Schroders
2009 Annual Results
trusted heritage
advanced thinking
Michael Dobson
Chief Executive
4 March 2010
2009 overview
• Strong investment performance: 79% of funds outperforming over 3 years
• Record net new business: £15.0bn net inflows (2008: net outflows £9.6bn)
• Record funds under management: £148.4bn (2008: £110.2bn)
• Profit before tax and exceptional items: £200.2m (2008: £290.5m)
• Earnings per share: 34.3p (2008: 27.5p)
• Dividend: 31.0p per share (2008: 31.0p)
• Shareholders’ equity: £1,649.0m (2008: £1,632.2m)
1
Performance relative to benchmark or peer group to 31 December 2009
Strong investment performance across asset classes
Over 1 year
Quartile rankings
28%
72%
Over 3 years
21%
79%
1 year
3 year
Euro Short-term Bond
2
1
Euro Corporate Bond
2
1
Euro Bond
1
1
Global Bond
2
1
High Yield Bond
2
1
UK Alpha Plus
1
1
European Equity Alpha
1
2
European Large Cap
2
2
US Small & Mid Cap
2
1
Japan Alpha Plus
1
1
Global Equity Alpha
1
1
Global Quantitative Equities
1
2
Emerging Markets Equity
2
1
Emerging Market Debt
1
1
Commodities
1
1
Above benchmark or peer group
Below benchmark or peer group
2
Source: Schroders. Performance relative to benchmark or peer group to 31 December 2009
Gross sales up 30%
By asset class
£bn
60
50
40
30
20
10
0
2005
Equities
* Gross flows before netting
3
2006
Fixed Income
2007
Multi-Asset
2008
Alternative
2009
Private Banking
Gross sales up 30%
By region
£bn
60
50
40
30
20
10
0
2005
2006
UK
* Gross flows before netting
4
2007
Continental Europe
2008
Asia
Americas
2009
Net inflows
15.0
15
10
7.0
6.2
3.8
5
0
(2.1)
-5
-10
(3.8)
(1.6)
(9.6)
2007
2008
-15
2006
Institutional
5
Q1 2009
Q2 2009
Intermediary
Q3 2009
Q4 2009
2009
Private Banking
Funds under management up 35%
£148.4bn (2008: £110.2bn)
By asset class
By region (including China JV FUM £7.7bn)
8%
12%
13%
34%
48%
28%
15%
16%
Equities
Multi-asset
UK
Europe
Fixed income
Alternatives
China JV
Americas
Private Banking
6
26%
Asia
Institutional
Funds under management up 29% to £76.7bn
• Strong performance, new products,
consultant upgrades
Sales by asset class
12%
• New business wins up 59% to £18.6bn
(2008: £11.7bn)
13%
40%
• Net inflows £4.9bn (2008: net outflows
£3.8bn)
• Net inflows in all regions
35%
7
Equities
Fixed income
Multi-asset
Alternatives
Intermediary
Funds under management up 52% to £59.1bn
• Gross sales up 25% to £29.0bn
(2008: £23.2bn)
• Net inflows £9.6bn
(2008: net outflows £6.2bn)
Sales by asset class
4%
15%
42%
• Net inflows in all regions
• No. 1 active manager for net sales of
mutual funds in Europe
39%
8
Equities
Fixed income
Alternatives
Multi-asset
Private Banking
Funds under management £12.6bn (2008: £11.7bn)
• Cyclical downturn in revenue and profit
Lower fees and commissions
Lower interest income
Loan loss provision
• Net new business inflows £0.5bn (2008: £0.4bn)
• Conservative and liquid balance sheet
• Investing for growth
Adding talent in UK and Europe
Partnership with Abu Dhabi Commercial Bank for UAE
Private banking licence in Singapore
9
Schroders
2009 Annual Results
Kevin Parry
Chief Financial Officer
4 March 2010
2009 Results
Total profit before tax before exceptional items: £200.2m (2008: £290.5m)
11
Quarterly pre-exceptional revenue and operating profit
£m
300
250
200
150
100
50
0
Q1
Q2
Q3
Q4
Q1
Q2
2009
2008
Revenue
12
Q3
Operating profit
Q4
2009 Results
13
•
Asset Management profit before tax and exceptional items: £192.0m (2008: £249.8m)
•
Private Banking profit before tax and exceptional items: £20.1m (2008: £39.7m)
•
Group segment loss before tax and exceptional items: £11.9m (2008: profit £1.0m)
•
Total profit before tax before exceptional items: £200.2m (2008: £290.5m)
•
Exceptional items: £62.7m (2008: £167.4m)
•
Profit after tax: £95.7m (2008: £71.3m)
•
Group investment capital: £1,059m (2008: £899m)
•
Dividend: 31.0p per share (2008: 31.0p per share)
Net revenues
excluding exceptional items
£m
Markets
£(3)m
900
Margins
£(56)m
2008 net
outflows
£(48)m
2009 net
inflows
£40m
Performance
fees
£(17)m
800
700
600
500
400
300
200
100
0
14
Net
revenues
2008
£873m
Net new
business
£(8)m
Net
revenues
2009
£789m
Asset Management net revenues
£m
Net revenue margins
2008: 66bps
2008: £748.7m
2009: £679.2m
246
228
65bps
2009: 62bps
67bps
58bps
65bps
195
148
174
165
160
112
H1 2008
H2 2008
H1 2009
Performance fees
15
61bps
H1 2008
H2 2008
58bps
60bps
H2 2009
Intermediary
Institutional
62bps
H1 2008
H2 2008
H1 2009
H2 2009
Instit.
15.2
28.3
1.7
31.6
Inter.
