six months ended 30 June 2023
but this was less significant.
As part of ongoing actions taken in recent years to reduce risk in abrdn's
principal defined benefit pension plan, the trustee submitted a petition to
the Court of Session in March 2023 seeking a direction on the destination of
any residual surplus assets that remain after all plan-related obligations are
settled or otherwise provided for. On 1 August 2023, the Court of Session,
among other things, confirmed that if a buy-out were to be completed and
sufficient provision made for: (i) any remaining liabilities; and (ii)
expenses of completing the winding-up of the pension scheme, there would be a
resulting trust in respect of any residual surplus assets in favour of the
employer. We are continuing to work with the trustee on next steps. Any
residual surplus will be determined on a different basis to IAS 19 or funding
measures of the plan surplus. The timing of release of any surplus remains a
matter for the trustee. The IAS 19 defined benefit plan asset is not included
in abrdn's regulatory capital.
(c) Principal assumptions
Determination of the valuation of principal plan liabilities is a key estimate
as a result of the assumptions made relating to both economic and non-economic
factors.
The key economic assumptions for the principal plan, which are based in part
on current market conditions, are shown below:
30 Jun 30 Jun 31 Dec
2023 2022 2022
% % %
Discount rate 5.25 4.00 4.85
Rates of inflation
Consumer Price Index (CPI) 2.80 2.60 2.75
Retail Price Index (RPI) 3.15 3.00 3.10
The changes in economic assumptions over the period reflect changes in both
corporate bond prices and market implied inflation. The population of
corporate bond prices excludes bonds issued by UK universities. The inflation
assumption reflects the future reform of RPI effective from 2030.
4.17 Provisions
30 Jun 30 Jun 31 Dec
2023 2022 2022
£m £m £m
Provisions
Separation costs 32 34 33
Process execution - - 41
Other provisions 26 18 23
Total provisions 58 52 97
The process execution provision recognised at 31 December 2022 for £41m in
respect of a payment required to compensate an asset management client
relating to the provision of certain services has been fully utilised in the
six months ended 30 June 2023 to fully settle the compensation.
Following the settlement, the Group has agreed a recovery of £36m from its
liability insurance, being the cost of the compensation net of a £5m excess
of which £25m had been received by 30 June 2023 with a reimbursement asset of
£11m recognised within Receivables and other financial assets in the
condensed consolidated statement of financial position. The recovery has been
credited against Other administrative expenses in the condensed consolidated
income statement.
4.18 Fair value of assets and liabilities
(a) Fair value hierarchy
In determining fair value, the following fair value hierarchy categorisation
has been used:
· Level 1: Fair values measured using quoted prices (unadjusted) in
active markets for identical assets or liabilities. An active market exists
where transactions take place with sufficient frequency and volume to provide
pricing information on an ongoing basis.
· Level 2: Fair values measured using inputs other than quoted prices
included within level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 3: Fair values measured using inputs that are not based on
observable market data (unobservable inputs).
Information on the methods and assumptions used to determine fair values for
equity securities and interests in pooled investment funds, debt securities
and derivatives measured at fair value is given below:
Equities and interests in pooled investment funds(1,2) Debt securities Derivatives(3)
Level 1 Equity instruments listed on a recognised exchange valued using prices sourced Debt securities listed on a recognised exchange valued using prices sourced Exchange traded derivatives valued using prices sourced from the relevant
from their primary exchange. from their primary exchange. exchange.
Level 2 Pooled investment funds where daily unit prices are available and reference is Debt securities valued using prices received from external pricing providers Over-the-counter derivatives measured using a range of valuation models
made to observable market data. based on quotes received from a number of market participants. including discounting future cash flows and option valuation techniques.
Debt securities valued using models and standard valuation formulas based on
observable market data(4).
