Schroders
2007 Annual Results
trusted heritage
advanced thinking
Chief Executive
Michael Dobson
4 March 2008
Overview
Record results
1
•
Strength of international business
•
Diversity of product range
•
Focus on high margin products
•
Growth in Retail
•
Repositioning in Institutional
•
Transformed profitability in Private Banking
Overview
Income £1,004.3 million
21% ▲
(2006: £832.3 million)
Profit before tax £392.5 million
35% ▲
(2006: £290.0 million)
Cost: income ratio 61%
(2006: 65%)
Basic earnings per share: 104.8 pence per share
36% ▲
(2006: 76.9 pence per share)
Dividend: 30.0 pence per share
20% ▲
(2006: 25.0 pence per share)
Funds under management £139.1 billion
(2006: £128.5 billion)
2
8% ▲
Strength of international business
• £86.4 billion funds under management
• 70% of total income
North
America
£13.8bn
UK
£52.7bn
South
America
£3.4bn
Continental
Europe
£29.8bn
Middle
East
£3.4bn
£3.8bn China joint venture
2007 funds under management: Investment by client domicile
China joint venture funds under management are not reported within Group funds under management
3
Asia
Pacific
£36.0bn
Strength of international business
• £86.4 billion funds under management
• 70% of total income
• 37 offices in 28 countries
Bermuda
Cayman Islands
Mexico City
New York
Philadelphia
• Investment operations in 16 locations
• 4 in Americas
Amsterdam
Copenhagen
Frankfurt
Geneva
Guernsey
Gibraltar
Jersey
Lisbon
London
Luxembourg
Madrid
Milan
Paris
Rome
Stockholm
Vienna
Wiesbaden
Zurich
• 5 in Europe
• 7 in Asia
• New offices in Dubai and Mumbai
• Negotiating to acquire SITE licence in Taiwan
Dubai
Buenos Aires
São Paulo
4
Beijing
Hong Kong
Jakarta
Melbourne
Mumbai
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Diversity of product range
• Full range of equity products:
• Single country
• Regional
• Multi-regional
• Small and mid-cap
• High alpha
• Defensive
• Relative and absolute return fixed income
• Multi-asset
• Multi-manager
5
Diversity of product range
• Full range of equity products:
Alternative FUM £15.9bn
0.9
• Single country
1.7
• Regional
• Multi-regional
• Small and mid-cap
2.2
• High alpha
8.8
• Defensive
• Relative and absolute return fixed income
• Multi-asset
• Multi-manager
6
2.3
property
funds of hedge funds
private equity funds of funds
emerging market debt
commodities
Focus on high margin products
•
Asset Management margins up 30%
Asset Management
funds under management and margins
since 2004
FUM (£bn)
(bps)
140
•
Growth in Retail
• Net inflows of £8.8bn
•
•
70
120
60
100
New products in Institutional
80
50
Alternatives
60
•
Performance fees
40
40
20
30
2004
2005
Institutional (lhs)
7
2006
Retail (lhs)
2007
margin (rhs)
Strength of international Retail
•
Record sales of retail funds in Asia
•
Leading position in rapidly growing
Korean market
•
Retail investment performance
33%
£0.8 billion net inflows in China joint
venture
•
Net inflows increasing in US intermediary
business
•
8
67%
(2006: 68%)
Net outflows in Continental Europe
• Performance
Above peer group 3 years Dec 2007
• Industry
Below peer group 3 years Dec 2007
Growth in UK Retail
Result
Focus
9
•
Broadening product offering
•
No. 2 for net sales in UK
•
Maintaining market share with
discretionary managers
•
No. 1 with discretionary managers
•
Strong position on key industry
platforms
•
Top 5 with financial advisers
•
