Standard Life Aberdeen share price: 4 things to watch out for in its 2018 results

Standard Life (SLA) saw capital outflows in its first half results and that trend is expected to continue when it unveils its full-year results on Wednesday, with the firm forecasting its assets under management (AuM) to decline by more than £40 billion, falling from £608 billion to £557 million – marking the second consecutive year of investors redemptions.

In 2017, SLA saw its customers yank close to £33 billion in funds away from the asset manager, and with outflows expected to be larger over the course of 2018, the company has warned that its adjusted pre-tax profits will fall by 6.5% to £617 million.

Earnings per share and dividend

SLA is forecast to record earnings per share of 18.5p in its full-year 2018 results on Wednesday, with revenues expected to come in at around £1.88 billion.

Investors will be particularly interested to see if the asset manager will provide any indication on the sustainability of its dividend, which came in at 21.3p a share in 2017.

However, analysts have hinted that shareholders might find themselves disappointed with size of the payout in the upcoming results due to SLA’s recent run of form.

Cost-cutting measures

Investors will also be keen to see how SLA’s management plans to reduce costs at a time when the business is haemorrhaging client cash.

Shareholders have piled on the pressure for SLA to implement cost-cutting measures and its management has listened. In mid-February, reports showed that the fund manager had drafted plans for a fresh round of job cuts as part of a larger cost-cutting plan aimed at improving investor confidence after heavy outflows. But with yet more bad news on the horizon, pressure remains on the firm's mangagement team to tighten its expenditures further.

Standard Life Aberdeen’s outlook

Analysts and investors are clearly concerned about the fund managers outlook, a view that is reflected in the company’s valuation, with SLA shares trading at around 10x earnings.

Furthermore, the dividend yield has now hit 9.5%, which is above the 8% level that normally signals an excessively high payout that is at risk of a cut – meaning that shareholders are likely to be disappointed with the upcoming results on Wednesday from that perspective in particular.

Overall, the fund manager’s share price has slowly declined over the last 12 months, falling from a high of 418.5p a share with its stock currently settling at 244p levels.

Ending its poor performance post-merger

Standard Life Aberdeen was formed two years ago out of the merger of Standard Life, the Edinburgh-based insurer and investments group and Aberdeen Asset Management, headquartered in Aberdeen.

The deal was done to create an asset manager with significant scale to become a market leader in Europe and compete with fund managers across the pond, but over the years since the Brexit referendum, the company has struggled to keep pace with its rivals.

Over the last two years, the asset manager has seen substantial capital outflows, downward pressure on fees driven by the rise of exchange-traded funds (ETFs) and a regulatory environment that seeks to make the financial services sector more transparent, increasing the cost of doing business and on compliance.

Investors will likely be disappointed by the upcoming full-year results on Wednesday, but will be hoping that the company’s management will provide some guidance about how it plans to steer the business out of heavy headwinds it is facing.