Level 3 These relate primarily to interests in private equity, real estate and Debt securities valued using prices received from external pricing providers N/A
infrastructure funds which are valued at net asset value. Underlying real based on a single broker indicative quote.
estate and private equity investments are generally valued in accordance with
independent professional valuation reports or International Private Equity and
Venture Capital Valuation Guidelines where relevant. The underlying
investments in infrastructure funds are generally valued based on the phase of Debt securities valued using models and standard valuation formulas based on
individual projects forming the overall investment and discounted cash flow unobservable market data(4).
techniques based on project earnings.
Where net asset values are not available at the same date as the reporting
date, these valuations are reviewed and, where appropriate, adjustments are
made to reflect the impact of changes in market conditions between the date of
the valuation and the end of the reporting period.
Other unlisted equity securities are generally valued at indicative share
prices from off market transactions.
1. Investments in associates at fair value through profit or loss are valued
in the same manner as the Group's equity securities and interests in pooled
investment funds.
2. Where pooled investment funds have been seeded and the investment in the
funds have been classified as held for sale, the costs to sell are assumed to
be negligible. The fair value of pooled investment funds held for sale is
calculated as equal to the observable unit price.
3. Non-performance risk arising from the credit risk of each counterparty is
also considered on a net exposure basis in line with the Group's risk
management policies. At 30 June 2023, 30 June 2022 and 31 December 2022, the
residual credit risk is considered immaterial and no credit risk adjustment
has been made.
4. If prices are not available from the external pricing providers or are
considered to be stale, the Group has established procedures to arrive at an
internal assessment of the fair value.
The fair value of liabilities in respect of third party interest in
consolidated funds and non-participating investment contracts are calculated
equal to the fair value of the underlying assets and liabilities.
Thus, the value of these liabilities is dependent on the methods and
assumptions set out above in relation to the underlying assets and
liabilities:
· For third party interest in consolidated funds, when the underlying
assets and liabilities are valued using readily available market information
the liabilities in respect of third party interest in consolidated funds are
treated as level 2. Where the underlying assets and liabilities are not valued
using readily available market information the liabilities in respect of third
party interest in consolidated funds are treated as level 3.
· For non-participating investment contracts, the underlying assets and
liabilities are predominately categorised as level 1 or 2 and as such, the
inputs into the valuation of the liabilities are observable and these
liabilities are predominately categorised within level 2 of the fair value
hierarchy. Where the underlying assets are categorised as level 3, the
liabilities are also categorised as level 3.
In addition, contingent consideration assets and contingent consideration
liabilities are also categorised as level 3 in the fair value hierarchy.
Contingent consideration assets and liabilities have been recognised in
respect of acquisitions and disposals. Generally valuations are based on
unobservable assumptions regarding the probability weighted cash flows and,
where relevant, discount rate.
(b) Fair value hierarchy for assets and liabilities measured at fair value other than assets backing unit linked liabilities and unit linked liabilities
(b)(i) Fair value hierarchy for assets measured at fair value in the
statement of financial position other than assets backing unit linked
liabilities
The table below presents the Group's non-unit linked assets measured at fair
value by level of the fair value hierarchy (refer Section 4.18(c) for fair
value analysis in relation to assets backing unit linked liabilities).
Fair value hierarchy
Total Level 1 Level 2 Level 3
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m £m £m £m £m £m £m
Derivative financial assets 78 70 104 - 2 3 78 68 101 - - -
Equity securities and interests in pooled investment vehicles(1) 1,167 2,513 2,033 808 2,057 1,621 128 340 181 231 116 231
Debt securities(2) 734 218 592 2 1 2 731 216 588 1 1 2
Financial investments 1,979 2,801 2,729 810 2,060 1,626 937 624 870 232 117 233
Owner occupied property(3) 1 1 1 - - - - - - 1 1 1
Contingent consideration assets(4) 24 35 19 - - - - - - 24 35 19
Total assets at fair value 2,004 2,837 2,749 810 2,060 1,626 937 624 870 257 153 253
1. Includes £554m (30 June 2022: £615m, 31 December 2022: £634m) for the
Group's listed equity investment in Phoenix which is classified as a
significant listed investment. The Group's listed equity investments in HDFC
Asset Management and HDFC Life which were also classified as significant
listed investments were sold in the six months ended 30 June 2023 (HDFC Asset
Management: 30 June 2022: £646m, 31 December 2022: £477m, HDFC Life: 30 June
2022: £451m, 31 December 2022: £203m).