Growing market share in advisory
•
Developing sub-advised business
Repositioning in Institutional
• Focus on new products
Institutional investment performance
• Gross sales up 25% to £11.6bn
• 100 new UK clients in 2007
31%
• Fourth year of increasing income
• Net outflows £10.6 billion
• Positive net notified inflows
• Improved investment performance
69%
(2006: 60%)
Above benchmark 3 years Dec 2007
Below benchmark 3 years Dec 2007
10
Transformed profitability in Private Banking
•
Turnaround complete
•
Growing income, containing costs
•
Focus on net new assets, revenue
growth
£mn
120
100
•
In the right jurisdictions
•
Completely client focussed
80
•
Access to traditional and alternative
products
60
•
•
41.3
26.9
First class execution, administration
and IT
40
Good environment for private bankers
and clients
20
6.0
2005
Income (lhs)
2005 underlying profit adjusted for £0.3mn gain on discontinued outsourcing project
11
2006
Costs (lhs)
2007
PBT (£mn)
Schroders
2007 Annual Results
Chief Financial Officer
Stephen Brooks
4 March 2008
Continued progress across all business segments
Group profit before tax £392.5 million
35% ▲
(2006: £290.0 million)
Asset Management profit before tax £266.5 million
22% ▲
(2006: £219.0 million)
Private Banking profit before tax £41.3 million
54% ▲
(2006: £26.9 million)
Private Equity and Group profit before tax £84.7 million
92% ▲
(2006: £44.1 million)
Funds under management £139.1 billion
8% ▲
(2006: £128.5 billion)
Dividend 30.0 pence per share
(2006: 25.0 pence per share)
13
20% ▲
Group financial performance
Continued income growth
£mn
1200
Total income
£1,004.3mn
1000
Costs
£611.8mn
▲21%
▲13%
800
392.5
600
400
290.0
230.3
200
0
2005
Income (lhs)
2006
Costs (lhs)
2005 underlying profit adjusted for £20.4mn gain on discontinued outsourcing project
14
2007
PBT (£mn)
Group income statement
Strong financial performance
£mn
2007
2006
Revenue
1,191.8
967.2
Cost of sales
(232.4)
(169.0)
959.4
798.2
(611.8)
(542.3)
347.6
255.9
Net finance income
22.6
18.7
Associates and joint ventures
22.3
15.4
392.5
290.0
(88.8)
(68.1)
22.6
23.5
303.7
221.9
104.8p
76.9p
Gross profit
%
+20
Administrative expenses
Operating profit
Profit before tax
+36
+35
Tax
Effective tax rate (%)
Profit after tax
Basic earnings per share
15
+36
Group income statement
Strong financial performance
£mn
%
2007
2006
Revenue
1,191.8
967.2
Cost of sales
(232.4)
(169.0)
959.4
798.2
(611.8)
(542.3)
347.6
255.9
Net finance income
22.6
18.7
Associates and joint ventures
22.3
15.4
392.5
290.0
(88.8)
(68.1)
22.6
23.5
303.7
221.9
104.8p
76.9p
+20
Gross profit
Administrative
expenses
Gross
profit margins (bps)
Operating profit
54
Profit before
2005 tax
59
2006
64
2007
+36
+35
Tax
Effective tax rate (%)
Profit after tax
Basic earnings per share
16
+36
Group income statement
Strong financial performance
£mn
%
2007
2006
Revenue
1,191.8
967.2
Cost of sales
(232.4)
(169.0)
959.4
798.2
(611.8)
(542.3)
347.6
255.9
22.6
18.7
22.3
15.4
392.5
290.0
(88.8)
(68.1)
22.6
23.5
303.7
221.9
104.8p
76.9p
+20
Gross profit
Administrative expenses
+36
Operating profit
Net finance income
Group cost: income ratio (%)
Associates68
and joint ventures
Profit before tax
65
61
+35
Tax
Effective tax rate (%)
2005
Profit after tax
2006
Basic earnings per share
2007
+36
2005 underlying figures adjusted for £20.4mn gain on discontinued outsourcing project
