Half-year Report - Part 2 of 4

RNS Number : 9889W

Standard Life Aberdeen plc

07 August 2018

 

Standard Life Aberdeen plc

Half year results 2018

Part 2 of 4

Contents

1.	Management report	1
	Financial and business performance
	Aberdeen Standard Investments
	Standard Life Pensions and Savings (Continuing operations)
	India and China life
	Standard Life Pensions and Savings (Discontinued operations)
	Risk oversight
	Basis of preparation
2.	Statement of Directors' responsibilities	13
3.	Independent review report from our External auditors	14
4.	Financial information	15
	IFRS condensed consolidated primary statements
	Notes to the IFRS condensed consolidated financial information
5.	Supplementary information	51
	5.1 Alternative performance measures
	5.2 Financial ratios
	5.3 Assets under management and administration and net flows
	5.4 Aberdeen Standard Investments assets under management and net flows
	5.5 Assets under management and administration - reconciliation to previously disclosed information
6.	Glossary	69
7.	Shareholder information	72

The Half year results 2018 are published on the Group's website at www.standardlifeaberdeen.com/hyresults

The Half year 2018 press release is also published on www.standardlifeaberdeen.com

Reported and Pro forma results

The merger of Standard Life plc and Aberdeen Asset Management PLC (Aberdeen) completed on 14 August 2017, with the merger accounted for as an acquisition of Aberdeen by Standard Life plc on that date. Pro forma results for the Group are prepared as if Standard Life Group and Aberdeen had always been merged and are included in these results to assist in explaining trends in financial performance by showing performance for both H1 2018 and H1 2017 for the combined Group. The difference between the Reported results and Pro forma results is the H1 2017 results of Aberdeen which were prior to completion of the merger.

Discontinued operations

Discontinued operations relate to the UK and European insurance business. The proposed sale of this business to Phoenix was announced on 23 February 2018 and approved by shareholders on 25 June 2018. The completion of the sale is subject to regulatory and other necessary approvals.

1. Management report

Key performance indicators	H1 2018	H1 2017
Adjusted profit before tax    Continuing operations1,2    Total including Discontinued operations2	£311m £478m	£355m £521m
Adjusted diluted earnings per share    Continuing operations1,2    Total including Discontinued operations2	8.2p 12.8p	9.7p 15.3p
Cost/income ratio1,2	69%	68%
Assets under management and  administration (AUMA)1,3	£610.1bn	£626.5bn
Net flows1,2	(£16.6bn)	(£12.4bn)
Investment performance - 3 years3,4	53%	63%
Interim dividend per share	7.30p	7.00p
Other financial highlights	H1 2018	H1 2017
IFRS profit before tax1	£127m	£94m
IFRS profit after tax attributable to equity holders    Continuing operations    Total including Discontinued operations	£111m £185m	£84m £292m
Diluted earnings per share    Continuing operations1    Total including Discontinued operations	3.7p 6.2p	4.3p 14.8p

1. Continuing operations excludes the UK and European insurance business. The proposed sale of this business to Phoenix Group Holdings (Phoenix) was announced on 23 February 2018 and is expected to complete in Q3 2018.

2. Comparative shown on a Pro forma basis.

3. Comparative as at 31 December 2017.

4. Percentage of AUM above benchmark. Calculated on a Pro forma basis and gross of fees. A full definition is included in the Glossary on page 70.

Certain measures, such as adjusted profit, are not defined under IFRS and are therefore termed alternative performance measures (APMs). Further details on APMs are included in Supplementary information in Section 5. Unless otherwise stated, 2017 comparatives in this Management report are provided on a Pro forma basis. Pro forma results are prepared as if Standard Life Group and Aberdeen had always been merged. Further details of the Reported basis and Pro forma basis are included on page 12.

Conditions for the asset management industry continue to be challenging. However, our gross inflows remain robust and are spread across a diverse range of investment capabilities, and our market-leading adviser platforms continue to grow. Our investment and distribution teams are winning new mandates and we have a good and diverse pipeline of business from around the world. We are actively taking steps to improve our investment performance in key areas and are encouraged by the impact of these initiatives.

We are also pleased by progress on the integration programme and achievement of cost synergies. The sale of our UK and European insurance operations will complete our transformation to a capital light business and enhances our strategic partnership with Phoenix. Our financial strength allows us, subject to necessary regulatory approvals, to return up to £1.75bn of capital to shareholders. We will commence the first tranche of £175m in the next few days. We will still have one of the strongest balance sheets in the sector, which enables us to continue to develop and broaden our areas of strength and focus on delivering long-term performance for our clients.

Building a diversified world-class investment company

On 23 February 2018, we announced the proposed sale of our UK and European insurance operations to Phoenix. The proposed sale was approved by shareholders on 25 June 2018 and, subject to certain regulatory approvals, we expect the transaction to complete later in Q3 2018. We have therefore classified the UK and European insurance business as a discontinued operation.

As part of the transaction we will enter into an enhanced strategic partnership with Phoenix, providing us with an additional source of earnings, dividends and AUM growth. We have retained our valuable and fast growing UK retail platforms Wrap and Elevate, as well as our financial planning and advice business 1825.

The general meeting on 25 June 2018 also approved the return of up to £1.75bn in aggregate to shareholders, subject to necessary regulatory approvals. This includes a return of capital of £1bn via a B-share scheme with an ordinary share consolidation, and a return of up to £750m by a share buyback programme. We are commencing the first tranche of £175m of the share buyback programme in the next few days. Completion of the proposed sale to Phoenix is expected in Q3 and the B-share scheme will commence soon after completion.

Resilient AUMA and improved operational efficiency

Total AUMA from continuing operations decreased to £610.1bn (FY 2017: £626.5bn). Assets managed by Aberdeen Standard Investments were £557.1bn (FY 2017: £575.7bn) while Standard Life Pensions and Savings assets under administration increased to £56.3bn (FY 2017: £54.0bn).

Adjusted profit before tax from continuing operations of £311m (H1 2017: £355m) is lower than the same period last year but up on H2 2017 as we start to see the benefit of improved operational efficiency.

Outlook

Market conditions remain challenging, as macroeconomic and political uncertainties continue to affect investor sentiment. These uncertainties are driving investors to look for innovative and outcome orientated 'new active' investment solutions and these will continue to grow in importance in meeting the needs of both institutional and increasingly retail customers. With our broad and diverse range of capabilities, Standard Life Aberdeen is well placed to take advantage of the opportunities and to deal with the challenges that these trends present.

We are making good progress on our integration programme. Our investment and distribution teams are fully integrated and focused on generating positive client outcomes. While net outflows remain a challenge in a tough market, they are concentrated in a narrow range of strategies and we remain focused on supporting our teams and improving performance in GARS, Emerging Markets and Global Equities, while remaining true to our investment style. However, we recognise that a turnaround in performance of these products may take some time and will depend partly on market conditions.

