abrdn H1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 30, 2025

Key Takeaways

  • Positive Sentiment: Interactive Investor delivered a 25% year-on-year rise in operating profit to £69 m, grew customers 9% to 461 000 and achieved record net inflows of £4 bn.
  • Neutral Sentiment: Advisor’s strategic repricing weighed on adjusted operating profit, which fell 35% to £42 m, but net outflows narrowed to £900 m from £2 bn in H1 2024, setting up a return to growth.
  • Positive Sentiment: The Investments business remained resilient with adjusted operating profit up £1 m to £35 m and delivered its highest Institutional & Retail Wealth gross inflows in over two years (£21.9 bn).
  • Positive Sentiment: The group’s transformation programme has achieved £137 m of the £150 m annualised cost-saving target, driven by process simplification, automation and AI.
  • Positive Sentiment: Net capital generation rose 7% to £111 m and the interim dividend was maintained at 7.3 p per share, underpinning the group’s ambition to reach £300 m of operating profit and capital generation in 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
abrdn H1 2025
00:00 / 00:00

Transcript Sections

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Jason Windsor
CEO & Director at Aberdeen Group

Good morning, and thank you for joining Aberdeen's results presentation for the 2025. I'm here today with Siobhan Boylan, our very new Group CFO, who only joined us last week. Siobhan brings us over thirty years of experience in financial services, and I'm delighted to welcome her to Aberdeen. Okay. Let me get into the results presentation.

Jason Windsor
CEO & Director at Aberdeen Group

I'm going to kick us off with an overview of the group's strategic and operational progress in the first half. I will then hand over to Siobhan, who will get us into more detail on financial performance and comment on the outlook. And we'll follow-up with Q and A. Let me start with a reminder of the group's ambition. As I set out in March, our ambition is to be The U.

Jason Windsor
CEO & Director at Aberdeen Group

K. Leading wealth and investments group. We're starting from a strong base. Both of our wealth businesses, Interactive Investor and Aberdeen Advisor offer long term savings and investments to U. K.

Jason Windsor
CEO & Director at Aberdeen Group

Customers. This market has excellent long term growth potential, driven by The U. K. Population's clear need for great value savings, retirement and investment propositions. II was the number one by flows in The U.

Jason Windsor
CEO & Director at Aberdeen Group

K. Direct to consumer market last year. And after another strong performance in H1, II now serves over 460,000 customers. II's excellent service and exceptional value for customers is at the heart of its continued success. Advisor is the second largest platform and serves around half of The U.

Jason Windsor
CEO & Director at Aberdeen Group

K. Advice firms and and around 400,000 end customers. We have taken the necessary decision to reprice to ensure Advisor is competitive. And with service levels now restored and getting better and with the platform working well, we've set the conditions for Advisor to return to growth. Our investments business operates worldwide with AUM of £368,000,000,000 and has many talented individuals.

Jason Windsor
CEO & Director at Aberdeen Group

We believe there are significant opportunities for specialist active asset managers in a transitioning industry, driven by clients' continued need for high quality and distinctive investment solutions. We have been repositioning our business to focus on our strengths where we see market growth whilst we further improve efficiency. All of this is underpinned by a continued focus on client service, technology and talent with more to come on this in a moment. So turning to our progress in the first half. We're making good progress against the strategic priorities that we set out in March.

Jason Windsor
CEO & Director at Aberdeen Group

Under a new executive leadership team, we are delivering through a focus on execution, simplifying the business and strengthening our talent. I see 2025 very much as a year of transition for Aberdeen, building a business capable of long term sustainable growth. The strong performance of Interactive Investor in particular combined with cost discipline across the group saw total adjusted operating profit remain broadly flat on H1 last year. We're a long term player with a long term focus. Despite the period of significant macro and geopolitical volatility we saw in the last six months, our business has not only proven resilient from a profitability perspective, but also laid the foundations for the future.

Jason Windsor
CEO & Director at Aberdeen Group

And I'd like to take a moment now just to thank my colleagues for their skill in navigating this challenging backdrop on behalf of their clients. Let me now provide a quick overview of our performance, which Siobhan will cover later in a bit more detail. Taking the three businesses in turn. Interactive Investor continues to go from strength to strength with operating profit up 25% year on year at £69,000,000 whilst maintaining a laser like focus on efficiency. In Advisor, the repricing we implemented to enhance our market competitiveness had the expected impact on adjusted operating profit, which reset down by 35% to £42,000,000 in the half.

Jason Windsor
CEO & Director at Aberdeen Group

This was a necessary step to set the conditions for future growth and to support advisers' return to net inflows. In investments, we delivered on our transformation program, which mitigated the impact of lower revenues in the half and improved the efficiency of our platform. Adjusted operating profit remained resilient at £35,000,000 which is £1,000,000 higher than the same period last year. Taken together, we saw adjusted operating profit in the first half of £125,000,000 which compares to £128,000,000 in the same period last year. And pleasingly, net capital generation was up 7% in the half to £111,000,000 This supports the dividend, which has been maintained at 7.3p per share for the interim.

Jason Windsor
CEO & Director at Aberdeen Group

Now let me take you through the operational highlights from each of the businesses starting with Interactive Investor. As a reminder, in March, we set out the strategic priority for II, which was to sustain efficient growth by building on our differentiated proposition and investing in the II brand. We also set out the twenty twenty six targets shown on the left hand side of the slide. I was pleased to welcome many of you to Manchester last month to the II Spotlight event. Richard and his team provided a very insightful deep dive into the business and our exciting new propositions.

Jason Windsor
CEO & Director at Aberdeen Group

I'm pleased to say that we made good progress on all fronts in the first half. Total customer numbers were up 9% year on year to 461,000 with high value SIP customers up 27% to 92,000. Earlier this month, we completed the integration of Jarvis' retail book and we expect an additional 20,000 customers by the end of the second half. Market volatility, particularly in early April, contributed to an increase in customers trading. This activity taken in combination with our ongoing customer growth and daily average retail trades were up 23% compared to the first half of last year.

