2 March 2007
Schroders
Annual Results 2006
29220
Annual Results 2006
Forward-Looking Statements
These presentation slides contain forward-looking statements and
forecasts with respect to the financial condition and results of the
businesses of Schroders plc and its subsidiaries
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
announcement should be construed as a profit forecast
29220
2 March 2007
2006 Results
Michael Dobson
Chief Executive
29220
2 March 2007
Financial Results
Jonathan Asquith
Chief Financial Officer
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
29220
Annual Results 2006
Profit Before Tax
£mn
350
300
250
200
150
100
50
0
-50
250.7
290.0
211.6
65.0
18.9
-8.1
2001
2002
2003
2004
2005
2006
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
Asset Management profit before tax £219.0 million
(2005: £193.9 million)
29220
Annual Results 2006
Profit Before Tax
Asset Management
£mn
250
219.0
193.9
200
150
120.9
100
50
52.6
11.5
14.1
2001
2002
0
2003
2004
2005
2006
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
Figures 2001-2003 include Private Banking
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
Asset Management profit before tax £219.0 million
(2005: £193.9 million)
Private Banking profit before tax £26.9 million
(2005: £6.3 million)
29220
Annual Results 2006
Profit Before Tax
Private Banking
£mn
30
26.9
25
20
15
10
5
3.5
6.3
0
2004
2005
2006
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
Asset Management profit before tax £219.0 million
(2005: £193.9 million)
Private Banking profit before tax £26.9 million
(2005: £6.3 million)
Private Equity profit before tax £34.6 million
(2005: £40.3 million)
29220
Annual Results 2006
Profit Before Tax
Private Equity and Group
£mn
120
100
80
60
40
20
0
-20
-40
87.2
IFP
4.8
50.5
44.1
2005
2006
12.4
-19.6
2001
2002
2003
2004
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
300
(20.4)
250
200
150
250.7
230.3
100
290.
0
50
0
2005 pre tax profit
Gain on discontinued
outsourcing project
Underlying 2005 pre tax
profit
2006 pre tax profit
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
300
107.8
250
200
290.
0
150
100
230.3
50
0
2005 pre tax profit
Underlying Asset
Management net
income
2006 pre tax profit
Underlying Asset Management net
income (£mn)
Revenue
External cost of sales
Asset Management gross profit
Net interest and other income
Underlying net income
2005
2006
Difference
667.8
(128.8)
539.0
8.8
547.8
811.1
(166.2)
644.9
10.7
655.6
143.3
(37.4)
105.9
1.9
107.8
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
300
107.8
250
(62.6)
200
290.
0
150
100
230.3
50
0
2005 pre tax profit
Underlying Asset
Management net
income
Asset Management
costs
2006 pre tax profit
Asset Management costs (£mn)
2005
2006
Asset Management staff costs
Asset Management other costs
Asset Management total costs
(264.5)
(109.5)
(374.0)
(297.6)
(139.0)
(436.6)
Difference
(33.1)
(29.5)
(62.6)
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
300
107.8
250
(62.6)
45.2
200
290.
0
150
100
230.3
50
0
2005 pre tax profit
Underlying Asset
Management net
income
Asset Management
costs
Underlying Asset Management profit
(£mn)
Underlying profit before tax
2006 pre tax profit
2005
2006
Difference
173.8
219.0
45.2
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
20.9
300
250
45.2
200
290.
0
150
100
230.3
50
0
2005 pre tax profit
Underlying Asset
Management profit
Underlying Private
Banking profit
Underlying Private Banking profit
(£mn)
Revenue
External cost of sales
Gross profit
Costs
Underlying profit before tax
2006 pre tax profit
2005
2006
Difference
74.1
(2.0)
72.1
(66.1)
6.0
98.5
(2.8)
95.7
(68.8)
26.9
24.4
(0.8)
23.6
(2.7)
20.9
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
20.9
300
250
(5.7)
45.2
200
290.