We will maintain our focus on operational efficiency and cost control, including the delivery of merger synergies and the implementation of a simplified global operating model, so that we continue to meet evolving client and customer needs while generating sustainable returns for our shareholders.

AUMA and net flows

Flows and AUMA	Gross inflows			Net flows			AUMA
	H1 2018 £bn	H1 2017 £bn		H1 2018 £bn	H1 2017 £bn		H1 2018 £bn	FY 2017 £bn
Aberdeen Standard Investments growth	22.8	26.5		(13.6)	(9.0)		291.0	303.9
Pensions and Savings continuing	4.7	5.5		2.5	3.7		56.3	54.0
Eliminations	(1.1)	(1.3)		(0.2)	-		(8.2)	(8.0)
Total growth channels from continuing operations	26.4	30.7		(11.3)	(5.3)		339.1	349.9
Aberdeen Standard Investments mature books	11.0	8.2		(5.6)	(7.4)		266.1	271.8
India and China life	0.6	0.6		0.3	0.3		4.9	4.8
Total from continuing operations	38.0	39.5		(16.6)	(12.4)		610.1	626.5
Discontinued operations1	4.4	4.8		(1.2)	(1.4)		133.2	134.1
Discontinued eliminations	(2.3)	(2.3)		0.7	1.1		(104.0)	(105.7)
Total including discontinued operations	40.1	42.0		(17.1)	(12.7)		639.3	654.9

1. Discontinued operations relate to the UK and European insurance business previously reported in the Pensions and Savings segment. Further details are included in Note 4.2.

Assets under management and administration

AUMA from continuing operations decreased to £610.1bn (FY 2017: £626.5bn) as a result of net outflows from Aberdeen Standard Investments and adverse market movements. Pensions and Savings continued to attract steady net inflows.

AUMA in the growth channel decreased by 3% to £339.1bn (FY 2017: £349.9bn) and accounts for 56% (FY 2017: 56%) of total AUMA from continuing operations.

AUMA was supplemented by three small bolt-on acquisitions which added £4.8bn of assets, accelerating our US capabilities in private markets, closed ended funds and exchange traded funds.

AUMA from discontinued operations remained largely stable at £133.2bn (FY 2017: £134.1bn).

There is an element of AUMA which is both administered by Pensions and Savings and also managed by Aberdeen Standard Investments. This AUMA is included in both Pensions and Savings and Aberdeen Standard Investments and to eliminate double-counting, an adjustment is required at Group level. At 30 June 2018 there were £8.2bn (FY 2017: £8.0bn) of eliminations relating to the continuing business and £104.0bn (FY 2017: £105.7bn) relating to discontinued operations.

Further information on AUMA and net flows is included in the Supplementary information section of this report. Definitions of growth channels and mature books are included in the Glossary.

Gross and net flows

Gross inflows from continuing operations remained robust at £38.0bn (H1 2017: £39.5bn), with a decrease in Aberdeen Standard Investments growth channel gross inflows to £22.8bn (H1 2017: £26.5bn) being largely offset by increased mature channel gross inflows of £11.0bn (H1 2017: £8.2bn). Gross inflows in Pensions and Savings continuing operations of £4.7bn (H1 2017: £5.5bn) continue to benefit from the boost in the pensions market from individuals looking to take advantage of high defined benefit transfer values by moving to products providing the flexibility offered by drawdown and pension freedoms.

Aberdeen Standard Investments growth channel net outflows were £13.6bn (H1 2017: £9.0bn), broadly in line with the second half of 2017 (H2 2017: £13.1bn). Net outflows from equities were £7.6bn (H1 2017: £3.4bn, H2 2017: £4.8bn), impacted by continued weaker investment performance. Multi-asset saw net outflows of £4.4bn (H1 2017: £3.8bn). Within this, GARS net outflows of £5.3bn (H1 2017: £5.6bn) continue to conceal more encouraging flows in the broader asset class.

Our mature books, which are in long-term run-off, saw net outflows of £5.6bn (H1 2017: £7.4bn).

Aberdeen Standard Investments total net outflows were £19.2bn (H1 2017: £16.4bn, H2 2017: £20.9bn).

Standard Life Pensions and Savings continuing operations delivered robust net inflows of £2.5bn (H1 2017: £3.7bn) with net inflows into both of our retail platforms, Wrap and Elevate.

India and China life net inflows remained steady at £0.3bn (H1 2017: £0.3bn) with lower net inflows for HDFC Life offset by higher inflows for Heng An Standard Life (HASL).

Profitability

Adjusted profit before tax from continuing operations of £311m is 12% lower than H1 2017 on a Pro forma basis of £355m and 62% higher than H1 2017 on a Reported basis of £192m. IFRS profit attributable to equity holders of Standard Life Aberdeen plc decreased by 36% to £185m.

Adjusted profit before tax from continuing operations

Adjusted profit before tax is a key measure which we believe provides a fuller understanding of the performance of the business by identifying and analysing adjusting items.

Adjusted profit before tax fell by 12% to £311m (H1 2017: £355m, H2 2017: £305m) mainly due to lower fee based revenue partially offset by a reduction in expenses.

On a Reported basis, adjusted profit before tax increased by £119m compared to H1 2017 primarily due to the inclusion of Aberdeen profit in the H1 2018 result.

Fee based revenue

Fee based revenue reduced by 7% to £966m (H1 2017: £1,041m) reflecting the impact of continued net outflows and adverse market movements. Performance fees represent less than 1% of total revenue at £3m (H1 2017: £2m).

Adjusted operating expenses

Adjusted operating expenses reduced to £712m (H1 2017: £739m, H2 2017: £812m) mainly due to lower staff costs including the benefit of merger synergies and careful cost control.

The cost/income ratio, which includes our share of associates' and joint ventures' (JVs) profit before tax was 69% (H1 2017: 68%) reflecting the fall in revenue noted above.

We are targeting to achieve over £350m of annualised efficiency savings. The merger integration continues to progress well and remains on track to achieve at least £250m of annual cost savings. In addition, we expect the sale of the UK and European insurance business to enable an additional £100m of efficiency savings by the end of 2020 as we implement our simplified operating model.

Share of associates' and joint ventures' profit before tax

Our share of profit before tax from associates and joint ventures increased by 13% to £60m (H1 2017: £53m) driven by higher profits from HDFC Asset Management of £26m (H1 2017: £20m). Higher profits from HASL, our Chinese life joint venture, were partly offset by a lower contribution from HDFC Life reflecting a reduction in our shareholding following the IPO in November 2017 and adverse movements in exchange rates.

The combined value of our residual shareholding in HDFC Asset Management following the IPO and our shareholding in HDFC Life at 6 August 2018 was c£4.5bn.

Adjusted profit before tax from discontinued operations

Adjusted profit before tax from discontinued operations was £167m (H1 2017: £166m) as growth in fee based revenue was offset by higher expenses. See page 10 for further information.