Jason Windsor
CEO & Director at Aberdeen Group

This sustained growth in customers has been supported by higher customer awareness, reflecting greater and more targeted marketing spend and of course customer recommendations. Brand awareness of II is now up to 30% from 25% a year ago, so better but with more to do. Increased customer numbers have helped II achieve record net inflows of £4,000,000,000 up nearly 30% versus the same period last year. I'm delighted that II continues to earn strong market and consumer recognition. We have now won Witcher's recommended SIP award for four years in a row alongside many other accolades.

Jason Windsor
CEO & Director at Aberdeen Group

In terms of proposition development, II Community, our new social trading platform now has 22,000 members. We're all excited about the second half. Not only do we expect continued growth in customers, but also our new innovative propositions to serve more customer needs. These include II360, a new platform to support more sophisticated investors II Advice, a simple digital advice service, which brings something different and better to the financial guidance market And following the success of our managed ISA last year, we'll be launching a managed SIP, a game designed with Aberdeen Investments to provide more support and guidance for investors who want the convenience of a ready made package. These enhancements combined with the exceptional service and value that the platform offers means we're well placed to sustain efficient growth and to enjoy the compound effects of gaining a growing share of a growing market.

Jason Windsor
CEO & Director at Aberdeen Group

Turning now to Advisor. Our strategy for Advisor is to return to net inflows by enhancing our proposition and delivering leading customer service, and we set clear targets shown on the slide. 2025 is about completing the foundational work to return to growth. Three key areas: first, a strengthened adviser leadership team, which is now in place. Second, a necessary decision to enhance our competitiveness with lower pricing, which is obviously painful from a P and L perspective.

Jason Windsor
CEO & Director at Aberdeen Group

This has been rolled out to all Wrap clients by Q1 this year. And finally service. As I highlighted in our Q1 call, service levels have been restored and indeed they improved further in Q2. Net Promoter Score was plus 43 in the first half, up from plus 34 last year. Other processes including average speed to answer have also improved as we continue to invest in the client experience.

Jason Windsor
CEO & Director at Aberdeen Group

During the first half, we continued to refine our partnership strategy with IFAs to capture growth and drive a healthier pipeline. Our approach is based around a personalized service and support model and continuous improvement in the integration between our platform and our clients. In the first half, Advisor had net outflows of £900,000,000 compared to net outflows of £2,000,000,000 in the 2024 and £1,900,000,000 in the second half of last year. In Q2 twenty twenty five, outflows were 300,000,000 which compares to £1,100,000,000 in Q2 last year. So while I would never celebrate outflows, the flow trend is showing some encouraging signs.

Jason Windsor
CEO & Director at Aberdeen Group

We remain focused on returning the business to positive inflows as soon as possible and to get back to winning. Moving on to investments. Our strategy for investments is to deliver a step change in profitability by repositioning to areas of strength and opportunity and driving improved efficiency. Consistent with this focus, the business showed steady progress in the first half. Three year investment performance versus benchmark has improved 71, up from 60% at the full year 2024, which is slightly ahead of our 2026 target.

Jason Windsor
CEO & Director at Aberdeen Group

Of course, we should not forget there is still more work to do to improve equity performance in particular in Asia. Under Xavier Meijer, we have further strengthened the investment's leadership team with the appointment of John McCarrens as the new Chief Client Officer. With the right leadership team in place, we're executing against our investment strategy and targets and positioning the business to succeed in a rapidly changing market. The ongoing trend toward passive strategies continues to put pressure on revenues and margins. We are responding with a market leading quant proposition and by always focusing on improving efficiency, including renegotiating third party contracts, simplifying processes and leveraging technology and AI.

Jason Windsor
CEO & Director at Aberdeen Group

In terms of flows, we're seeing some encouraging trends in Institutional and Retail Wealth, which represents almost 60% of our investment business measured by AUM. Excluding liquidity, gross inflows in INRW were 9,300,000,000.0 higher than last year at £21,900,000,000 driven mainly by our success in quants and fixed income. This is the highest level of gross inflow for well over two years. Insurance Partners saw a net outflow of £4,500,000,000 in the half. And looking forward, we expect our mix of business with Phoenix to evolve.

Jason Windsor
CEO & Director at Aberdeen Group

We continue to accelerate in wholesale and private markets, which are areas of specific opportunity, which we flagged to you in March. During H1, we launched two active ETFs, which actually listed on the LSE yesterday and we won a long term asset fund mandate with Scottish Widows. You may also have seen our fund finance launch, a strategy which has raised over £500,000,000 year to date. Turning now to progress on our transformation program. The program has continued to deliver very well against the targets we outlined at the start of 2024, driving significant savings and bringing benefits to our clients and colleagues and setting up Aberdeen for the future.

Jason Windsor
CEO & Director at Aberdeen Group

We're on track to hit our target of at least £150,000,000 of annualized savings by the end of this year. As at the end of H1, we've achieved £137,000,000 of that. Under the leadership of Richard Wilson, our group COO, we are beginning to realize tangible improvements in operational efficiency, driven by the streamlined processes, enhanced operating models, increased automation and more strategic deployment of technology and AI. These improvements in efficiency are in turn creating additional capacity for us to invest in the business to drive long term profitable growth, while still delivering a significant reduction in overall expenses. Continued focus here beyond meeting the program's target is critical to meeting our profitability ambitions.

Jason Windsor
CEO & Director at Aberdeen Group

And lastly, let me cover my strategic priorities and the group targets. This final slide shows the three priorities I set out one year ago, which are all about execution and delivery. And we've made good progress across all three. I've already talked about how we're transforming performance, including focusing on where we have competitive advantage, growing fast and interactive investor, turning around flows in Advisor and targeting a step change in profitability and investments. In terms of improving the client experience, my overriding objective will always be to support our clients to achieve their investing goals, be it through improving investment performance or winning in U.

Jason Windsor
CEO & Director at Aberdeen Group

K. Wealth by differentiating through client experience. We will continue to invest wisely in our platforms to maintain our competitive edge. And third, strengthening our talent and culture. This has been and will remain very important to me.