3.5
3.7
-
1.1
H1 2009
H2 2009
Private Banking net revenues
Net revenue margins
£m
2008: 100bps
2008: £111.3m
2009: £97.7m
56.2
13.0
102bps
98bps
55.1
86bps
49.2
48.5
11.4
7.7
14.4
43.2
40.7
37.8
40.8
H1 2008
H2 2008
H1 2009
H2 2009
Fees
16
2009: 84bps
Interest income
H1 2008
H2 2008
H1 2009
81bps
H2 2009
Profit before tax and exceptional items
£m
Lower
revenues
£(84)m
350
300
Net cost savings
£12m
Gross
£57m
250
200
FX impact
£(45)m
Net interest
income
£(28)m
JVs and
Associates
£9m
2008
150
£290.5m
100
50
0
17
2009
£200.2m
Operating expenses before exceptionals
£mn
2008
2009
09 vs 08
Underlying staff costs
373.4
362.9
(10.5)
-
27.8
27.8
Total compensation costs
373.4
390.7
17.3
Other costs
254.0
207.2
(46.8)
-
17.1
17.1
627.4
615.1
(12.3)
Compensation cost: operating revenue ratio
45%
49%
+4%
Profit share ratio
36%
45%
+9%
2,834
2,609
Adverse FX impact
Adverse FX impact
Total
No of employees (period-end)
18
Exceptional items
H1-09
H2-09
2009
2008
(4.8)
0.2
(4.6)
(72.5)
1.4
2.9
4.3
(21.9)
Private Equity
(0.6)
(9.7)
(10.3)
(22.6)
Seed capital (including property)
(20.2)
(7.5)
(27.7)
(26.7)
0.6
(1.4)
(0.8)
(3.5)
Within Revenue:
(23.6)
(15.5)
(39.1)
(147.2)
Redundancy costs
(6.2)
(1.6)
(7.8)
(13.6)
Office rationalisation and other costs
(4.1)
(3.1)
(7.2)
-
Surplus space provision
(3.0)
(1.9)
(4.9)
-
Impairment of acquired intangible assets and JVs
(3.7)
-
(3.7)
(6.6)
Within operating expenses:
(17.0)
(6.6)
(23.6)
(20.2)
Total exceptional items
(40.6)
(22.1)
(62.7)
(167.4)
ABS/MBS
Third party hedge funds
Other
19
Underlying investment profits
£m
Profits on disposals
2009
2.9
Mark to market
(0.2)
Impairments
(41.8)
Exceptional losses within revenue
(39.1)
Add back:
20
Losses previously recognised in reserves
42.4
Current year profits/(losses) in reserves
15.8
Underlying investment return
19.1
Exceptional items
H1-09
H2-09
2009
2008
(4.8)
0.2
(4.6)
(72.5)
1.4
2.9
4.3
(21.9)
Private Equity
(0.6)
(9.7)
(10.3)
(22.6)
Seed capital (including property)
(20.2)
(7.5)
(27.7)
(26.7)
0.6
(1.4)
(0.8)
(3.5)
Within Revenue:
(23.6)
(15.5)
(39.1)
(147.2)
Redundancy costs
(6.2)
(1.6)
(7.8)
(13.6)
Office rationalisation and other costs
(4.1)
(3.1)
(7.2)
-
Surplus space provision
(3.0)
(1.9)
(4.9)
-
Impairment of acquired intangible assets and JVs
(3.7)
-
(3.7)
(6.6)
Within operating expenses:
(17.0)
(6.6)
(23.6)
(20.2)
Total exceptional items
(40.6)
(22.1)
(62.7)
(167.4)
ABS/MBS
Third party hedge funds
Other
21
Income statement
Tax charge impacted by exceptional items and lower private equity realisations
£mn
Before
exceptional
items
Exceptional
items
2009
2008
Profit before tax
200.2
(62.7)
137.5
123.1
Tax
(49.6)
7.8
(41.8)
(51.8)
24.8
12.4
30.4
42.1
Profit after tax
150.6
(54.9)
95.7
71.3
Basic earnings per share
54.0p
(19.7)p
34.3p
27.5p
Effective tax rate(%)
22
Group Capital allocation
£m
Investment capital:
Cash and cash equivalents
Liquid debt securities
Seed capital
Private equity
Other investments
Total Group investment capital
Private Banking:
Cash and cash equivalents
Other net liabilities
Total Private Banking operational capital
Asset Management:
Cash and cash equivalents
Liquid debt securities
Other net assets
Total Asset Management operational capital
Total Group Capital
23
Liquid debt securities represent bank CDs, investments in liquidity funds etc.
Dec 2009
Dec 2008
276
532
141
90
20
1,059
310
118
252
58
161
899
1,011
(769)
242
662
(395)
267
216
56
76
348
1,649
95
235
136
466
1,632
Outlook
Michael Dobson
Chief Executive
Outlook
• Cautious outlook for markets
• Continuing momentum in Institutional and Intermediary
• Decline in revenue margins as Institutional grows
Increasing overall longevity
Remaining above peer group average
• Continued investment in Private Banking
Payback in 2011
• Long term growth opportunities inherent in our business
Investment led
Broad product range
Strong distribution capability
International diversification
Financial strength
25
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Forward-Looking Statements
These presentation slides may contain forward-looking statements with respect to the
financial condition and results of the operations and businesses of Schroders plc
These statements and forecasts involve risk and uncertainty because they relate to events
and depend upon circumstances that may occur in the future
There are a number of factors that could cause actual results or developments to differ
materially from those expressed or implied by those forward-looking statements and
forecasts. Forward-looking statements and forecasts are based on the Directors’ current
view and information known to them at the date of this presentation. The Directors do not
make any undertaking to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Nothing in this presentation should
be construed as a profit forecast
27