Profitability	H1 2018 £m	Pro forma basis H1 2017 £m	Reported basis H1 2017 £m
Fee based revenue	966	1,041	520
Spread/risk margin	-	-	-
Total adjusted operating income	966	1,041	520
Total adjusted operating expenses	(712)	(739)	(390)
Adjusted operating profit	254	302	130
Capital management	(3)	-	9
Share of associates' and joint ventures' profit before tax	60	53	53
Adjusted profit before tax from continuing operations	311	355	192
Adjusted profit before tax from discontinued operations	167	166	166
Adjusted profit before tax	478	521	358
Total adjusting items	(240)		(36)
Share of associates' and joint ventures' tax expense	(18)		(7)
Profit attributable to non-controlling interests (preference shares)	(3)		-
Tax expense	(32)		(23)
Profit for the period attributable to equity holders of Standard Life Aberdeen plc	185		292

As disclosed in our Annual report and accounts 2017, the Group renamed 'operating profit before tax' as 'adjusted profit before tax' and changes to the basis of calculation were also made. Comparatives have been restated. Refer to Note 4.3 in Section 4 of this report for more information. This report includes results for comparative periods on both a Reported basis and on a Pro forma basis. See page 12 for more information.

Comparatives have also been restated to reflect the classification of the UK and European insurance business within the Pensions and Savings reportable segment as discontinued operations. Refer to Note 4.2 for more information.

For further details on our IFRS results, see the Group's IFRS condensed consolidated income statement on page 15.

IFRS profit

(H1 2017 on a Reported basis)

IFRS profit before tax increased to £127m (H1 2017: £94m) due to the inclusion of Aberdeen adjusted profit in H1 2018, partly offset by increased amortisation as a result of the intangible assets added by the merger.

IFRS profit from continuing operations	H1 2018 £m	H1 2017 £m
Adjusted profit before tax	311	192
Total adjusting items	(166)	(91)
Share of associates' and joint ventures' tax expense	(18)	(7)
Profit before tax	127	94
Tax expense	(13)	(10)
Profit for the period	114	84

Adjusting items are shown in the table below.

Restructuring and corporate transaction expenses were £59m (H1 2017: £57m). H1 2018 includes Aberdeen integration and merger related costs of £52m (H1 2017: £39m). Further details on restructuring and corporate transaction expenses are provided in the Supplementary information section.

The amortisation and impairment of intangible assets acquired in business combinations increased to £108m (H1 2017: £10m). This includes an amortisation charge of £84m on the intangible assets recognised as a result of the merger.

Other adjusting items in H1 2017 related to the £24m impairment from the proposed sale of our wholly owned Hong Kong insurance company to our Chinese life joint venture company, Heng An Standard Life.

The loss in adjusting items from discontinued operations of £74m (H1 2017: profit £55m) included short-term fluctuations in investment return and economic assumption changes which generated a loss of £61m (H1 2017: profit £59m), primarily relating to credit spread widening in H1 2018 compared to narrowing in H1 2017. See page 10 for further information on adjusting items from discontinued operations.

Analysis of adjusting items (H1 2017 shown on a Reported basis)	H1 2018 £m	H1 2017 £m
Restructuring and corporate transaction expenses	(59)	(57)
Amortisation and impairment of intangible assets acquired in business combinations	(108)	(10)
Other	1	(24)
Total adjusting items from continuing operations	(166)	(91)
Discontinued operations	(74)	55
Total adjusting items	(240)	(36)

Tax expense from continuing operations
(H1 2017 on a Reported basis)

The IFRS tax expense was £13m (H1 2017: £10m) including a credit of £35m (H1 2017: credit £21m) relating to adjusting items. The effective tax rate on total IFRS profit is 10% (H1 2017: 11%) compared to a UK corporation tax rate of 19% (H1 2017: 19.25%). The effective tax rate is lower than the UK corporation tax rate due to a one-off deferred tax adjustment and the tax effect of accounting for associates and joint ventures. These impacts are partially offset by non-deductible costs.

The effective tax rate on adjusted profit is 21% (H1 2017: 20%). This reflects the tax on associates and joint ventures being at a higher rate than the UK Corporation tax rate. The effective tax rate on adjusted profit excluding associates and joint ventures is 19% (H1 2017: 22%).

Earnings per share from continuing operations

Adjusted diluted earnings per share of 8.2p increased by 0.4p compared to H1 2017 on a Reported basis of 7.8p, and decreased by 1.5p compared to H1 2017 on a Pro forma basis of 9.7p.

See pages 17 and 39 for further details on adjusted profit and reconciliation of adjusted profit to IFRS profit

Adjusted cash generation from continuing operations

This measure provides insight into our ability to generate cash that supports further investment in the business and the payment of dividends to our shareholders. Adjusted cash generation was as follows:

Analysis of adjusted cash generation	H1 2018 £m	H1 2017 £m
Aberdeen Standard Investments	225	241
Standard Life Pensions and Savings	6	4
India and China life	-	-
Other	(32)	(23)
Adjusted cash generation from continuing operations	199	222

Liquidity management

At 30 June 2018, Standard Life Aberdeen plc held £1.0bn (H1 2017: £0.8bn) of cash and liquid resources, comprising £551m (H1 2017: £327m) of cash and short-term debt securities, £290m (H1 2017: £304m) of bonds and £199m (H1 2017: £202m) of holdings in pooled investment funds.

Dividends received from subsidiaries comprised £312m (H1 2017: £180m) from Standard Life Assurance Limited (SLAL), £140m (H1 2017: £120m) from Aberdeen Standard Investments entities and £9m (H1 2017: £nil) relating to dividends from HDFC Life. The SLAL dividend represents higher profits in 2017 compared to 2016 and was the last dividend paid before the proposed sale of SLAL to Phoenix.

Cash investments in subsidiaries primarily relates to acquisitions in the period.

Holding company cash and liquid resources		H1 2018 £m	H1 2017 £m
Opening 1 January		1,195	900
Dividends received from subsidiaries		461	300
Cash dividends paid to shareholders		(420)	(263)
Cash investments in subsidiaries, associates and joint ventures		(135)	-
Expenses		(57)	(51)
Acquisition of shares by Employee Share Trust		(29)	(56)
Other		25	(1)
Closing		1,040	829

At 30 June 2018 Standard Life Aberdeen plc held distributable reserves of £1.3bn.

Staff pension scheme

The principal defined benefit staff pension scheme, which is closed to future accrual, continues to have a significant surplus of £1.0bn at 30 June 2018 (31 Dec 2017: £1.1bn). Further details are provided in Note 4.13.

Dividends

Proposed dividend

We propose an interim dividend for 2018 of 7.30p per share which is an increase of 4.3%. This will be paid on 25 September 2018 to shareholders on the register at close of business on 17 August 2018. The expected cost of the interim dividend is approximately £214m.

How the dividend is funded

External dividends are funded from the cumulative dividend income that Standard Life Aberdeen plc receives from its subsidiaries. To provide some protection against fluctuations in subsidiary dividends, Standard Life Aberdeen plc holds a buffer of distributable cash and liquid resources. This buffer is dynamic and takes into account expected future subsidiary dividend flows and the risks to those dividends.