Jason Windsor
CEO & Director at Aberdeen Group

The leadership teams at group and adviser and investments have been overhauled, adding some key people into critical roles. We need our people to have belief and confidence in Aberdeen and a culture that is always looking at ways of being better for our clients. We are heading in the right direction. So before I close, a quick reminder of our group targets. We're targeting at least £300,000,000 of adjusted operating profit in 2026.

Jason Windsor
CEO & Director at Aberdeen Group

And together with the much lower expected restructuring costs and the new pension arrangement we outlined in March, we're targeting net capital generation of around £300,000,000 in 2026, which of course will support the ongoing dividend. These targets are ambitious. But whilst my team and I have our feet on the ground, we do have real ambition for this group. I'll now hand over to Siobhan, who'll provide us more details on financial performance.

Siobhan Boylan
CFO at Aberdeen Group

Thanks, Jason, and good morning, everyone. I'm delighted to be here. It's an exciting time to be joining with lots to do, and I look forward to meeting many of you in the coming weeks and months. So let me provide a summary of key financial highlights from the first half. We're seeing good progress across the group.

Siobhan Boylan
CFO at Aberdeen Group

In Interactive Investor, we have sustained the strong performance reported in recent periods. In Advisor, we have seen a significant improvement in flows. And in investments, our institutional and retail wealth business has seen an encouraging gross flows. We are also focused on improving efficiency with adjusted operating expenses down 7%, benefiting from the ongoing transformation savings Jason has already covered. Adjusted operating profit of £125,000,000 has been broadly steady with strong growth in II and continued cost discipline investments offsetting the impact of the strategic repricing in Advisor.

Siobhan Boylan
CFO at Aberdeen Group

Net capital generation is up 7% to £111,000,000 This has not yet taken to account the action taken to unlock the value from our DB pension surplus, which we announced at full year results and will deliver circa £35,000,000,000 of annual benefit from the second half onwards. And finally, we have maintained our dividend of 7.3p per share. Turning to the group's financial performance in a bit more detail. Adjusted operating profit of £125,000,000 was 2% lower than the prior year. This is a resilient performance given heightened market volatility in the first half and the previously announced repricing and the end of the outsourcing discount in adviser.

Siobhan Boylan
CFO at Aberdeen Group

Adjusted net operating revenue is 6% lower at £628,000,000 with strong growth in II being offset by adviser and a continued change in the asset mix in investments. Progress in the transformation program has helped deliver a 7% reduction in adjusted operating expenses to $5.00 £3,000,000 after taking into account increased investment in II to support long term growth. IFRS profit before tax of £271,000,000 is 45% higher than in half one last year. This significant improvement principally reflects a gain in the market value of our Phoenix stake. Adjusted capital generation is up 1% to £145,000,000 with net capital generation up 7% to £111,000,000 benefiting from lower restructuring expenses.

Siobhan Boylan
CFO at Aberdeen Group

Turning now to performance in our three core businesses in a bit more detail and starting with II. The strong organic growth seen in previous periods has continued with total customers increasing by 9% year on year. This includes a notable 27% increase in customers with a SIP, which we know tend to be higher value on average. Net flows are up 29% to £4,000,000,000 with net flows £2,400,000,000 in the second quarter benefiting from a strong tax year end. This along with the benefit of positive markets means AUMA is up 9% compared to the 2024.

Siobhan Boylan
CFO at Aberdeen Group

Revenue is up 12% to £154,000,000 Within this, trading revenue was up 36% to £45,000,000 reflecting customers' increasing engagement with the platform's trading capabilities as well as elevated activity levels during the period of heightened market volatility. Treasury income is up 10% to £75,000,000 with the average cash margin of two twenty one basis points of upper end of guidance. Subscription revenue is flat despite the increase in customers, reflecting continued investment in acquisition such as the use of promotional offers and greater uptake of our Essentials pricing package. Revenue from advice in the Financial Planning business was 8% lower at £12,000,000 Higher expenses reflect investment in brand awareness, technology developments and the business' capacity to support future growth. Operation profit has increased by £40,000,000 or 25% compared to the first half last year, with the scalability of the business reflected in an improved cost to asset ratio of 21 basis points compared to 24 in half one twenty twenty four.

Siobhan Boylan
CFO at Aberdeen Group

Now switching to Advisor. Restored service levels, enhanced platform functionality and our competitive repricing have led to a significant improvement in net outflows, which are lower by £1,100,000,000 compared to the first half last year. As a result of the actions taken, revenue was 14% lower at 102,000,000 The actions were necessary to return the business to sustainable growth, including the rolling out of repricing to the back book earlier this year as well as additional strategic pricing initiatives for large cases. Revenue was also impacted by the sale of three sixty last year. As a result of these factors, the revenue margin in the business was four basis points lower at 27.4%.

Siobhan Boylan
CFO at Aberdeen Group

Treasury margin was two fifty seven basis points compared with 263% for the 2024. We previously communicated that adviser would see an end to a temporary third party outsourcing discount. This has now ended. And together with investment in the client proposition, this has led to higher expenses overall. This was partly offset by the sale of three sixty.

Siobhan Boylan
CFO at Aberdeen Group

Taken together, these factors resulted in a reduced operating profit of £42,000,000 Onto our investments business. In our Institutional and Retail Wealth business, net flows excluding liquidity were up £3,800,000,000 versus the first half of last year at £1,800,000,000 For investments overall, AUM was broadly flat with positive markets largely offsetting net outflows from the Heritage Insurance Partners business, which is in structural runoff. Changes to the asset mix have resulted in a reduction in the revenue margin. At £371,000,000 revenue investments was 9% lower than half one twenty twenty four. The impact of lower revenues was offset by positive markets and cost savings as the business continues to focus on improving efficiency.