0
150
100
230.3
50
0
2005 pre tax profit
Underlying Asset
Management profit
Underlying Private
Banking profit
Private Equity (£mn)
Profit before tax
Private Equity
profit
2006 pre tax profit
2005
2006
Difference
40.3
34.6
(5.7)
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
20.9
300
250
(5.7)
(0.7)
45.2
200
150
100
290.0
230.3
50
0
2005 pre tax profit
Underlying Asset
Management profit
Underlying Private
Banking profit
Private Equity
profit
Group (£mn)
Gross profit
Surplus space
Administrative expenses
Net interest and other income
Profit before tax
Group
2006 pre tax profit
2005
2006
Difference
30.8
(9.2)
(32.0)
20.6
10.2
31.0
(4.5)
(29.2)
12.2
9.5
0.2
4.7
2.8
(8.4)
(0.7)
29220
Annual Results 2006
Profit Before Tax
Reconciliation – 2005 to 2006
£mn
350
20.9
300
250
(5.7)
(0.7)
45.2
200
150
100
290.0
230.3
50
0
2005 pre tax profit
Underlying Asset
Management profit
Underlying Private
Banking profit
Private Equity
profit
Group
2006 pre tax profit
29220
Annual Results 2006
Costs
Total Group
£mn
Staff costs
Other costs
Surplus space provisions
Depreciation and amortisation
Total administrative expenses
2005
2006
309.8
154.4
9.2
10.9
484.3
29220
Annual Results 2006
Costs
Total Group
£mn
700
600
520.0
500
470.1
484.3
406.2
408.6
2003
2004
542.3
400
300
200
100
0
2001
2002
Staff Costs
2005
2006
Non-staff Costs
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Compensation Costs: Operating Revenues
70%
60%
57%
56%
56%
51%
51%
2004
2005
50%
47%
40%
30%
20%
10%
0%
2001
2002
2003
2006
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Cost: Income Ratio
120%
102%
100%
96%
86%
80%
66%
66%
65%
2004
2005
2006
60%
40%
20%
0%
2001
2002
2003
Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS
29220
Annual Results 2006
Capital Allocation
£mn
31 December 2005
31 December 2006
Regulatory
230.0
258.6
Other operating
208.2
322.3
24.6
73.5
Liquid funds
411.9
311.8
Third party hedge funds
134.3
138.4
Other Schroders funds
165.9
163.7
Private Equity
160.9
168.2
7.0
6.9
1,342.8
1,443.4
Goodwill & Intangibles
Leasing
Total
29220
Annual Results 2006
Capital Allocation
£mn
31 December 2005
31 December 2006
Regulatory
230.0
258.6
Other operating
208.2
322.3
24.6
73.5
Liquid funds
411.9
311.8
Third party hedge funds
134.3
138.4
Other Schroders funds
165.9
163.7
Private Equity
160.9
168.2
7.0
6.9
1,342.8
1,443.4
Goodwill & Intangibles
Leasing
Total
29220
Annual Results 2006
Capital Allocation
£mn
31 December 2005
31 December 2006
Regulatory
230.0
258.6
Other operating
208.2
322.3
24.6
73.5
Liquid funds
411.9
311.8
Third party hedge funds
134.3
138.4
Other Schroders funds
165.9
163.7
Private Equity
160.9
168.2
7.0
6.9
1,342.8
1,443.4
Goodwill & Intangibles
Leasing
Total
29220
Annual Results 2006
Capital Allocation
£mn
31 December 2005
31 December 2006
Regulatory
230.0
258.6
Other operating
208.2
322.3
24.6
73.5
Liquid funds
411.9
311.8
Third party hedge funds
134.3
138.4
Other Schroders funds
165.9
163.7
Private Equity
160.9
168.2
7.0
6.9
1,342.8
1,443.4
Goodwill & Intangibles
Leasing
Total
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
Asset Management profit before tax £219.0 million
(2005: £193.9 million)
Private Banking profit before tax £26.9 million
(2005: £6.3 million)
Private Equity profit before tax £34.6 million
(2005: £40.3 million)
Funds under management £128.5 billion
(31 December 2005: £122.5 billion)
29220
Annual Results 2006
Funds Under Management
31 Dec 2006 (31 Dec 2005)
By client type
By client domicile
Institutional 60% (64%)
UK 44% (43%)
Retail 33% (30%)
Continental Europe 23% (23%)
Private Banking 7% (6%)
Asia Pacific 21% (22%)