Solvency II

We are strongly capitalised with a Solvency II capital surplus (Investor view) of £3.4bn (FY 2017: £3.8bn) representing a solvency ratio of 195% (FY 2017: 206%). The Investor view of our solvency position gives insight into the solvency capital provided by equity and debt investors. The £0.4bn decrease in Investor view surplus in H1 2018 is due to the payment of the 2017 final dividend.

The Regulatory view solvency cover prescribed by Solvency II regulations is 175% (FY 2017: 185%). This capital surplus excludes £0.2bn (FY 2017: £0.2bn) of capital in insurance subsidiaries that is not deemed to be freely transferrable around the Group.

 In addition, the Regulatory view solvency cover is diluted by the inclusion of £0.6bn (FY 2017: £0.7bn) of capital requirements for with profits funds and our defined benefit pension scheme. These capital requirements are covered in full by capital resources in those funds.

The Group expects that, post completion of the sale of the UK and European insurance business, the retained Group will be subject to the CRD IV regime for group-level prudential regulatory capital purposes. This is subject to receiving regulatory approval. CRD IV is the European regulatory capital regime that applies to investment firms.

Reconciliation of Standard Life Aberdeen Investor view and Regulatory view	30 June 2018 (Draft returns)					31 December 2017 (Final returns)
	Investor view	Less unrecognised capital	Add with profits funds and pension scheme	Regulatory view		Investor view	Less unrecognised capital	Add with profits funds and pension scheme	Regulatory view
Own funds	£7.0bn	(£0.2bn)	£0.6bn	£7.4bn		£7.4bn	(£0.2bn)	£0.7bn	£7.9bn
Solvency capital requirement (SCR)	(£3.6bn)	-	(£0.6bn)	(£4.2bn)		(£3.6bn)	-	(£0.7bn)	(£4.3bn)
Solvency II capital surplus	£3.4bn	(£0.2bn)	-	£3.2bn		£3.8bn	(£0.2bn)	-	£3.6bn
Solvency cover	195%			175%		206%			185%

Business performance

Our reportable segments have been identified in accordance with the way that we are structured and managed.

Analysis of adjusted profit H1 2018	Aberdeen Standard Investments	Standard Life Pensions and Savings	India and China life	Other	Total continuing operations	Discontinued operations	Eliminations	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue	871	89	6	-	966	395	(69)	1,292
Spread/risk margin	-	-	-	-	-	55	-	55
Total adjusted operating income	871	89	6	-	966	450	(69)	1,347
Total adjusted operating expenses	(580)	(102)	(5)	(25)	(712)	(280)	69	(923)
Adjusted operating profit	291	(13)	1	(25)	254	170	-	424
Capital management	-	14	-	(17)	(3)	(3)	-	(6)
Share of associates' and joint ventures' profit before tax	26	-	34	-	60	-	-	60
Adjusted profit before tax	317	1	35	(42)	311	167	-	478
Total adjusting items	(142)	(16)	(2)	(6)	(166)	(74)	-	(240)
Share of associates' and joint ventures' tax expense	(11)	-	(7)	-	(18)	-	-	(18)
Profit attributable to non-controlling interests (preference shares)	(3)	-	-	-	(3)	-	-	(3)
Tax expense	(23)	5	-	5	(13)	(19)	-	(32)
Profit for the period attributable to equity holders of Standard Life Aberdeen plc	138	(10)	26	(43)	111	74	-	185
Analysis of adjusted profit H1 2017	Aberdeen Standard Investments	Standard Life Pensions and Savings	India and China life	Other	Total continuing operations	Discontinued operations	Eliminations	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue	950	84	7	-	1,041	382	(66)	1,357
Spread/risk margin	-	-	-	-	-	49	-	49
Total adjusted operating income	950	84	7	-	1,041	431	(66)	1,406
Total adjusted operating expenses	(609)	(97)	(7)	(26)	(739)	(258)	66	(931)
Adjusted operating profit	341	(13)	-	(26)	302	173	-	475
Capital management	(9)	13	-	(4)	-	(7)	-	(7)
Share of associates' and joint ventures' profit before tax	20	-	33	-	53	-	-	53
Adjusted profit before tax (Pro forma basis)	352	-	33	(30)	355	166	-	521
Adjust for Aberdeen results pre-merger completion (14 Aug 2017)	(163)	-	-	-	(163)	-	-	(163)
Adjusted profit before tax (Reported basis)	189	-	33	(30)	192	166	-	358
Total adjusting items	(18)	(8)	(24)	(41)	(91)	55	-	(36)
Share of associates' and joint ventures' tax expense	(5)	-	(2)	-	(7)	-	-	(7)
Tax expense	(30)	(1)	-	21	(10)	(13)	-	(23)
Profit for the period attributable to equity holders of Standard Life Aberdeen plc	136	(9)	7	(50)	84	208	-	292

Further details on how adjusted profit before tax and other alternative performance measures reconcile to the most appropriate measure prepared in accordance with IFRS are provided in the Supplementary information in Section 5.

Aberdeen Standard Investments

AUM

Total AUM decreased by 3% from 31 December 2017 to £557.1bn as a result of net outflows and adverse market movements in some asset classes during the period. Growth channel, which comprises Institutional, Wholesale and Wealth/Digital AUM decreased by 4% to £291.0bn, and accounts for 52% of total AUM.

Growth channel AUM was supplemented by three small bolt-on acquisitions which accelerated our US capabilities in private markets, closed ended funds and exchange traded funds.

We have increased the pace of innovation in 'new active' investment capabilities with 20 fund launches in H1 2018 compared to 22 across the whole of 2017. There is a strong pipeline of innovation, including more than 20 funds in the later stages of development, across a broad range of asset classes, regions and target markets planned for delivery in H2 2018 and into 2019. 

Gross and net flows

Total gross inflows were £33.8bn (H1 2017: £34.7bn, H2 2017: £31.8bn) and net outflows were to £19.2bn (H1 2017: £16.4bn, H2 2017: £20.9bn).

Gross inflows from growth channel of £22.8bn (H1 2017: £26.5bn) and redemptions of £36.4bn (H1 2017: £35.5bn) resulted in growth channel net outflows of £13.6bn (H1 2017: £9.0bn). Growth channel net outflows were broadly in line with the second half of 2017 (H2 2017: £13.1bn).

Net outflows of £7.6bn (H1 2017: £3.4bn) from equities were primarily from Global, Asia and Emerging Markets, as our flows continue to be impacted by weaker investment performance.

Multi-asset saw net outflows to £4.4bn (H1 2017: £3.8bn). GARS continues to dominate flows in this asset class with net outflows of £5.3bn (H1 2017: £5.6bn). While GARS performance is behind benchmark over one and three years and behind its target over one, three and five years, it has continued to operate within the targeted volatility range, which is a key element of its design.