2. Excludes debt securities measured at amortised cost of £101m (30 June
2022: £139m, 31 December 2022: £210m) - refer Section 4.18(d).
3. Presented in Property, plant and equipment in the condensed consolidated
statement of financial position.
4. Presented in Receivables and other financial assets in the condensed
consolidated statement of financial position.
There were no significant transfers between level 1 and level 2 during the
period ended 30 June 2023 (30 June 2022: none, 31 December 2022: none).
Transfers are deemed to have occurred at the end of the calendar quarter in
which they arose.
Refer Section 4.18(b)(iii) below for details of movements in level 3.
(b)(ii) Fair value hierarchy for liabilities measured at fair value in the statement of financial position other than unit linked liabilities
The table below presents the Group's non-unit linked liabilities measured at
fair value by level of the fair value hierarchy.
Fair value hierarchy
Total Level 1 Level 2 Level 3
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m £m £m £m £m £m £m
Liabilities in respect of third party interest in consolidated funds(1) 212 130 242 - - - 141 130 168 71 - 74
Derivative financial liabilities 2 17 1 1 - - 1 17 1 - - -
Contingent consideration liabilities(2) 129 163 132 - - - - - - 129 163 132
Other financial liabilities(3) 16 - 11 - - - - - - 16 - 11
Total liabilities at fair value 359 310 386 1 - - 142 147 169 216 163 217
1. Liabilities in respect of third party interest in consolidated funds at 31
December 2022 were previously all disclosed as Level 2 (£242m). £74m of the
liability at this date has been represented in the table above as Level 3 to
be consistent with the categorisation of the underlying assets.
2. Presented in Other financial liabilities in the condensed consolidated
statement of financial position.
3. Excluding contingent consideration liabilities.
There were no significant transfers between levels 1 and 2 during the period
(30 June 2022: none, 31 December 2022: none). Refer Section 4.18(b)(iii) below
for details of movements in level 3.
(b)(iii) Reconciliation of movements in level 3 instruments
The movements during the period of level 3 assets and liabilities held at fair
value, excluding unit linked assets and liabilities and assets and liabilities
held for sale, are analysed below.
Owner occupied property Equity securities and interests in Debt securities Liabilities in respect of third party interest in consolidated funds
pooled investment funds
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m £m £m £m £m £m £m
At start of period 1 1 1 231 106 106 2 1 1 (74) - -
Total gains/(losses) recognised in the condensed consolidated income statement - - - 1 4 2 - - (2) - - -
Purchases - - - 7 17 139 - - 3 - - (70)
Sales and other adjustments - - - (2) (16) (16) (1) - - 3 - (4)
Foreign exchange adjustment - - - (6) 5 - - - - - - -
At end of period 1 1 1 231 116 231 1 1 2 (71) - (74)
Contingent consideration assets Contingent consideration liabilities Other financial liabilities(1)
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m £m £m £m
At start of period 19 31 31 (132) (165) (165) (11) - -
Total amounts recognised in the condensed consolidated income statement 7 2 3 (2) 4 32 (5) - (11)
Additions - 1 1 - (6) (6) - - -
Settlements (2) - (18) 4 4 7 - - -
Other movements - 1 2 1 - - - - -
At end of period 24 35 19 (129) (163) (132) (16) - (11)
1. Excluding contingent consideration liabilities.
For the six months ended 30 June 2023, gains of £1m (30 June 2022: gains of
£10m, 31 December 2022: gains of £24m) were recognised in the condensed
consolidated income statement in respect of non-unit linked assets and
liabilities held at fair value classified as level 3 at the period end,
excluding assets and liabilities held for sale. All gains were recognised in
net gains or losses on financial instruments and other income.
