Schroders
2008 Interim Results
trusted heritage
advanced thinking
Chief Executive
Michael Dobson
8 August 2008
2008 Interim Results
Asset Management profit before tax £136.7 million
11% ▲
(H1 2007: £123.2 million)
Private Banking profit before tax £22.3 million
40% ▲
(H1 2007: £15.9 million)
Private Equity profit before tax £7.4 million
80% ▼
(H1 2007: £36.2 million)
Group loss before tax £30.7 million
(H1 2007 profit: £10.3 million)
Total profit before tax £135.7 million
27% ▼
(H1 2007: £185.6 million)
Funds under management £130.2 billion
6% ▼
(2007: £139.1 billion)
Dividend 10.0 pence per share
(H1 2007: 9.0 pence per share)
1
11% ▲
Overview: Asset Management and Private Banking
Profits up 14% despite difficult market conditions
•
Income and profit growth in Asset Management
• Successfully repositioning Institutional
• Challenging market conditions in Retail
• Higher margins – up 8bps to 65bps
•
2
Continued growth in Private Banking profitability
Successfully repositioning Institutional
• New business wins up 28% to £7.3bn
Net Institutional outflows reduced
£bn
• Net inflows in Q2 2008
• Additional €4bn advisory mandate
• Strong momentum in new products
•
LDI
•
Multi-Asset
•
Fixed Income
•
Quantitative equities
•
Alternatives
• Positive net new business in UK
• Swiss Re acquisition
Source: Schroders
3
4
2
0
(1.1)
-2
-4
-6
-8
(3.4)
(4.6)
(4.1)
(6.5)
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008
Challenging conditions in Retail
• Market volatility impacting retail
demand worldwide
• Record industry outflows in Europe
• Falling sales in UK, Asia Pacific
H1 Record net industry outflows in Europe
€bn
250
200
150
100
50
0
-50
-100
-150
-200
-250
H1
H2
H1
H2
H1
H2
H1
2005 2005 2006 2006 2007 2007 2008
Feri SalesWatch data, All Europe, ex Money Market including local to local and cross-border
4
Diversity of Retail business
•
Revenues up 22%
•
Net outflows £0.2bn
•
5
June 2008 Retail FUM by region
8%
Positive flows Q1, negative Q2
•
Inflows in UK, Asia, Americas offset outflows in
Europe
•
Inflows in:
• Alternatives, Emerging market equities &
Global equities
•
Outflows in European equities and bonds
•
Emphasis on defensive range:
• Diversified total return
• Income maximiser
• Cautious managed
* Retail and sub-advisory gross sales
27%
41%
24%
UK
Europe
Asia
Americas
Continued growth in Private Banking profitability
•
Turnaround completed
•
Improving income, containing costs
•
Leveraging Swiss platform
•
Singapore acquisition
£mn
60
30
40
20
22.3
20
10
15.9
11.2
0
0
H1 2006
Income (lhs)
6
H1 2007
Costs (lhs)
H1 2008
PBT (£mn)
Schroders
2008 Interim Results
Chief Financial Officer
Stephen Brooks
8 August 2008
Profit before tax
H1 07
H1 08
Mv’mt
Revenue
29.4 challenging
2.0
(27.4)
As anticipated,
market
conditions have
Admin
(2.2) reduced
(2.2)the level- of
250
Asset
Management
£13.5mn
200
SVIL
Private
Banking
£6.4mn
Total
8
(1.4)
36.2
7.4
(28.8)
H1 2008
£185.6mn
H1 07
0
7.6
Group
£(41.0)mn
H1 2007
50
9.0
Private
Equity
£(28.8)mn
150
100
Private Equity realisations
Q1 08
Q2 08
H1 08
Mv’mt
Fair value write downs on seed capital investment and
fixed10.3
income(36.7)
securities 6.0
during Q1
2008 (41.0)
PBT
(30.7)
£135.7mn
Key ratios
Profit before Tax (£mn)
AM & PB cost: income ratio (%)
185.6
135.7
132.3
H1 2006
H1 2007
H1 2008
Gross profit margins (bps)
69
H1 2006
66
66
H1 2007
H1 2008
Compensation costs: operating revenues ratio (%)
68
48
47
60
45
55
H1 2006
9
H1 2007
H1 2008
H1 2007
H1 2007
H1 2008
Financial performance of our core businesses
Resilient performance in Asset Management and Private Banking
500
AM & PB Income
£461.9mn
12% ▲
AM & PB Costs
£302.9mn
11% ▲
250
200
400
Performance fees
300
Total