Multi-asset (excluding GARS) generated net inflows of £0.9bn (H1 2017: £1.8bn). This included continued demand for MyFolio and Parmenion products which delivered net inflows of £0.8bn and £0.6bn respectively.

Flows and AUM	Gross inflows				Net flows				AUM
	H1 2018 £bn	H2 2017 £bn	H1 2017 £bn		H1 2018 £bn	H2 2017 £bn	H1 2017 £bn		H1 2018 £bn	FY 2017 £bn
Equities	7.1	8.0	8.2		(7.6)	(4.8)	(3.4)		94.1	104.5
Fixed income	3.2	4.7	3.7		(2.1)	(1.7)	(1.6)		49.9	51.4
Multi-asset	5.0	6.7	7.2		(4.4)	(3.1)	(3.8)		66.6	72.4
Private markets/alternatives	1.0	1.0	0.9		(0.9)	(0.3)	(0.5)		27.2	24.5
Real estate	1.6	1.7	1.9		(0.2)	(0.3)	(0.7)		28.9	28.5
Quantitative	0.1	0.1	0.1		-	(0.1)	(0.4)		2.2	2.2
Cash/liquidity	4.8	2.2	4.5		1.6	(2.8)	1.4		22.1	20.4
Total growth	22.8	24.4	26.5		(13.6)	(13.1)	(9.0)		291.0	303.9
Total mature	11.0	7.4	8.2		(5.6)	(7.8)	(7.4)		266.1	271.8
Total Aberdeen Standard Investments	33.8	31.8	34.7		(19.2)	(20.9)	(16.4)		557.1	575.7

Mature books

AUM in our mature channel, which comprises Standard Life Pensions and Savings and third party strategic partner life business, including Phoenix and Lloyds Banking Group, decreased by 2% to £266.1bn from 31 December 2017. Our mature books business, which is in natural run-off, saw net outflows of £5.6bn (H1 2017: £7.4bn, H2 2017: £7.8bn), benefiting from additional assets secured from the Phoenix Group including the first fixed income bulk annuity mandate which demonstrates the strength of our enhanced strategic partnership. We consider these outflows to be structural and we expect this level of attrition from the insurance book. Fees associated with the mature AUM are lower margin.

On 15 February 2018, we announced that Lloyds Banking Group (LBG) and Scottish Widows had sent Standard Life Aberdeen (SLA) a notice on 14 February purporting to terminate the long-term asset management arrangements between them (IMAs) covering, in aggregate, around £109bn of AUM at the end of a 12 month notice period. SLA has informed LBG that it does not agree that, following the merger of Aberdeen Asset Management PLC and Standard Life plc, SLA was in material competition in the UK with LBG and that, therefore, SLA does not consider that LBG, Scottish Widows or their respective affiliates has the right to terminate the IMAs. The parties continue to engage with each other within the framework of the dispute resolution process envisaged in the IMAs.

Investment performance

Investment performance (Pro forma basis)	1 year		3 years		5 years
% of AUM ahead of benchmark	H1 2018	FY 2017	H1 2018	FY 2017	H1 2018	FY 2017
Growth	43	65	38	59	61	54
Mature	83	77	71	72	79	81
Total	61	70	53	63	66	64

Investment performance over three years was mixed, with 53% (FY 2017: 63%) of total assets under management ahead of benchmark on a gross of fees basis. Within this, 38% of growth channel assets were ahead of benchmark. The decline in performance from year end 2017 was primarily due to the negative relative return within multi-asset absolute return strategies, and ongoing weakness in equities. Performance for other multi-asset, fixed income and quantitative asset classes is positive with the majority of assets ahead of benchmark over all timeframes.

The performance results of our investment capabilities and their underlying investment processes are actively monitored and independently evaluated by our Investment Governance and Oversight team, with the insights then used to drive enhancements across our investment processes. 

Profitability

Adjusted profit before tax was £317m (H1 2017: £352m, H2 2017: £325m) as a result of lower fee based revenue partially offset by reduced operating expenses.

Fee based revenue decreased to £871m (H1 2017: £950m, H2 2017: £962m) reflecting the impact of net outflows in 2017 and 2018. Performance fees represent less than 1% of total revenue at £3m (H1 2017: £2m).

The average growth channel fee revenue yield decreased to 49bps (FY 2017: 51bps), driven by net outflows from higher margin products. Within private markets/alternatives, 2017 revenue included the non-recurring impact of £7m (3bps) deferred income recognised.

The revenue yield on the mature books remained stable at 14bps (FY 2017: 14bps).

Revenue analysis	Fee based revenue			Fee revenue yield
	H1 2018 £m	H1 2017 £m		H1 2018 bps	FY 2017 bps
Equities	311	327		67	68
Fixed income	66	73		28	29
Multi-asset	188	226		54	58
Private markets/ alternatives	41	53		32	41
Real estate	77	79		54	54
Quantitative	1	1		10	12
Cash/liquidity	7	8		8	7
Total growth channels	691	767		49	51
Total mature books	180	183		14	14
Total	871	950		32	33

Adjusted operating expenses decreased by 5% to £580m (H1 2017: £609m, H2 2017: £669m) including the benefit of synergies achieved as a result of the ongoing merger integration.

Capital management items were nil (H1 2017: loss of £9m) consisting of £4m interest received (H1 2017: £13m interest paid) offset by £4m fair value losses on investments due to markets and FX (H1 2017: £4m gains).

Our share of associates' profit before tax increased to £26m (H1 2017: £20m). The IPO of HDFC Asset Management completed on 6 August 2018. As part of the IPO we reduced our holding from c38% to c30% for a total net consideration of approximately £180m. At 6 August 2018, our remaining shareholding was valued at c£1.3bn.

On a Reported basis, adjusted profit before tax increased by £128m to £317m (H1 2017: £189m) reflecting the inclusion of Aberdeen profit in the H1 2018 result.

Profit attributable to equity holders increased to £138m (H1 2017: £136m) including the impact of an increased loss from adjusting items. As a result of the merger, amortisation of intangibles and customer assets increased to £92m (H1 2017: £8m). Restructuring costs increased to £53m (H1 2017: £10m), including £50m from merger and integration expenses mainly in relation to staff costs and consultancy fees.

The cost/income ratio stands at 65%, compared to 63% at H1 2017 and 68% at H2 2017.

Profitability	H1 2018 £m	H1 2017 £m
Fee based revenue	871	950
Adjusted operating expenses	(580)	(609)
Adjusted operating profit	291	341
Capital management	-	(9)
Share of associates' profit before tax	26	20
Adjusted profit before tax (Pro forma basis)	317	352
Adjust for Aberdeen results pre-merger completion (14 Aug 2017)	-	(163)
Adjusted profit before tax (Reported basis)	317	189
Adjusting items	(142)	(18)
Share of associates' tax expense	(11)	(5)
Profit attributable to non-controlling interests (preference shares)	(3)	-
Total tax expense	(23)	(30)
Profit for the period attributable to equity holders of Standard Life Aberdeen plc	138	136

Merger integration update

The integration continues to progress well and is complete across our client and consultant facing investment and distribution teams. We remain on target to achieve £250m of annual cost savings by 2020 and the estimated integration costs remain at around £370m in order to achieve these synergies.