Siobhan Boylan
CFO at Aberdeen Group

Adjusted operating profit was £1,000,000 higher at £35,000,000 Turning now to capital. Net capital generation is up 7% at £111,000,000 Breaking that down, adjusted capital generation is up one percent £145,000,000 while net restructuring and corporate transaction expenses were down 15% to £34,000,000 compared to £40,000,000 in the first half of last year. While not yet reflected in the results we are reporting today, we are now able to unlock value from our DB pension surplus to fund our DC pension contributions. This will result in a circa GBP 35,000,000 annual increase in net capital generation starting in the second half of this year. And now if we turn to look at our capital base.

Siobhan Boylan
CFO at Aberdeen Group

We continue to benefit from strong capital position with a CET1 of GBP 1,500,000,000.0, covering 139% of our regulatory requirement. This is further enhanced by £800,000,000 of gross AT1 and Tier two debt, 500,000,000.0 of which contributes to that regulatory capital. In addition, we have £1,500,000,000 of net assets not included in capital. This comprises a £800,000,000 IAS 19 surplus as well as our £700,000,000 stake in Phoenix from which we received GBP 56,000,000 in dividends last year. And finally, I would now like to provide some guidance regarding our expectations for full year 2025.

Siobhan Boylan
CFO at Aberdeen Group

In Interactive Investor, investment has created capacity for sustained growth in customers, net flows, revenue and profit. The cash margin for full year 2025 is now expected to be between two ten and two twenty basis points. As already highlighted, the revenue margin in Advisor has been impacted by the rolling out of the platform repricing to the back book earlier this year. This and other strategic pricing initiatives are expected to be reflected in a revenue margin of circa 27 basis points for the full year. In investments, we now expect the revenue margin for full year 2025 to be circa 20 basis points due to ongoing changes to asset mix.

Siobhan Boylan
CFO at Aberdeen Group

We have clear plans to grow in our focus areas in Institutional and Retail Wealth and expect our business mix with Phoenix to evolve over time. Expenses and investments will continue to benefit from transformation savings and we are on track to deliver at least 150,000,000 of annualized cost savings by the end of this year. Thank you. And I'll now pass you back to Jason.

Jason Windsor
CEO & Director at Aberdeen Group

Thank you, Siobhan, and thanks everyone for joining us. That brings us to the end of the presentation. As I mentioned at the start of the call, we will be hosting a conference call with analysts starting at 08:15 this morning. You can stay tuned to this feed to listen along to the Q and A or you can listen later. Morning and welcome to our Q and A call for our first half results.

Jason Windsor
CEO & Director at Aberdeen Group

This is Jason Windsor and I'm very pleased to be joined this morning by Siobhan Boylan, our new group CFO. Some of you will have had the opportunity to listen to our online presentation and I hope you've all had a chance to read the press release. But I'll just begin with a quick summary of the key messages. We're making progress against our strategic priorities that we set out in March. We're delivering through a focus on execution, simplifying the business and strengthening our talent.

Jason Windsor
CEO & Director at Aberdeen Group

Operating profit was broadly flat at £125,000,000 in the half and net capital generation was up 7%. Taking the businesses the headlines in turn, Interactive Investor had sustained organic growth with record net inflows. In Advisor, net inflows improved net flows rather improved significantly with lower profitability reflecting the strategic decision to reprice the book to improve competitiveness. And in investments, greater efficiency has supported profitability with some encouraging gross flows particularly in quants and fixed income. Our transformation program is on track to deliver at least £150,000,000 of annualized savings by the end of this year.

Jason Windsor
CEO & Director at Aberdeen Group

As at the end of H1, we've achieved £137,000,000 of that. As we head into the 2025, we remain focused on realizing the significant potential of this group. We have clear strategic priorities and a 2026 set of targets, which will enable us to provide evidence of our progress as we build a business capable of long term sustainable growth. And now, I hand over to the operator to take your questions.

Operator

Thank you. We will now begin the question and answer session. Your first question today comes from Enrico Bolzoni from JPMorgan. Please go ahead.

Enrico Bolzoni
Enrico Bolzoni
ED - Equity Research Analyst at J.P. Morgan

Thank you. Thanks for taking my questions. So one, Taplachine, on Advisor, there has been a pronounced improvement in the flow picture there. Perhaps can you give us some color on what has been the exit rate of the quarter in terms of redemptions? Redemption came down quite a lot.

Enrico Bolzoni
Enrico Bolzoni
ED - Equity Research Analyst at J.P. Morgan

Do you see that improving further as we enter the third quarter? And with respect to that, how do you see your target of achieving at least €1,000,000,000 inflows by next year? Do you think you are maybe running a bit as of schedule there? And then my second question was on the investment vector. Good performance.

Enrico Bolzoni
Enrico Bolzoni
ED - Equity Research Analyst at J.P. Morgan

Performance seems to be improving. The flow momentum seems to have improved as well. Can you give us maybe some color in terms of pipeline you have in conversation with institutional clients perhaps or the possibility of you winning additional mandates over the coming quarters? Thanks.

Jason Windsor
CEO & Director at Aberdeen Group

Okay. Good morning, Henrico. Thanks for the question. In Advisor, I mean, we've seen steady progress this actually. We've seen lower outflows and slightly higher inflows more on the outflows in the inflow side in terms of movement in the percentage sense.

Jason Windsor
CEO & Director at Aberdeen Group

So you can see the little chart in the presentation. It does show nicely the quarterly progression through pretty flat around £1,000,000,000 out per quarter last year and then starting to improve this year. And we're not changing our target for 2026. We still think that's actually quite ambitious to go from a business that was losing £1,000,000,000 a quarter into a net inflow position next year. There's still a lot of work to do.

Jason Windsor
CEO & Director at Aberdeen Group

And it takes time. And that's work with IFAs. It's to build the confidence. It's just to get out there and strike the relationships. And it's it's a lot of shoe leather frankly going out around the country meeting people building confidence and getting them back onto the platform.

Jason Windsor
CEO & Director at Aberdeen Group

On investments, we've had a good first half. There were some ups and downs as you've seen through that. So then the net figure in IRW as we mentioned was £400,000,000 But gross flows are up. Strong growth in fixed income and quants in particular. You can see that in the numbers.