200
H1 07
H1 08
Mv’mt
11.3
18.7
7.4
108.0
139.1
150
100
159.0
50
0
100
H1 2006
PBT(rhs)
10
H1 2007
Income (lhs)
H1 2008
Costs (lhs)
Group Income statement
Continued growth in gross profit margins
£mn
H1-08
H1-07
Revenue
542.2
558.6
Cost of sales
(118.2)
(109.1)
Gross profit
424.0
449.5
(318.9)
(285.9)
105.1
163.6
19.4
10.0
11.2
12.0
135.7
185.6
(35.5)
(45.6)
26.2
24.6
Profit after tax
100.2
140.0
Basic earnings per share
35.8p
49.0p
Administrative
expenses
Gross
profit margins (bps)
Operating profit
55income
Net finance
60
68
Associates and joint ventures
Profit before
H1 tax
Tax
2006
H1
2007
Effective tax rate (%)
11
H1
2008
Group income statement
£mn
H1-08
H1-07
Revenue
542.2
558.6
Cost of sales
(118.2)
(109.1)
Gross profit
424.0
449.5
(318.9)
(285.9)
Operating profit
105.1
163.6
Net finance income
19.4
10.0
Associates and joint ventures
11.2
12.0
Profit before tax
135.7
185.6
Tax
(35.5)
(45.6)
26.2
24.6
Profit after tax
100.2
140.0
Basic earnings per share
35.8p
49.0p
Administrative expenses
Effective tax rate (%)
12
Underlying earnings per share
Core businesses
50
36.8
40
30
41.2
27.6
20
10
0
June 2006
13
June 2007
June 2008
•
EPS from core businesses continues to increase
•
£71.8m spent on repurchase of over 8.5 million non-voting shares
Group costs
Administrative expenses
£mn
% of total
H1-08
H1-07
Staff costs
64
205.1
187.1
Other costs including:
34
108.1
95.1
Depreciation and amortisation
2
5.7
3.7
100
318.9
285.9
2,998
2,782
Total
No of employees (year-end)
Key Drivers
14
•
Compensation costs: operating revenue ratio reduced to 45%
•
Investment in key infrastructure projects
•
Targeted marketing and brand expenditure
Group costs
Marketing and project expenditure
Marketing spend (£mn)
IT spend (£mn)
25
25
20
20
15
15
10
10
15.3
5
9.3
11.6
16.5
H1 2006
H1 2007
18.3
5
0
0
H1 2006
15
17.1
H1 2007
H1 2008
H1 2008
Segmental results
Asset Management
Continued income growth
Asset Management (£mn)
200
Income
Costs
£406.0mn
£269.3mn
Gross profit margins (bps)
12% ▲
500
12% ▲
65
400
150
57
300
100
50
96.8
123.2
136.7
51
100
0
0
H1 2006
PBT
17
200
H1 2007
Income
H1 2008
Costs
H1 2006
H1 2007
H1 2008
Asset Management
Income (£mn)
253.1
206.8
135.9
169.3
H1 2006
156.9
152.9
H1 2007
Institutional
18
H1 2008
Retail
Private Banking
60
Income
Costs
£55.9mn
£33.6mn
18% ▲
6% ▲
30
40
20
22.3
20
10
15.9
11.2
0
0
H1 2006
H1 2007
PBT
19
Income
H1 2008
Costs
Private Equity
– Reduced Private Equity H1 PBT of £7.4mn as anticipated (H1 2007: £36.2mn)
– Total private equity investments of £126mn
– Unrealised profit within reserves of £62.3mn
20
Group
Income
Q1 2008
Q2 2008
H1 2008
Seed Capital
(7.7)
(1.0)
(8.7)
Fixed Income
(25.8)
7.6
(18.2)
2.9
7.1
10.0
Total
(30.6)
13.7
(16.9)
Profit before tax
(36.7)
6.0
(30.7)
Third party hedge funds
& other
21
Group Capital allocation
£mn
30 June 2008
31 March 2008
31 Dec 2007
Cash and cash equivalents
504
492
582
Fixed income: mortgage and asset backed securities
151
209
249
Third party hedge funds
173
208
208
Seed capital
248
182
191
Private Banking net assets
221
218
213
Private Equity
126
139
138
Pension fund surplus
12
44
43
Other net assets
182
212
72
1,617
1,704
1,696
Shareholders’ equity
22
Outlook
Outlook
•
Challenging market environment to continue
•
Balancing cost discipline and investment for future growth
•
Well positioned longer-term
• diversity of business
• balance sheet strength
24
Forward-Looking Statements
These presentation slides contain certain forward-looking statements and forecasts with
respect to the financial condition and results of the 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. Nothing in this presentation should be construed as a profit forecast
25