Transfers of equity securities and interests in pooled investment funds and
debt securities into level 3 generally arise when external pricing providers
stop providing a price or where the price provided is considered stale.
Transfers of equity securities and interests in pooled investment funds and
debt securities out of level 3 arise when acceptable prices become available
from external pricing providers.
(b)(iv) Significant unobservable inputs in level 3 instrument valuations
The table below identifies the significant unobservable inputs in relation to
equity securities and interests in pooled investment funds categorised as
level 3 instruments at 30 June 2023 with a fair value of £231m (30 June 2022:
£116m, 31 December 2022: £231m).
Fair value
30 Jun 2023 30 Jun 2022 31 Dec 2022 Valuation technique Unobservable input Range (weighted average)
£m £m £m
Private equity, real estate and infrastructure funds 219 104 219 Net asset value Net asset value statements provided for seven significant funds (fair value A range of unobservable inputs is not applicable as we have determined that
>£5m) and a large number of smaller funds the reported NAV represents fair value at the end of the reporting period
Other unlisted equity securities 12 12 12 Indicative share price Recent off market capital raising transactions A range of unobservable inputs is not applicable as we have determined that
the indicative share price from off market transactions represents fair value
at the end of the reporting period
The table below identifies the significant unobservable inputs in relation to
contingent consideration assets and liabilities and other financial instrument
liabilities categorised as level 3 instruments at 30 June 2023 with a fair
value of (£121m) (30 June 2022: (£128m), 31 December 2022: (£124m)).
Fair value
30 Jun 2023 30 Jun 2022 31 Dec 2022 Valuation technique Unobservable input Range (weighted average)
£m £m £m
Contingent consideration assets and liabilities and other financial instrument (121) (128) (124) Probability weighted cash flow and where applicable discount rates Unobservable inputs relate to probability weighted cash flows and, where The base scenario for Tritax contingent consideration used a revenue compound
liabilities relevant, discount rates. annual growth rate (CAGR) from 31 March 2022 to 31 March 2026 of 14% (30 June
2022: CAGR from 31 March 2021 to 31 March 2026 of 21% and 31 December 2022:
The most significant unobservable inputs relate to assumptions used to value CAGR from 31 March 2022 to 31 March 2026 of 14%) with other scenarios using a
the contingent consideration liability related to the acquisition of Tritax of range of revenue growth rates around this base. The base scenario used a
£109m (30 June 2022: £148m, 31 December 2022: £112m). For Tritax a number cost/income ratio of c52% (30 June 2022: c50% and 31 December 2022: c52%) with
of scenarios were prepared, around a base case, with probabilities assigned to other scenarios using a range of cost/income ratios around this base.
each scenario (based on an assessment of the likelihood of each scenario). The
value of the contingent consideration was determined for each scenario, and The risk adjusted contingent consideration cash flows have been discounted
these were then probability weighted, with this probability weighted valuation using a primary discount rate of 5% (30 June 2022: 3.1% and 31 December 2022:
then discounted from the payment date to the balance sheet date. It was 4.5%).
assumed that the timing of the exercise of the earn out put options between
2024, 2025 and 2026 would be that which is most beneficial to the holders of
the put options.
(b)(v) Sensitivity of the fair value of level 3 instruments to changes in key assumptions
At 30 June 2023, the shareholder is directly exposed to movements in the value
of all non-unit linked level 3 instruments. No level 3 instruments are held in
consolidated structured entities. Refer Section 4.18(c) for unit linked level
3 instruments.
Sensitivities for material level 3 assets and liabilities are provided below.
Changing unobservable inputs in the measurement of the fair value of the other
level 3 financial assets and financial liabilities to reasonably possible
alternative assumptions would not have a significant impact on profit
attributable to equity holders or on total assets.