Jason Windsor
CEO & Director at Aberdeen Group

I think we've seen a better Q2 in equities than we had in Q1. And I sat in front of you, but it's still in outflow. We're continuing to work on that. And as I talk about often, we're trying to change the shop front to get the product that people want to buy in front of them and deliver new things into the marketplace, so we can create growth across the waterfront. And we see that the pipeline is good.

Jason Windsor
CEO & Director at Aberdeen Group

I wouldn't say spectacular. We're continuing to again, I use the term shoe leather again. It's about getting out there being proud about our performance, our products, building those long term relationships and being really focused on growth over the next three to five years.

Siobhan Boylan
CFO at Aberdeen Group

And just to add some color on the adviser. Two, the focus on the MPS of being plus 43% getting that consistency will encourage the gross inflows. But as you see it is a step change in the outflows that is driving this performance.

Operator

Thank you. Your next question comes from Hubert Lam from Bank of America. Please go ahead.

Hubert Lam
Hubert Lam
Equity Research Analyst at Bank of America Merrill Lynch

Hi. Thanks for taking my questions. I've got three of them. Costs were better in the first half. Just wondering how should we think about the full year now in terms of costs?

Hubert Lam
Hubert Lam
Equity Research Analyst at Bank of America Merrill Lynch

Can you analyze the first half just so outlook around costs? Second question is on fee margin and advisor. It fell to 27.4 basis points, quite a bit lower than what we expected. How should we think about this for the full year and into 2026? And lastly, investment performance was a bit mixed.

Hubert Lam
Hubert Lam
Equity Research Analyst at Bank of America Merrill Lynch

Equity is still pretty lackluster. Has that been a deterrent in terms of new flows going into equities? And I know it's work in progress in terms of improving. Just Jason what are your thoughts around performance? And what do you think you can get? Thanks.

Jason Windsor
CEO & Director at Aberdeen Group

Well, I'll have a go at one and three. Jo you can have a go at two if that's all right. Been with us ten whole days, but it's already absolutely up to speed. So on the cost side, we've hit 137,000,000 run rate. That's not all through into the P and L just to be clear.

Jason Windsor
CEO & Director at Aberdeen Group

So that's of the €150,000,000 transformation target that's a gross target. So it doesn't all flow through. And you can see there's a little chart in the presentation because I've not given the presentation. I don't know what slide it's on, but you can see the half by half progress on absolute cost reduction through that. So we've got momentum into the second half from the actions that we've already taken.

Jason Windsor
CEO & Director at Aberdeen Group

So I think the second half broadly is going to be a repeat of the first in terms of trends. And you can see that in terms of profitability and trends through that with more cost out supporting the level of profitability and we've got confidence in that. We are investing to grow though in our select areas. We're not pulling cost out everywhere. We're making a decision to be more efficient.

Jason Windsor
CEO & Director at Aberdeen Group

We're reducing inefficiencies taking out waste being selective. But in II in adviser and in our growth areas in investments we are supporting and growing the business. But I would expect the a similar trend in twenty twenty five second half to the first. But I would then see cost efficiency being absolutely critical to our success in 2026 and beyond. There's going to be no slacking off of our focus on being an efficient platform.

Jason Windsor
CEO & Director at Aberdeen Group

Why? That's what I see. And I know Siobhan would agree with me and Richard Wilson would agree with me and the whole leadership team that is our source of competitiveness. And as we look further forward and we continue to invest in the business by being absolutely focused on efficiency. I'll do the performance one.

Jason Windsor
CEO & Director at Aberdeen Group

So and Equities you're right. Clearly, we're not sitting still. Our challenges are mainly in the Asian product, which is and the GEM product by scale of AUM that's what comes through. We've been faithful to our style. And then Peter Branner, the CIO has implemented numerous improvement initiatives working with the equity team, which are working.

Jason Windsor
CEO & Director at Aberdeen Group

Quality has underperformed as a star and as a factor in the last twelve months or so, particularly in China and across sort of parts of Asia. But we've got really good performance in our GEM income product, in our smaller companies product, in our U. S. Smaller both U. K.

Jason Windsor
CEO & Director at Aberdeen Group

And Europe and some of our thematic products. So equities are still a broad church for us and we've got things that are selling and are at the front of the queue in terms of the shop window. We've got other things that we're continuing to be faithful to our investment style and deliver to the client what they bought.

Siobhan Boylan
CFO at Aberdeen Group

And just to touch on the revenue margin. So as we indicated at the beginning of the year, we did expect to see some repricing to the back book. That was about three basis points. So you can see that coming through in the numbers. And if I look forward, I'd expect the 27 bps to be and we've given guidance on that.

Siobhan Boylan
CFO at Aberdeen Group

That would be through into 2025 and onwards. So that gives you an indication of the impact on the revenue margin.

Hubert Lam
Hubert Lam
Equity Research Analyst at Bank of America Merrill Lynch

Thank you.

Operator

Thank you. Your next question comes from Mandu Jardbal from RBC. Please go ahead.

Mandeep Jagpal
Mandeep Jagpal
Director - Equity Research at RBC Capital Markets

Hey, good morning. Mandu Jardbal, RBC. Three questions from me as well please. First one is you stated today that you expect the business mix of Phoenix to evolve over time. Could you remind us of what this evolution is and whether it will have a notable impact on the outlook for either flows or margins?

Mandeep Jagpal
Mandeep Jagpal
Director - Equity Research at RBC Capital Markets

I guess I'm thinking here in the context of their future capital JV they'll have another asset manager, which will attract a large portion of the higher margin DC flows? And then on and RW, kind of follow-up question, your close flows are particularly strong. Are you able to provide any details on which client channels these flows are coming from, so from retail, both institutional and regionally? Trying to get a sense here of where the improvement in flow performance is coming from. And then just a kind of a modeling question, the £35,000,000 benefit to capital generation from the DB scheme, How should we model this in terms of 1H, 2H split in future years?

Mandeep Jagpal
Mandeep Jagpal
Director - Equity Research at RBC Capital Markets

And should we only expect half the amount in FY 2025? Thank you.

