Abrdn, an Edinburgh headquartered investment company, has unveiled its strategy to reduce its workforce by approximately 10% in an effort to streamline its operations and reduce costs. This decision comes in the wake of a challenging second half of 2023, during which clients withdrew £12.4 billion from the firm's investment arm.
Streamlining for Cost Efficiency
As part of its broader cost-cutting initiative, Abrdn aims to eliminate around 500 positions, with an emphasis on reducing staff within its investment segment. The company's ultimate goal is to achieve £150 million in annual savings by the end of 2025, thereby enhancing the profitability of its investments division.
Positive Market Response
Despite recent setbacks, Abrdn experienced a 4% increase in shares on Wednesday, partially offsetting a decline of 14% over the previous year.
To achieve the targeted cost reductions, Abrdn plans to implement several measures. These include reducing overhead costs in support services, involving more outsourcing of functions, and eliminating managerial layers. By streamlining its operations in this manner, the company aims to achieve greater operational efficiency and cost-effectiveness.
A Legacy of Excellence
With its establishment dating back to 1825, Abrdn boasts a rich heritage. It consists of three distinct units, encompassing asset management, support for financial advisors, and a personal division that owns the popular consumer investment platform, Interactive Investor. Through these divisions, Abrdn has cemented its position as a key player in the investment industry.
Overall, Abrdn is taking proactive steps to adapt to changing market conditions and ensure a strong future for its business. Through careful restructuring and cost optimization, the company aims to enhance its profitability and continue serving its clients with excellence.
Abrdn Aims to Cut Costs for Improved Profitability
Abrdn, an active asset manager, has expressed its goal of reducing costs in order to restore its investment business to a satisfactory level of profitability. In the first half of 2023, the company generated £26 million in adjusted profits, a significant decline from the £127 million achieved in the same period of 2022.
CEO Stephen Bird stated that while the diversification provided by operating three businesses is advantageous, they will not be satisfied until all of them contribute significantly to the group's profitability, similar to what Adviser and interactive investor achieved in 2023.
This decline in profitability for Abrdn's investment business was a result of a significant decrease in revenues. In the first half of 2022, the business generated £1.07 billion, whereas in the same period of 2023, revenues plummeted to £466 billion. The company faced challenges amidst high levels of inflation and geopolitical uncertainty.
As of December 31, 2023, Abrdn's three business units managed and administered £494.4 billion in assets, reflecting a marginal 0.8% decrease from the £500 billion controlled at the end of 2022.
Bird acknowledged that market conditions remained difficult for their mix of businesses, as evidenced by their year-end assets under management and administration (AUMA), flow numbers, and margins.