As at 30 June 2018, actions have been taken which will deliver £135m of annualised cost savings. Total integration costs incurred since the completion of the merger are £98m.

Standard Life Pensions and Savings (Continuing operations)

On 23 February 2018 we announced the proposed sale of our UK and European insurance business to Phoenix. This was approved by shareholders on 25 June 2018 and remains subject to certain regulatory approvals, with the transaction expected to complete in Q3 2018. We have therefore classified the UK and European insurance business as a discontinued operation.

We have retained our valuable and fast growing UK retail platforms Wrap and Elevate, as well as our financial planning and advice business 1825, and our distribution and marketing capabilities. The enhanced strategic partnership with Phoenix will also see us actively collaborating across a number of areas including the retail platforms and workplace pensions.

We will continue to use our expertise to help people get good advice and make better financial choices for their future. Our overall ambition, for Standard Life to be customers' first choice for their life savings, remains unchanged but our method of delivering this will change and will now be supported by our strategic partnership with Phoenix.

AUA and net flows

Platforms

AUA increased by 4% to £56.3bn (FY 2017: £54.0bn), benefiting from net inflows of £2.5bn (H1 2017: £3.7bn) into our retail platforms, Wrap and Elevate.

Gross inflows, although down on last year's record levels, remain strong at £4.7bn (H1 2017: £5.5bn). Inflows continue to benefit from the boost in the pensions market from individuals looking to take advantage of high defined benefit transfer values by moving to products providing the flexibility offered by drawdown and pension freedoms.

Redemptions increased to £2.2bn (H1 2017: £1.8bn) and reflect the growth in the size of our platforms. However, as a percentage of opening AUA, annualised redemptions were flat at 8.1% (H1 2017: 8.1%).

Our retail platforms offer customers access to a wide range of investment capabilities including over 5,000 in-house and third party mutual funds. Of total platform assets 15% are managed by Aberdeen Standard Investments.

Flows and AUA	H1 2018 £bn	H1 2017 £bn
Gross inflows	4.7	5.5
Net flows	2.5	3.7
AUA1	56.3	54.0

1. Comparative as at 31 December 2017.

Advice

Our financial planning and advice business 1825 offers Standard Life Aberdeen greater proximity to retail customers at a time when there is a growing need for financial advice in the UK as individuals become increasingly responsible for their own saving needs.

We continue to build scale as we aim for national UK coverage. Following the completion of a further two acquisitions this year, we now have 80 financial planners across 14 locations providing face-to-face and over the phone advice to in excess of 9,000 clients.

Assets under advice increased to £4.3bn during the period (FY 2017: £3.6bn).

Adjusted profit before tax

Adjusted profit before tax was £1m (H1 2017: £nil) including a contribution of £14m from our growing Platforms business (H1 2017: £10m). The Other channel loss includes expenses related to our distribution, marketing and support functions partially offset by the benefit from the pension scheme surplus.

Adjusted profit by channel	H1 2018 £m	H1 2017 £m
Platforms	14	11
Advice	(1)	(2)
Other	(12)	(9)
Adjusted profit before tax	1	-

Fee based revenue of £89m (H1 2017: £84m) includes a one-off reduction in H1 2018 of £5m following the adoption of the new revenue recognition accounting standard IFRS 15. This also impacted the average fee revenue yield which fell to 33bps (FY 2017: 36bps).

Excluding this one-off item, revenue grew by £10m, a 12% increase which reflects the continuing growth in our platforms and advice businesses and the average fee revenue yield was broadly stable at 35bps.

Adjusted operating expenses increased by £5m to £102m (H1 2017: £97m) reflecting the growth in our business. The cost/income ratio was stable at 115% (H1 2017: 115%). Excluding the one-off IFRS 15 impact, the cost/income ratio reduced to 109% as we continue to see the benefits of our highly scalable platform business.

The capital management result of £14m (H1 2017: £13m) mainly relates to the net interest credit from the pension scheme surplus.

Total IFRS loss

Total IFRS loss after tax was £10m (H1 2017: £9m).

Profitability	H1 2018 £m	H1 2017 £m
Fee based revenue	89	84
Adjusted operating expenses	(102)	(97)
Adjusted operating profit	(13)	(13)
Capital management	14	13
Adjusted profit before tax	1	-
Adjusting items	(16)	(8)
Total tax credit/(expense)	5	(1)
Total IFRS loss after tax	(10)	(9)

India and China life

AUMA and net flows

Total AUA increased by 2% to £4.9bn (FY 2017: £4.8bn) reflecting an increase in HASL AUA. HDFC Life AUA remained steady at £3.5bn (FY 2017: £3.5bn) with growth in assets offsetting adverse exchange rate movements.

HASL AUA increased to £0.7bn (FY 2017: £0.6bn) and Hong Kong remains at £0.7bn (FY 2017: £0.7bn).

Net inflows for our associate and joint venture life businesses increased to £286m (H1 2017: £274m). Net inflows for HDFC Life reduced to £209m (H1 2017: £225m) due to the reduction in our shareholding in November 2017. HASL's net flows rose to £77m (H1 2017: £49m).

Profitability

Adjusted profit before tax increased to £35m (H1 2017: £33m) driven by HASL which rose to £10m (H1 2017: £6m), benefiting from higher profits from group business and higher premium income.

HDFC Life profit increased in H1 2018 due to strong premium growth. However, due to the impact from our reduced shareholding and adverse movements in exchange rates, our share of profit fell to £24m (H1 2017: £27m).

Adjusted profit before tax in Hong Kong is £1m (H1 2017: £nil).

IFRS profit after tax increased to £26m (H1 2017: £7m) mainly due to H1 2017 including the £24m impairment loss relating to the proposed sale of our wholly owned Hong Kong insurance company to HASL. The sale process remains subject to regulatory approvals and we remain hopeful that it will complete in 2018.

Profitability	H1 2018 £m	H1 2017 £m
HDFC Life	24	27
HASL	10	6
Hong Kong	1	-
Adjusted profit before tax	35	33
Share of associates' and joint ventures' tax expense	(7)	(2)
Total adjusting items	(2)	(24)
Total tax expense	-	-
IFRS profit after tax	26	7

At 6 August 2018 the market value of HDFC Life was c£11bn, which values our stake at c£3.2bn.

Note: Results are presented on the basis of Standard Life Aberdeen ownership percentages. In 2017, HDFC Life ownership was c35% until the end of October 2017 and then c29.3% thereafter. HASL ownership is 50% and Hong Kong is 100%. Our 38.0% share in HDFC Asset Management is included in the Aberdeen Standard Investments segment.

Standard Life Pensions and Savings (Discontinued operations)

Discontinued operations relates to the UK and European insurance business which comprises of our Spread/risk, Europe, Workplace and elements of our Retail business. The proposed sale of this business to Phoenix, which remains subject to regulatory approval, was announced on 23 February 2018 and approved by our shareholders at the general meeting held on 25 June 2018.