Jason Windsor
CEO & Director at Aberdeen Group

Okay. Thanks, Mandeep. Phoenix is continuing in its implement its own strategy. We've seen an evolution of that over time. Big picture from equities, they've largely moved from active to passive.

Jason Windsor
CEO & Director at Aberdeen Group

I think we'll see that probably continue. So that's part of the evolution. They've also got no appetite at all to run policyholder assets themselves. So we will continue to support them and be their strategic partner on all the policyholder side. They've got some appetite on the shareholder assets, if I can use that term, which is the balance sheet fixed income assets from annuities to manage that in house.

Jason Windsor
CEO & Director at Aberdeen Group

So that will be a feature as we look further forward. I've not got any specifics to guide you to, but I think we'll see directionally more on the policyholder side and slightly less on the shareholder side just talking to you like an insurance guy, which of course I used to be. But it's got not I don't think it's much to do with that other thing that you mentioned that I won't repeat. The on the IRW flows, the large wins in fixed income were in Europe from big institutions. So there were major institutional wins.

Jason Windsor
CEO & Director at Aberdeen Group

And in The U. K, the quants are mainly in The U. K. And was mainly from large insurance companies. They were the biggest.

Jason Windsor
CEO & Director at Aberdeen Group

We did have some nice little wins out of The U. S. In equities and we had some nice wins out of Asia, but they were more in the hundreds rather than the billions to give you a sense. So I'm not going to name check everything. But the big flows were those European and U. K. Institutional flows.

Siobhan Boylan
CFO at Aberdeen Group

And then finally on the modeling of the DB pension scheme surplus. So it should be £35,000,000 That's the full year effect. So the second half you'd expect to see half of that come through.

Operator

Thank you. Your next question comes from Nicholas Herman from Citi. Please go ahead.

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

Yes. Morning. Hope you can hear me okay. Nothing good.

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

Three questions from my side please. So on Advisor, I noted on the comment about the recent FY twenty twenty six target. Clearly the momentum is very strong. Could you just talk competitive about dynamics in that market and kind of where I guess where I mean, obviously, there's been a lot of self help in your part, but is that kind of has there been any evolution in that competitive dynamics in that market? Is it also is it still as strong as just as it has been in the past and therefore you are or you seem to see it getting also getting progressively easier as you've implemented that self help?

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

That's the first one. Second one, on costs, what do you mind if you think what areas you and Richard are working on to develop potential additional cost saves? When do think you might be in a position to communicate different to that work to the market? And then the final question I had is in interactive investment cash balances, what I can see around 8%. Beyond rates, can you remind us what are the same factors that will, first of all, I guess sorry, on the margin, excuse me, drive the variance in your cash margin guidance?

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

But then on the cash balances side, how are you thinking about the outlook on that 8% of AUA evolving today given tailwinds from growing SIP penetration versus potentially evolving customer client allocations? Thank you.

Jason Windsor
CEO & Director at Aberdeen Group

Okay.

Jason Windsor
CEO & Director at Aberdeen Group

I'll start. I haven't got any great statement of insight unfortunately on the adviser competitive dynamics. Mean there are some qualified competitors. People who've got different strategies whether they are offering more integrated propositions which some do without getting into names. You can work out with Betty's.

Jason Windsor
CEO & Director at Aberdeen Group

We pride ourselves on our independence and we partner with IFAs as an independent partner and that's our differentiation. We've got an MPS product that we will be seeking to expand through into that marketplace. We've undershot I think we know where we ought to be in that. So that's an opportunity for us to compete. But the sources of competition are clearly service number one.

Jason Windsor
CEO & Director at Aberdeen Group

And we've really got our act together in that regard. Invested in the platform. We've got a modern platform and we've worked really hard the last 12 to improve that and we're going to go further. We want to go from meeting people's expectations to delighting them. That's going to take us some time.

Jason Windsor
CEO & Director at Aberdeen Group

There's going to be effort required and skill required, but that's what we're aiming to do to differentiate ourselves to beat the competition because frankly they're quite good some of these guys. I mean I wouldn't I don't mind saying that. So to get out there and win you've got to be really good. And we're absolutely up for that. On the cost side, there's a little bit everywhere.

Jason Windsor
CEO & Director at Aberdeen Group

What we've been with Richard's new leadership and new vigor to the program, we had a plan the 150,000,000 plan which we are pretty much through them. We haven't finished. And we always said it was at least 150,000,000 The we've not been the sharpest we could have been with third parties. And then that applies to some of our big outsource providers to some IT arrangements to some market data. And that's where some of the big bills are.

Jason Windsor
CEO & Director at Aberdeen Group

Headcount is down a little bit in line with plans, but the big source of this is absolutely not headcount. And we've been taking it out of operations, IT. And last year we largely took out the functional cost. There might be a little bit more to do on that. And we'll continue to sort of ask ourselves questions of how do we do better?

Jason Windsor
CEO & Director at Aberdeen Group

How do we automate wherever we can? How do we use data more intelligently to support the front office? So within transformation, it's not just about cost out. It is about better. And we think we can do both, particularly on the automation and use of data side.

Siobhan Boylan
CFO at Aberdeen Group

And it's about cost culture as well. It's about being efficient across the platforms. Clearly, we need to invest, but it is in certain areas, but it is a focus of achieving those cost targets and beyond.

Jason Windsor
CEO & Director at Aberdeen Group

On the II cash balances, they popped up slightly at Q1. I think you've heard them quite invested. I think the broad trend would be in line with customer and AUA growth across the piece. I think you're right. SIPs are slightly higher tilted to cash probably more like 10% than just over eight for the overall book.

Jason Windsor
CEO & Director at Aberdeen Group

So I mean obviously SIPs are growing at sort of 3x the overall book. So that will flow through slightly, but it's not going to be a huge factor. So I think on average the cash will grow in that range that we've seen maybe ticking up just slightly as a percentage of AUA. And as you say the margin is what it is. We hit I think 2.2% in the first half.