(b)(v)(i) Equity securities and interests in pooled investment funds
As noted above, of the level 3 equity securities and interests in pooled
investment funds, £219m relates to private equity, real estate and
infrastructure funds (30 June 2022: £104m, 31 December 2022: £219m) which
are valued using net asset value statements. A 10% increase or decrease in the
net asset value of these investments would increase or decrease the fair value
of the investments by £22m.
(b)(v)(ii) Contingent consideration assets and liabilities and other financial instrument liabilities
As noted above, the most significant unobservable inputs for level 3
instruments relate to assumptions used to value the contingent consideration
related to the purchase of Tritax. Sensitivities for reasonably possible
changes to key assumptions are provided in the table below.
Assumption Change in assumption Consequential increase/(decrease) in contingent consideration liability
30 Jun
2023
£m
Revenue compound annual growth rate (CAGR) from 31 March 2022 to 31 March 2026 Decreased by 10% (41)
Increased by 10% 38
Cost/income ratio Decreased by 5% 12
Increased by 5% (13)
Discount rate Decreased by 2% 6
Increased by 2% (5)
(c) Fair value hierarchy for assets backing unit linked liabilities and unit linked liabilities measured at fair value
The table below presents the Group's assets backing unit linked liabilities
and unit linked liabilities measured at fair value by level of the fair value
hierarchy.
Total Fair value hierarchy
Level 1 Level 2 Level 3
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m £m £m £m £m £m £m
Financial investments 873 1,114 924 590 844 601 283 269 322 - 1 1
Total assets at fair value backing unit linked liabilities 873 1,114 924 590 844 601 283 269 322 - 1 1
Investment contract liabilities 724 890 773 - - - 724 889 772 - 1 1
Third party interest in consolidated funds 165 256 173 - - - 165 256 173 - - -
Other unit linked liabilities(1) 1 5 2 - - - 1 5 2 - - -
Total unit linked liabilities at fair value 890 1,151 948 - - - 890 1,150 947 - 1 1
1. Excludes other unit linked liabilities not measured at fair value of £4m
(30 June 2022: £5m, 31 December 2022: £4m).
The financial investments backing unit linked liabilities comprise equity
securities and interests in pooled investment funds of £764m (30 June 2022:
£977m, 31 December 2022: £811m), debt securities of £107m (30 June 2022:
£135m, 31 December 2022: £112m) and derivative financial assets of £2m (30
June 2022: £2m, 31 December 2022: £1m).
There were no significant transfers from level 1 to level 2 during the six
months ended 30 June 2023 (six months ended 30 June 2022: none). There were
transfers from level 1 to level 2 of £52m during the 12 months ended 31
December 2022. The Group now considers government bonds not issued by the G7
countries or the European Union as level 2. There were no significant
transfers from level 2 to level 1 during the six months ended 30 June 2023
(six months ended 30 June 2022: none, 12 months ended 31 December 2022: none).
The movements during the period of level 3 unit linked assets and liabilities
held at fair value are analysed below.
Equity securities and interests in Investment contract liabilities
pooled investment funds
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m
At start of period 1 1 1 (1) (1) (1)
Sales (1) - - 1 - -
At end of period - 1 1 - (1) (1)
Unit linked level 3 assets related to holdings in real estate funds.
(d) Assets and liabilities not carried at fair value
The table below presents estimated fair values of non-unit linked financial
assets and liabilities whose carrying value does not approximate fair value.
Fair values of assets and liabilities are based on observable market inputs
where available, or are estimated using other valuation techniques.
As recognised in condensed consolidated statement of financial position line Fair value
item
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m
Assets
Debt securities 101 139 210 101 140 211
Liabilities
Subordinated liabilities 588 707 621 515 671 550
The estimated fair values for subordinated liabilities are based on the quoted
market offer price. The carrying value of all other financial assets and
liabilities measured at amortised cost approximates their fair value.
4.19 Contingent liabilities and contingent assets
Legal proceedings, complaints and regulations
The Group is subject to regulation in all of the territories in which it
operates investment management and insurance businesses. In the UK, where the
Group primarily operates, the FCA has broad powers, including powers to
investigate marketing and sales practices.