Americas 12% (12%)
29220
Annual Results 2006
Funds Under Management
31 Dec 2006 (31 Dec 2005)
By asset type
Equities 69% (69%)
Fixed income 21% (22%)
Alternative investments 10% (9%)
Equities
UK 36% (35%)
Continental Europe 23% (16%)
Asia Pacific 32% (41%)
Americas 9% (8%)
Fixed Income
UK 27% (30%)
Continental Europe 21% (24%)
Asia Pacific 23% (19%)
Americas 29% (27%)
29220
Annual Results 2006
Movements in Funds Under Management
£bn
31 December 2005
Institutional
Retail
Private
Banking
Total
78.7
36.0
7.8
122.5
1.4
0.0
0.0
1.4
(8.0)
3.8
0.4
(3.8)
Market movement
5.3
2.7
0.4
8.4
31 December 2006
77.4
42.5
8.6
128.5
Purchase of NFC
Net asset (losses)/gains
29220
Annual Results 2006
Gross Profits and Margin
2005
2006
Gross
Margin
Gross
Margin
£mn
Profit
(bps)
Profit
(bps)
Institutional
Retail
Total Asset Management
254.1
284.9
539.0
35
85
51
295.6
349.3
644.9
38
89
55
72.1
105
95.7
117
Private Banking
29220
Annual Results 2006
Overview
Profit before tax £290.0 million
(2005: £250.7 million)
Asset Management profit before tax £219.0 million
(2005: £193.9 million)
Private Banking profit before tax £26.9 million
(2005: £6.3 million)
Private Equity profit before tax £34.6 million
(2005: £40.3 million)
Funds under management £128.5 billion
(31 December 2005: £122.5 billion)
Total dividend for the year of 25.0 pence per share
(2005: 21.5 pence per share)
29220
Annual Results 2006
Dividends and Earnings Per Share
2005
2004
Pence
£mn
per share
Interim
Final
Basic earnings per share
Diluted earnings per share
6.5
13.5
20.0
18.8
39.2
58.0
53.5p
53.1p
Pence
£mn
per share
7.0
14.5
21.5
20.3
42.0
62.3
65.7p
65.1p
2006
Pence
£mn
per share
7.5
17.5
25.0
21.4
49.7
71.1
76.9p
75.7p
29220
2 March 2007
Distribution
Massimo Tosato
Global Head of Distribution
29220
Annual Results 2006
The Market Long Term Trends
Demographics:
Channels
Defined
Benefit
Schemes
Defined Contribution
Schemes
Personal Savings
― Growth of individual and “instividual” savings
― Outcome oriented products
Products
― Strategic solutions
29220
Annual Results 2006
Schroders’ Positioning within these Trends
– Channel
– Product
– Geography
29220
Annual Results 2006
An International Example
The Luxembourg mutual fund platform
FUM (€bn)
Headcount
Subfunds
Share Classes
Countries
1996
2006
1.2
12
19
48
5
39
179
107
789
37
Outsourced: treasury, fund accounting, fund custody, stock lending
29220
Annual Results 2006
Gross Sales
£bn
35.3
CAGR = +35.6%
28.6
23.7
20.3
7.7
5.2
2.5
2001
10.7
7.6
3.1
2002
Institutional
11.1
26.0
20.3
15.2
9.2
8.5
8.3
9.3
2003
2004
2005
2006
Retail
29220
2 March 2007
Investment
Alan Brown
Global Head of Investment
29220
Annual Results 2006
Investment Performance
% of Institutional and Retail assets above and below benchmark
3 years to 31 December 2006
Retail
Institutional
32%
40%
60%
68%
Above benchmark
Below benchmark
29220
Annual Results 2006
Our Traditional Business
Challenges:
UK Multi-Asset
Continued Restructuring
Japan Equities
Performance
Opportunities:
Pacific ex-Japan
European Equities
Property – SEPUT & FoFs
Performance & Capacity
Institutional
Asset Allocation & Diversification
29220
Annual Results 2006
Harnessing Change
Catalysts
Accounting Rules and Regulation
Defined Benefit
Defined Contribution
Two Themes
Diversification
Outcome Oriented Strategies
29220
Annual Results 2006
Diversification
DGF
Equity return at lower volatility
Property Securities
Global diversification and liquidity
Commodities
Diversification and real asset
Hedge Fund of Funds
Best of breed diversification
Multi-Asset team
Schroder Property
Alternative Investments Group
NewFinance Capital
29220