17
Group income statement
Strong financial performance
£mn
%
2007
2006
Revenue
1,191.8
967.2
Cost of sales
(232.4)
(169.0)
959.4
798.2
(611.8)
(542.3)
347.6
255.9
Net finance income
22.6
18.7
Associates and joint ventures
22.3
15.4
392.5
290.0
(88.8)
(68.1)
22.6
23.5
303.7
221.9
104.8p
76.9p
+20
Gross profit
Administrative expenses
+36
Operating profit
Compensation costs: operating revenues ratio (%)
51
Profit before tax
47
46
+35
Tax
Effective tax rate (%)
2005
Profit after tax
2006
Basic earnings per share
18
2007
+36
Group costs
Administrative expenses
£mn
% of total
2007
2006
Staff costs
66
403.1
345.2
Other costs
33
200.0
189.6
Depreciation and amortisation
1
8.7
7.5
100
611.8
542.3
2,891
2,675
Total
No of employees (year-end)
Key drivers
• Compensation costs: operating revenue ratio reduced to 46%
• Increased marketing and brand expenditure
• Investment in key infrastructure projects
19
Group costs
Marketing and project expenditure
Marketing spend (£mn)
Project spend (£mn)
47.3
33.4
30.2
27.9
29.1
27.9
24.7
19.9
14.5
2005
2006
2007
2005
Cash spend
20
2006
2007
Income statement
Group income statement
Strong financial performance
£mn
2007
2006
Revenue
1,191.8
967.2
Cost of sales
(232.4)
(169.0)
959.4
798.2
(611.8)
(542.3)
347.6
255.9
Net finance income
22.6
18.7
Associates and joint ventures
22.3
15.4
392.5
290.0
(88.8)
(68.1)
22.6
23.5
303.7
221.9
104.8p
76.9p
Gross profit
%
+20
Administrative expenses
Operating profit
Profit before tax
+36
+35
Tax
Effective tax rate (%)
Profit after tax
Basic earnings per share
21
+36
Segmental results
Asset Management
Continued income growth
Asset Management (£mn)
800
Gross profit margins (bps)
Total income £785.4 mn ▲20%
Costs £518.9 mn ▲19%
60
600
55
266.5
400
51
219.0
173.8
200
0
2005
Income (lhs)
2006
Costs (lhs)
2007
2005
PBT (£mn)
2005 underlying profit adjusted for £20.1mn gain on discontinued outsourcing project
23
2006
2007
Asset Management
Income growth in Institutional and Retail channels
Income (£mn)
454.6
352.7
288.4
302.9
330.8
259.4
2005
2006
Institutional
24
2007
Retail
Private Banking
£mn
120
Total income
Costs
£105.9 mn
£64.6 mn
▲ 11%
▼ 6%
100
80
41.3
60
26.9
40
20
6.0
2005
Income (lhs)
2006
Costs (lhs)
2005 underlying profit adjusted for £0.3mn gain on discontinued outsourcing project
25
2007
PBT (£mn)
Private Equity and Group
Profit before tax (£mn)
84.7
26.2
50.5
10.2
£mn
2007
2006
2005
Total Private Equity
investments
138.1
168.2
161.7
74.5
102.4
76.2
44.1
9.5
58.5
40.3
34.6
2005
2006
of which
Unrealised profit
within reserves*
2007
* Unrealised profit represents the revaluation on Private Equity investments classified under
IFRS as available-for-sale
Private Equity
26
Group
Capital allocation
£mn
31 Dec 2007
31 Dec 2006
Regulatory and working capital
716.1
654.4
Liquid funds
371.0
311.8
Third party hedge funds
208.2
138.4
Other Schroders funds
262.3
163.7
Private Equity
138.1
168.2
-
6.9
1,695.7
1,443.4
Leasing
Shareholders’ equity
27
Outlook
Outlook
29
•
Investment performance holding up well
•
Inflows in specialist products
•
Challenging market environment to continue
•
Two thirds of cost base linked to revenues
•
Additional flexibility in non-compensation costs
•
Continuing to invest for future growth
•
2008 result YTD reflects diversity of product range
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
30