Jason Windsor
CEO & Director at Aberdeen Group

We're not going to be miles off of that. We're probably in the sort of 2.1% to 2.2% area for the second half. We would expect I base rates could jump around a bit, but that would be our expectation as we sit here today.

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

That's helpful. Thank you. So I I'll just maybe circle back on the cost point. I mean, when you announced your 150 plan you cost at least 150 target. You're pretty consistent and you could deliver those with very limited revenue attrition.

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

And it sounds like any incremental cost saves you kind of retreatment that message as well?

Jason Windsor
CEO & Director at Aberdeen Group

Absolutely. We are I like to use we're reengineering the business rather than swinging through it to take out capacity such that we can provide a business that's got a much more efficient operational platform and it allows us to grow. So it's taking out waste, automating being faster and allowing the business to add value when we add new assets.

Nicholas Herman
Nicholas Herman
Director - Equity Research at Citigroup

Very helpful. Thank you.

Operator

Thank you. Your next question comes from Charles Bennett from Rothschild and Co. Redburn. Please go ahead.

Charles Bendit
Equity Research Analyst at Redburn Atlantic

Good morning. Thank you for taking my questions. I had a follow-up please on the Pfenex relationship. So thank you for the color there. In addition to the active to passive shift, I think you mentioned that there was some appetite on Pfenex's part to manage some shareholder assets in house I. E. The assets underlying annuity business. Can you just remind us what the split here is between policyholder and shareholder assets in terms of existing business that Aberdeen manages for Phoenix? And then the second question was on flows. Besides quant, it looks like the standout was a large gross inflow contribution from DM Credit. Just wondering if you could give us some color around this.

Charles Bendit
Equity Research Analyst at Redburn Atlantic

Was it single mandate driven, broad based demand? Is the strategy meaningfully outperforming peers? Or is the category just strongly in paper at the moment? Thank you.

Jason Windsor
CEO & Director at Aberdeen Group

Yes. I don't know exactly the answer to your first question. I think that they've got about £30,000,000,000 of annuities. We probably run half of that give or take. So it's about 10% to 15% I'm going to guess.

Jason Windsor
CEO & Director at Aberdeen Group

It's in that range of assets that back annuities of what we run for them. It's more a question for them than for me. I think it's in that. That's not going to be far off. On the credit side, yes, we had a couple of large mandates actually that came through there which were significant.

Jason Windsor
CEO & Director at Aberdeen Group

But there were a number of wins that were smaller. There was a couple that were in the sort of or was it just one just over €1,000,000,000 and then the rest were in the sort of hundreds of millions through that. If you just took was your question just on DM credit just to be clear? I think it was.

Charles Bendit
Equity Research Analyst at Redburn Atlantic

Yes. My question was on DM credit just because it looked like unlike the other categories it saw a £5,000,000,000 gross inflow in the period.

Jason Windsor
CEO & Director at Aberdeen Group

Yes. There was GBP1 billion mandate and then a number in the GBP0.5 billion or several 100,000,000 category.

Operator

Thank you. Your next question comes from Gregory Simpson from BNP Paribas. Please go ahead.

Gregory Simpson
Equity Research Analyst at Exane BNP Paribas

Hi, good morning. So first question is, I think costs which were up 4% year on year and the cost income now up 55%. Can you talk a bit more about the outlook for cost growth given the pipeline for new products and some of your peers have talked about not wanting to over earn too much on margins. So just any thoughts on whether I is doing the right amount of marketing for instance? That's the first question.

Gregory Simpson
Equity Research Analyst at Exane BNP Paribas

Second on II again, if I look at the account fee line, it's been this kind of £26,000,000 per half level for the last three point five years. That's quite good customer growth. So can you maybe flesh out a bit more what's going on and when we expect that to converge better with customer growth? And then thirdly, on investments you've got $13,000,000,000 of U. S.

Gregory Simpson
Equity Research Analyst at Exane BNP Paribas

ETF AUM. I think a lot of that is in commodities, big gold ETF. Can you maybe talk a bit about the kind of competitive positions and how Aberdeen is seeing the outlook in what's a very competitive marketplace? Thank you.

Jason Windsor
CEO & Director at Aberdeen Group

Okay.

Jason Windsor
CEO & Director at Aberdeen Group

So in I'll take the second question first if that's all right. I would expect the easy part to answer is the outlook. I think from the second half onwards will start to trend more toward customer growth. We've seen a little bit of change in product mix and the way that incentives have gone through as we've stepped up marketing. I think I said this in previous calls.

Jason Windsor
CEO & Director at Aberdeen Group

There's a sort of kind of a one off effect as we up the marketing that is offset to subscriptions. But in the from the second half and into 2026, I expect that number to trend more in line with customer growth. I think we talked Richard more precisely and his team talked in Manchester about the brand and marketing investments that we've made. We stepped that up materially last year and then a little bit further this year. We're broadly comfortable with the level that we're at.

Jason Windsor
CEO & Director at Aberdeen Group

We continue to see real upside in the brand awareness of II across the whole marketplace in different areas. So we do see real return on that investment in brand from the base that we're at and that will be a good fillet to the growth outlook of the business. And your specific question around the prop growth that's already kind of in the numbers. So there's nothing new. We've been building them.

Jason Windsor
CEO & Director at Aberdeen Group

We don't capitalize a lot. So that's actually already in the figures. So we'll continue to spend money as they go from build to operate, but that's what you'd expect. So I'm not expecting a step up in fact. I sort of touched on this without saying explicitly.

Jason Windsor
CEO & Director at Aberdeen Group

Efficiency and we measure that NII by the cost to asset ratio is absolutely a core part of our success. The business is very, very good at managing its efficiency and we'll continue to do that. And then we think that places us well and that allows us to offer that very attractive price point for customers. On The U. S.

Jason Windsor
CEO & Director at Aberdeen Group

Side, you're right most of that is in the commodity products. I mean, it's been a remarkable success for us. We the points during Q2 we're taking 80,000,000 to $100,000,000 a day as it was it's been tracking up quite nicely. I don't have a lot to say about it. I mean it is clearly playing in a market with real tailwind.