AUA and net flows¹

Discontinued AUA decreased to £133.2bn (FY 2017: £134.1bn). Net outflows decreased by 14% to £1.2bn (H1 2017: £1.4bn outflows).

Retail AUA presented as discontinued remained stable at £59.4bn (FY 2017: £59.7bn), with net outflows of £1.7bn (H1 2017: £1.8bn outflows).

UK Workplace AUA remained stable at £40.2bn (FY 2017: £40.2bn). Net inflows were also in line with H1 2017 at £0.8bn. Regular premiums have increased by 5% to £1.7bn and account for 85% of total Workplace inflows. Approximately 70% of total Workplace assets are managed by Aberdeen Standard Investments.

Spread/risk AUA decreased by 4% to £14.5bn (FY 2017: £15.1bn), reflecting net outflows from scheduled annuity payments of £0.5bn (H1 2017: £0.5bn) and the impact of market movements.

Europe AUA of £19.1bn (FY 2017: £19.1bn) benefited from net inflows of £0.2bn (H1 2017: £0.1bn), offset by market movements.

Profitability

Discontinued adjusted profit before tax increased by £1m to £167m (H1 2017: £166m). Growth in fee based revenue and the spread/risk margin was offset by an increase in operating expenses.

Fee based revenue increased by £13m to £395m (H1 2017: £382m), benefiting from higher average AUA.

Spread/risk margin increased by £6m to £55m (H1 2017: £49m) and included a benefit from specific asset and liability management actions of £17m (H1 2017: £17m).

Adjusted operating expenses increased by £22m to £280m, including the impacts of increased change spend and customer remediation. Investment expenses payable to Aberdeen Standard Investments increased by £2m to £63m, in line with higher average AUA compared to H1 2017.

Discontinued total IFRS profit decreased by £134m to £74m (H1 2017: £208m). The loss from adjusting items of £74m (H1 2017: £55m profit) includes a negative £61m short-term fluctuation in investment return which was impacted by a widening of credit spreads, £38m of transaction and separation costs relating to the proposed sale to Phoenix and Brexit related costs of £12m. These items were partially offset by a held for sale accounting adjustment in H1 2018 of £38m relating to the amortisation of intangible assets (primarily deferred acquisition costs) and depreciation of tangible assets. Following the classification of the UK and European insurance business as held for sale on the announcement of the proposed transaction on 23 February 2018, no amortisation or depreciation is recognised. This increase to profit has been classified as an adjusting item.

The tax expense of £19m increased by £6m (H1 2017: £13m), the 2017 result having benefited from a deferred tax credit due to revalued tax assets relating to the German business.

Profitability	H1 2018 £m	H1 2017 £m
Fee based revenue	395	382
Spread/risk margin	55	49
Adjusted operating income	450	431
Adjusted operating expenses	(280)	(258)
Adjusted operating profit	170	173
Capital management	(3)	(7)
Adjusted profit before tax	167	166
Adjusting items	(74)	55
Total tax expense	(19)	(13)
IFRS profit after tax	74	208
1    Excludes AUMA from products such as Wrap SIPP, where the SIPP product is moving to Phoenix but will continue to be administered via the Wrap platform. To avoid a double count, this AUMA is included in Pensions and Savings - Continuing only. The total AUA from these products is £26.2bn (FY 2017: £24.5bn) and net inflows are £1.7bn (H1 2017: £2.3bn).

Risk oversight

As we reshape our business, we have embarked on a programme to transform our Risk & Compliance function. Stronger second line oversight of the business will go hand in hand with initiatives to support first line accountability which anticipate the introduction of the UK Senior Managers and Certification Regime.

Our enhanced risk framework will reflect and respond to the increased regulatory expectations around executive accountability and take advantage of innovations in risk and compliance working practices, process controls and information management.

Pages 54 to 59 of our Annual report and accounts 2017 details 16 principal risks to which the Group is exposed. These risks are: Investment Performance; Strategic Transition and Delivery; Distribution and Client Management; Client and Customer Preferences and Demand; Political Change; Talent Management; Change Management; IT Failure and Security, including cyber risk; Oversight of Third Parties; Process Execution Failure; Client and Customer Outcomes; Regulatory and Legal; Market Risk; Liquidity Risk; Counterparty Failure and Longevity Risk.

The principal risks currently facing the Group and those that we believe the Group will be exposed to in the second half of 2018 remain the same as those outlined in the Annual report and accounts 2017, with the exception of Longevity Risk which will no longer be a principal risk following the completion of the proposed sale of SLAL to Phoenix. We will continue to have some exposure to Longevity Risk through our investment in Phoenix and the exposures within our defined benefit staff pension scheme, but the overall exposure will be reduced. There have been a number of developments within some of our principal risks since publication of the Annual report and accounts 2017 and they are outlined below.

Key developments in relation to our principal risks

The substantial volume of corporate change currently underway is complex and far reaching due to numerous interdependencies across the Group leading to a heightened risk environment. Our risk framework is being enhanced to ensure that there is clarity and accountability around the risk environment and management actions are being taken to reduce the level of risk.

The competing demands of the proposed sale of SLAL to Phoenix, the ongoing transformation of our business to a world-class investment company as well as an evolving regulatory agenda have created a heightened exposure to 'Change Management', 'Strategic Transition and Delivery' and 'Talent Management' risks, contributing to a period of operational stretch in the business. If these risks are not managed effectively, the business and financial results of the Group could be adversely affected. If these challenges were to adversely affect customer outcomes there could be reputational, regulatory and financial consequences for the business. To manage these risks, we have established a transformation programme which aims to provide a single governance structure to oversee the design of the new Standard Life Aberdeen operating model. This governance structure will ensure workload is prioritised and coordinated across the business, whilst also providing further clarity to our people around future organisational changes. To date, where possible, teams have been ring-fenced against activity resulting from the proposed sale of SLAL to Phoenix.

There will continue to be interdependencies between SLAL and the Group after the proposed sale of SLAL to Phoenix, resulting in a number of new material outsourcing arrangements and an increase in 'Oversight of Third Parties' risk and 'Client and Customer Outcomes' risk. A failure to maintain existing customer experience and service standards could lead to unfair customer outcomes and increased operational risk exposure. Detailed dependency planning has taken place and the implementation of Transitional Service Agreements, the Client Services and Proposition Agreement, Investment Management Agreements and Ancillary Service Agreements are designed to ensure existing service standards are maintained for both our clients and customers and for Standard Life Aberdeen as a business. Material outsourcing arrangements will follow Group policy guidelines and be subject to ongoing oversight by Risk & Compliance.

Cyber security continues to be a key area of focus against a backdrop of significant change activities in the business. The proposed sale of SLAL to Phoenix presents increased 'IT Failure and Security, including Cyber' risk and the potential for insider threats. We are working to ensure that our cyber security control framework post-transaction remains appropriate to protect client and customer assets and information from misuse, the effects of crime and the impact of a significant disruption to our operations. Ongoing arrangements between Standard Life Aberdeen and Phoenix will be an important part of our overall approach to maintaining strong security governance and adherence to industry good practice standards throughout the transition period.