The Group, like other financial organisations, is subject to legal
proceedings, complaints and regulatory discussions, reviews and challenges 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 Group 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 30 June 2023, there are no identified
contingent liabilities expected to lead to a material exposure.
4.20 Commitments
(a) Unrecognised financial instruments
As at 30 June 2023, the Group has committed to investing an additional £74m
(30 June 2022: £112m, 31 December 2022: £72m) into funds in which it holds a
co-investment interest.
(b) Capital and other commitments
As at 30 June 2023, the Group has no capital commitments other than in
relation to financial instruments (30 June 2022: £nil, 31 December 2022:
£2m).
In addition, the Group has commitments relating to future acquisitions.
· In June 2023, the Group announced the proposed acquisition of the
healthcare fund management capabilities of Tekla Capital Management, including
the closed-end funds they currently advise, through an asset purchase
agreement for a total consideration of up to US$160m (initial consideration of
US$140m and contingent consideration of up to US$20m if revenues exceed an
agreed hurdle level above current revenues). The acquisition is expected to
complete in H2 2023, following satisfaction of certain conditions.
· In February 2021, the Group announced the purchase of certain
products in the Phoenix Group's savings business offered through abrdn's Wrap
platform, comprising a self-invested pension plan (SIPP) and an onshore bond
product; together with the Phoenix Group's trustee investment plan (TIP)
business for UK pension scheme clients. The transaction is not expected to
fully complete before 2025 and is subject to regulatory and court approvals.
The upfront consideration paid by the Group in February 2021 was £62.5m,
which is offset in part by payments from Phoenix to the Group relating to
profits of the products prior to completion of the legal transfer. The net
amount of consideration paid is included in prepayments in the condensed
consolidated statement of financial position with cash movements in relation
to the consideration included in prepayment in respect of potential
acquisition of customer contracts in the condensed consolidated statement of
cash flows.
4.21 Related party transactions
In the normal course of business, the Group enters into transactions with
related parties that relate to investment management and insurance businesses.
There have been no changes in the nature of these transactions during the
period to those reported in the Annual report and accounts for the year ended
31 December 2022.
During the six months ended 30 June 2023, there were no sales to associates
accounted for using the equity method (six months ended 30 June 2022: £nil,
12 months ended 31 December 2022: £nil) and no purchases in relation to
services received (six months ended 30 June 2022: £nil, 12 months ended 31
December 2022: £nil). During this period, the Group contributed capital of
£2m to an associate (six months ended 30 June 2022: £nil, 12 months ended 31
December 2022: £3m). At 30 June 2023, there were no outstanding commitments
to make capital contributions to associates accounted for using the equity
method (30 June 2022: £nil, 31 December 2022: £2m).
During the six months ended 30 June 2023, there were sales to joint ventures
accounted for using the equity method of £2m, (six months ended 30 June 2022:
£2m, 12 months ended 31 December 2022: £4m). There were no purchases from
joint ventures (six months ended 30 June 2022: £nil, 12 months ended 31
December 2022: £nil). During this period, the Group made no capital
contributions to joint ventures accounted for using the equity method (six
months ended 30 June 2022: £2m, 12 months ended 31 December 2022: £2m). At
30 June 2023, there were no outstanding commitments to make capital
contributions to joint ventures accounted for using the equity method (30 June
2022: £nil, 31 December 2022: £nil).
4.22 Events after the reporting period
On 20 July 2023, the Group agreed the sale of US Private Equity and Venture
Capital capabilities to HighVista Strategies. The Group's US Private Equity
and Venture Capital capabilities are currently within our Investments segment.
The sale is expected to complete in H2 2023, following satisfaction of certain
conditions. The sale involves the transfer of approximately US$4bn in assets
under management (as at 31 December 2022) and approximately 30 employees. The
sale is expected to result in an IFRS profit on disposal of subsidiaries and
other operations of approximately £17m.
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