Jason Windsor
CEO & Director at Aberdeen Group

And it's a well structured well managed product at a good price point.

Gregory Simpson
Equity Research Analyst at Exane BNP Paribas

Thank you.

Operator

Thank you. Your next question comes from Bruce Hamilton from Morgan Stanley. Please go ahead.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

Hi, there. Good morning. Thanks for taking my questions. Maybe firstly on sort of synergies revenue synergies within the business. You mentioned the managed SIP at II that's going to be sort of provided by Aberdeen.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

Have you identified other areas that you can drive sort of revenues through cross sell across the three kind of divisions would be my first question? Secondly, on the pension, obviously, we're going to get this nice sort of benefit running through from the second half onwards. But is there any scope for a more substantial sort of one off capital return? And just understanding where we are on the process in terms of getting packs or other approvals that might be necessary? Or is that not the way you want to move forward?

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

And then finally on sort of active ETFs, can you just remind us which products you've rolled out and how you're thinking about the pipeline for new products there? Thank you.

Jason Windsor
CEO & Director at Aberdeen Group

Yes. Sure. So synergies across I know you asked this every call. The synergies the revenue side of the synergies across the business are on the Managed side where we've seen good launch of the Managed ISA through Interactive Investor, which is it's not solely provided by Aberdeen Investments, but they provide ultimately, II is responsible for the product, but they provide the skill in the multi asset structuring and provide some of the componentry. That will be a similar product structure for the SiP, which we'll be launching in the second half.

Jason Windsor
CEO & Director at Aberdeen Group

We've also launched the two ETFs that we listed in London yesterday on to II. I'm not going to expect the floodgates to open on that, but we continue to be able to get our products in the right way into the market because of the distribution asset that we have. Within Advisor, I touched on this a moment ago, we've got an NPS offering, which is now I'm not quite sure why this was the case. We had NPS within adviser and investments. We moved it all into investments.

Jason Windsor
CEO & Director at Aberdeen Group

That is now sort of where the skill set sits and we can we've definitely got plenty of runway to improve our NPS and the team and adviser are acutely aware of that. So there's further there's much further that we can do. On pensions, I think we stay vigilant as to moves by the chancellor to change the run on regime. There's nothing specific out there. So that's an opportunity that we can't assess properly until it comes up.

Jason Windsor
CEO & Director at Aberdeen Group

And I think as I've said to you but that might lead to some capital being released from the surplus TBD, but I think that's part of the objective that the chancellor is trying to achieve. On the more traditional buyout side, I think as I've said on at least two or three of these calls now, we don't have the tax clearance that we would need to pursue that. So it's not an option available to us currently. If that changed that would then be thrown into the mix. But we're quite comfortable with the arrangement that we reached.

Jason Windsor
CEO & Director at Aberdeen Group

We're not inclined to sort of chop and change. But there's a there is value now coming through to shareholders from that significant surplus which is built up over many years. The two active ETFs that we launched is that what your question was for? I mean there's a number of them, but the ones Yes.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

Just to understand you just remind me the two products and what the pipeline and how excited you are about further launches or whether you're going to be really quite selective in terms of what you do there?

Jason Windsor
CEO & Director at Aberdeen Group

Yes. So you've got to differentiate this. The U. S. Is more of a transition to active ETFs where we're not huge in The U.

Jason Windsor
CEO & Director at Aberdeen Group

S. But we've got we've moved two active ETFs where it makes sense. The two that we launched a few months ago in Europe and then listed in London yesterday was a future supply chain ETF and a future raw materials product. So they're both run by the equity team here in The U. K.

Jason Windsor
CEO & Director at Aberdeen Group

We continue to be keen to provide that product to those that want to invest through an ETF. We still see a lot of demand for CCaaS or HOTICS in Europe to be clear. Distribution is more teed up around that. So whilst it's important that we have that offering, we'll continue with the more classic products as well.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

Perfect. Thanks very much.

Operator

Thank you. Your next question comes from Michael Werder from UBS. Please go ahead.

Michael Werner
Michael Werner
Equity Research Analyst at UBS Group

Thank you.

Michael Werner
Michael Werner
Equity Research Analyst at UBS Group

Thank you very much. Thanks for the opportunity to ask the question. Just one for me regarding Interactive Investor. Obviously, volatility towards the end of Q1 beginning of Q2 led to very strong trading activity. We And saw that in the daily average trades.

Michael Werner
Michael Werner
Equity Research Analyst at UBS Group

But as we kind of exit Q2 and enter Q3, has there been sign of or evidence of kind of an investor trading fatigue? Where do you see kind of the trading activity as we go through the second half of this year as a result? Thanks.

Jason Windsor
CEO & Director at Aberdeen Group

So you're right. We did see quite a pickup in that period. I think the we're up about Q2, Q3 around sort of 23%, 24% on the daily average retail trade volumes. I think there's certainly no slowdown versus trend. If we take trend as being last year, I think we'd expect it to remain at least consistent with the growth in AUA and with customer numbers.

Jason Windsor
CEO & Director at Aberdeen Group

So we do see which is therefore 10 ish percent growth depending on with customers slightly below assets slightly above that. But no we've not seen in July at least a discernible step down and it's probably slightly elevated relative to the figures from last year.

Michael Werner
Michael Werner
Equity Research Analyst at UBS Group

Thank you.

Operator

Thank you. This does conclude our question and answer session. I would now like to turn the conference over back to Jason for any closing remarks.

Jason Windsor
CEO & Director at Aberdeen Group

Well, you very much everybody for joining. Hope you found not dragging you over here to Bishopsgate a bit more efficient and gave you a chance to do other things. We really do appreciate you joining listening to the presentation and the Q and A. We think we've had a good first half. As I said, we're set up to continue into the second half.

Jason Windsor
CEO & Director at Aberdeen Group

And we're absolutely focused on delivering the growth ambition that we've set out into those targets. So expect to hear more from us on that topic. And I look forward to seeing you all in due course.

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