Abrdn has reported an 8% drop in fee-based revenue to £696m, with adjusted operating falling 28% to £115m, driven by market movements.
The financial services group's half-year results showed that a profit of £113m for the same period last year has now reversed to a loss before tax of £320m, largely due to losses of £313m from the change in fair value of significant listed investments.
Net outflows were £3.8bn, up from £1.9bn during the first half last year. Total net outflows were £35.9bn, up from £5.6bn year-on-year, largely reflecting final Lloyds Banking Group tranche withdrawal of £24.4bn.
Assets under management and administration stood at £508bn, down from £542bn at full year 2021, reflecting lower markets and final LBG tranche withdrawal, partly offset by inclusion of assets from the Interactive Investor acquisition.
Abrdn retained around £7.5bn of LBG assets in the solutions business, while Tritax assets under management increased from £5.9bn a year ago to £7.7bn, and there is more than £1.7bn in the property acquisition pipeline; including the student residence market.
Fee-based revenue from the investments division was down 11% and adjusted operating profit fell 40%, again reflecting "adverse market conditions".
This has resulted in a "material rationalisation" of funds to focus on the strongest and most relevant strategies.
The statement explained that a "sharp rotation" from growth to value has impacted investment performance in equities and multi-asset, while performance in real assets, alternatives and fixed income is more competitive over the medium and longer term.
"Our long-term quality focus should fare better in the natural next phase of rotation as recessionary concerns mount - likewise, our Asia and China expertise represent a potential counter cyclical investment opportunity as the US slows."
Overall costs within the vector remain too high and a range of initiatives are underway to address this, the report stated. "We are continuing with fund rationalisation and non-core disposals... we have simplified management processes, progressed single middle office migration and transformed our equity and multi-asset solutions operations."
Areas of strategic focus in institutional and wholesale, such as real assets and alternatives, have delivered growth and supported gross flows of £13.5bn, excluding liquidity.
Investment performance was broadly stable during the first half, with 63% of assets under management coming in above benchmark over three years - although this was down from 67% during the full year 2021.
The adviser division "continues to deliver in tough markets", with fee based revenue up 6% and adjusted operating profit up 3%.
Net flows in adviser of £1.4bn were down from £2bn during the first half last year, reflecting "customer activity in the current environment".
The capital position remains strong, with a regulatory surplus of £600m, although this was down from £1.8bn last year, after funding the Interactive Investor acquisition.
The initial phase of a £300m shareholder return programme has commenced, with a £150m share buyback launched.
An interim dividend of 7.3p is in line with abrdn's previously-stated dividend policy.
"Current market uncertainty means our ambitions for revenue growth and improved cost/income ratio are likely to take longer than originally expected," read the stock exchange statement.
The group is targeting net cost savings in the investments division of circa £75m over the period to 2024, comprising gross cost savings of around £150m and £75m investment in future growth and inflation.
Restructuring costs are expected to be circa £150m during this full year - excluding corporate transaction costs - with additional restructuring costs associated with the investments division expected to be broadly funded by proceeds from disposals of non-core assets.
Chief executive Stephen Bird stated that the results largely reflect the challenging global economic environment and market turbulence.
"When I became CEO in late 2020 I said that we would pursue a strategy of diversification by refocusing our Investments business in to areas of strength, where we have scale and that lean into global growth trends and also significantly expand our reach into the higher growth UK wealth market.
"We are doing exactly that and the addition of interactive investor transforms our UK retail presence and future revenue streams - the strength of our balance sheet means that we can continue to invest and reward shareholders."
Bird's statement continued that his approach is designed to diversify earnings, improve efficiency and ensure optimal use of capital.
"Now that the shape of the group is largely settled, we expect inorganic actions on a more modest scale - this may include both further divestments and selective reinvestment where we see capabilities we need and that offer compelling value."
He added: "Whilst the global economic outlook remains very uncertain, we are focusing on what we can control through the ongoing delivery of our strategy."
John Moore, senior investment manager at Brewin Dolphin, commented: "Today’s mixed set of results from abrdn confirm the tricky position the company finds itself in.
"After a challenging year or so, between market turbulence and a restructuring of its business, abrdn finds itself at the edge of the FTSE 100 having lost around 30% of its value since the beginning of 2022.
"The purchase of Tritax and Interactive Investor have reshaped the company and appear to be performing well, but there are some more strategic moves required to get the fund manager back on track.
"Abrdn seems certain to be relegated from London’s top index unless it can pull something out of the bag in the near-term."
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