Governance structures overseeing each aspect of the transition are in place to ensure conflicts of interest are managed appropriately and any 'Regulatory and Legal' risk is appropriately mitigated.

A number of limited indemnities have been agreed to as part of the proposed sale of SLAL to Phoenix that may increase 'Liquidity Risk' for the Group. Following completion of the sale, any clauses breached could result in unforeseen capital expenditure and the impact may not be fully known until the end of the indemnity period. Ensuring we hold appropriate levels of capital through our Internal Risk and Capital Assessment processes aims to minimise this risk.

Managing 'Investment Performance' risk is core to our business. Investment performance remains mixed, with challenges across key funds and asset classes such as multi-asset and equities. We recognise that weaker performance in key areas is having an impact on net flows. Actions are being taken to address performance challenges and the business remains well positioned to benefit from the trends which are shaping the investments landscape.

There remains unavoidable uncertainty in relation to the UK's exit from the EU in March 2019 and we remain exposed to 'Political Change' risk. An established Group-wide programme remains in place to deliver solutions that, given the current backdrop of political uncertainty, will aim to address the consequences of a hard Brexit. Active regulatory engagement and close monitoring of ongoing political debates are in place. Responsibility for delivery of the aspects that relate to SLAL will transfer to Phoenix following completion of the proposed sale of SLAL.

Basis of preparation

Overview

Our Management report for the period to 30 June 2018 has been prepared in accordance with the Disclosure Guidance and Transparency Rules (DTR) issued by the FCA. The DTR incorporates the requirement of the European Union (EU) Transparency Directive for all UK listed companies to report their half year results in accordance with IAS 34 Interim Financial Reporting. Under DTR 4.2.7R, the Group is required to provide at least an indication of important events that have occurred during the first six months of the financial year, and their impact on the financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year. Principal risks and uncertainties are included in the Risk oversight section of the Management report and Note 39 of the Group's Annual report and accounts 2017. Under DTR 4.2.8R the Group is also required to make certain related party disclosures. These are contained in Note 4.18 of the IFRS condensed consolidated financial information. To provide clear and helpful information, we have also considered the voluntary best practice principles of the Guidance on the Strategic report issued by the Financial Reporting Council in 2014. We have also considered the European Securities and Markets Authority (ESMA) guidelines on alternative performance measures issued in October 2015.

The Group's International Financial Reporting Standards (IFRS) condensed consolidated half year financial information has been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union (EU). However, our Board believes that alternative performance measures (APMs), which have been used in the Management report, are also useful for both management and investors.

All APMs should be read together with the Group's IFRS condensed consolidated income statement, IFRS condensed consolidated statement of financial position and IFRS condensed consolidated statement of cash flows, which are presented in the Financial information section of this report.

Going concern

After making enquiries, the Directors are satisfied that the Group has and will maintain sufficient resources to enable it to continue operating for at least 12 months from the date of approval of the Half year results and therefore considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

IFRS reporting

The financial results, which are unaudited at the half year are prepared on an IFRS basis. All EU-listed companies are required to prepare consolidated financial statements using IFRS issued by the International Accounting Standards Board (IASB) as endorsed by the EU. The IFRS financial results in the Management report and in Section 4 have been prepared on the basis of the IFRS accounting policies applied by the Group in the Annual report and accounts 2017 as amended for new standards effective from 1 January 2018, as described in Note 4.1 - Accounting policies.

Reported and Pro forma results

The merger of Standard Life plc and Aberdeen Asset Management PLC (Aberdeen) completed on 14 August 2017, with the merger accounted for as an acquisition of Aberdeen by Standard Life plc on that date. Pro forma results for the Group are prepared as if Standard Life Group and Aberdeen had always been merged and are included in these results to assist in explaining trends in financial performance by showing performance for both H1 2018 and H1 2017 for the combined Group. The difference between the Reported results and Pro forma results is the H1 2017 results of Aberdeen which were prior to completion of the merger. A reconciliation between profitability on a Pro forma basis and the Reported basis is included on page 53.

Adjusted profit

The H1 2018 reconciliation of consolidated adjusted profit before tax to IFRS profit for the period, presented on page 17 of this report, presents profit before tax amended for adjusting items. Further detail on the calculation of adjusted profit is presented in Supplementary information in Section 5. Adjusted profit reporting provides further analysis of the results reported under IFRS and the Directors believe helps to give shareholders a fuller understanding of the performance of the business by identifying and analysing adjusting items.

Forward-looking statements

This document may contain certain 'forward-looking statements' with respect to the financial condition, performance, results, strategy, objectives, plans, goals and expectations of the Company and its affiliates. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of management about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. For example, statements containing words such as 'may', 'will', 'should', 'could', 'continue', 'aims', 'estimates', 'projects', 'believes', 'intends', 'expects', 'hopes', 'plans', 'pursues', 'seeks', 'targets' and 'anticipates', and words of similar meaning, may be forward-looking. These statements are based on assumptions and assessments made by the Company in light of its experience and its perception of historical trends, current conditions, future developments and other factors it believes appropriate. By their nature, all forward-looking statements involve risk and uncertainty because they are based on information available at the time they are made, including current expectations and assumptions, and relate to future events and depend on circumstances which may be or are beyond the Company's control, including among other things: UK domestic and global political, economic and business conditions (such as the UK's exit from the EU); market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the impact of inflation and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the impact of competition; the timing, impact and other uncertainties associated with future acquisitions, disposals or combinations undertaken by the Company or its affiliates (including those associated with acquisitions, disposals or combinations announced by the Company or its affiliates which have yet to complete including the proposed sale of Standard Life Aberdeen's UK and European insurance business to Phoenix) and/or within relevant industries; the value of and earnings from Standard Life Aberdeen's strategic investments and ongoing commercial relationships (including the value of and earnings from the proposed enhanced strategic partnership between Standard Life Aberdeen and Phoenix); default by counterparties; information technology or data security breaches; natural or man-made catastrophic events; the failure to attract or retain necessary key personnel; the policies and actions of regulatory authorities; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations (including changes to the regulatory capital requirements that the Company is subject to) in the jurisdictions in which the Company and its affiliates operate. These may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, the Company's actual future financial condition, performance and results may differ materially from the plans, goals, objectives and expectations set forth in the forward-looking statements. Persons receiving this document should not place undue reliance on forward-looking statements. Neither the Company nor its affiliates assume any obligation to update or correct any of the forward-looking statements contained in this document or any other forward-looking statements it or they may make (whether as a result of new information, future events or otherwise), except as required by law. Past performance is not an indicator of future results and the results of the Company and its affiliates in this document may not be indicative of, and are not an estimate, forecast or projection of, the Company's or its affiliates' future results.

 

END

 

 

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