The abrdn (LSE: ABDN) share price has dropped 15% this year, with much of this coming after its 2022 results. However, for long-term investments, as in life, it’s not how you start that’s important, but how you finish.
The market reaction to last year’s results was unsurprising. The investment company made a pre-tax loss of £651m for 2022, having made a £1.1bn profit a year earlier. Its adjusted operating profit also fell, by 19% to £263m. Its assets under management dropped to £500m in 2022, a 7.8% year-on-year fall.
abrdn attributed these figures to last year being one of the toughest years in living memory. However, investment companies are paid by clients to do well in all market conditions. And they can sell assets to make money as well as buy them. So I’m not necessarily convinced by its excuse.
New development plan looks good
Last year was bad then, but where do we go from here? The company’s three-year development plan looks promising. Basically it focuses on selling off non-core and underperforming assets and optimising core and performing ones.
This is clearly a good idea and abrdn has not lost any time in executing it. Last year, it shut down its Emerging Markets Local Currency Bond Fund. In February, it sold its discretionary fund management arm to Liechtenstein-based private bank LGT for £140m. Earlier this month, there were reports that it is looking to split its private equity business to sell in parts.
New high-value deals done
To boost its core business offering, abrdn bought interactive investor, the UK’s leading subscription-based direct investment platform, last March. This acquisition significantly bolsters its presence in the UK savings and wealth markets.
Indeed, interactive investor’s net revenue increased 38% to £176m last year, with profits doubling to £94m.
Additionally positive was that earlier this month, abrdn launched an investment platform with Virgin Money. Customers will be able to invest through this in a Stocks and Shares ISA or a non-ISA investment account.
Rewarding shareholders is a core policy
In August last year, abrdn suffered the indignity of being dropped from the FTSE 100. Its removal from the blue-chip index came after the company’s share price had dropped around 40% in the year.
Vital to its quick return (in December) to the leading index was its policy of ensuring excellent shareholder returns.
Despite its temporary exile, it maintained share buybacks and high dividends in 2022. It said it would pay a full-year dividend of 14.6p per share, the same as in 2021. This gave a final yearly dividend yield of 7.7%. It also restated the ongoing annual dividend target of 14.6p.
There are risks to the share price, of course. There could be further major market shocks this year, and these would test the abrdn investment teams again. There may also be some further setbacks in executing its new development strategy.
I already have holdings in the investment management sector and don’t want to increase its weighting in my portfolio. If I didn’t, then I would buy abrdn shares today. To me, they offer a very high yield and the possibility of a major price rise.