Annual Results 2006
Outcome Oriented Strategies
LDI
Liability matching portfolios
Multi-Asset team
Structured Products
Capital guarantees, income products
Multi-Asset team
Absolute and Total Return
Credit notes, strategic bond
Benchmark Unaware
Global active value, improved Sharpe ratios
Fixed Income
Quantitative Equity
29220
2 March 2007
Private Banking
Philip Mallinckrodt
Global Head of Private Banking
29220
Annual Results 2006
Private Banking Summary
Considerable progress in 2006
Positioning for growth over next five years
Integrated business model for our banks in UK,
Guernsey and Switzerland
29220
Annual Results 2006
Management Priorities in 2006/7
Integrate back office in Zurich
Sharpen our client proposition
29220
2 March 2007
2006 Results
Michael Dobson
Chief Executive
29220
2 March 2007
Appendices
29220
Annual Results 2006
Income Statement Progression
Profit before tax
£mn
Q3
2005
141.2
Q4
2005
152.9
Q1
2006
152.8
Q2
2006
152.4
Q3
2006
157.2
Q4
2006
193.2
Asset Management cost
(95.1)
(104.9)
(102.9)
(105.5)
(108.9)
(119.3)
Asset Management profit
46.1
48.0
49.9
46.9
48.3
73.9
Private Banking profit
1.5
2.6
3.7
7.5
6.9
8.8
Private Equity
5.5
16.8
7.2
10.5
6.2
10.7
Group
10.5
(3.8)
10.6
(4.0)
2.6
0.3
Profit before tax
63.6
63.6
71.4
60.9
64.0
93.7
Asset Management income
29220
Annual Results 2006
2006 Business Segment Profits
£mn
350
300
250
34.6
9.5
290.0
Group pre tax profits
Total pre tax profits
26.9
219.0
200
150
100
50
0
Asset Management pre Private Banking pre tax
tax profit
profits
Private Equity pre tax
profits
29220
Annual Results 2006
Gross Profit Margins
Asset Management gross profit £644.9 million
(2005: £539.0 million)
Asset Management
2005
Gross profit on average AM FUM
Of which: performance fees
Costs on average AM FUM
Net
Average AM FUM
51bps
2bps
35bps
16bps
£106.5bn
2006
55bps
4bps
37bps
18bps
£116.6bn
29220
Annual Results 2006
Gross Profit Margins
Asset Management gross profit £644.9 million
(2005: £539.0 million)
Private Bank gross profit £95.7 million
(2005: £72.1 million)
Asset Management & Private Bank
2005
Gross profit on average AM FUM
Gross profit on average PB FUM
Gross profit on average AM & PB FUM
Average combined FUM
51bps
104bps
54bps
£113.4bn
2006
55bps
117bps
59bps
£124.8bn
29220
Annual Results 2006
Comparison of Costs
Asset Management
£mn
Staff costs
Other costs
Depreciation and amortisation
Total administrative expenses
2005
2006
264.5
102.8
6.7
374.0
29220
Annual Results 2006
Comparison of Costs
Private Banking
£mn
Staff costs
Other costs
Depreciation and amortisation
Total administrative expenses
2005
2006
34.0
27.9
4.2
66.1
29220
Annual Results 2006
Headcount
No. employees
3,000
2,750
2,675
2,539
2,500
2,371
2,250
2,000
Dec 04
Dec 05
Dec 06
29220
Annual Results 2006
Balance Sheet
£mn
31 Dec 2005
31 Dec 2006
30.2
80.3
526.9
701.8
2,760.9
2,736.7
23.4
60.1
0.0
1,532.0
Total assets
3,341.4
5,110.9
Total equity
1,343.1
1,443.6
210.2
338.4
1,788.1
1,796.9
0.0
1,532.0
3,341.4
5,110.9
Intangible assets
Other non-current assets
Current assets
Non-current assets held for sale
Assets backing insurance unit-linked liabilities
Non-current liabilities
Current liabilities
Insurance unit-linked liabilities
Total equity and liabilities
29220
Annual Results 2006
Asset Management Balance Sheet
£mn
31 Dec 2005
31 Dec 2006
23.3
75.0
Other non-current assets
109.6
98.9
Current assets
514.9
721.4
0.0
1,532.0
Total assets
647.8
2,427.3
Total equity
278.6
414.0
59.6
86.2
309.6
395.1
0.0
1,532.0
647.8
2,427.3
Intangible assets
Assets backing insurance unit-linked liabilities
Non-current liabilities
Current liabilities
Insurance unit-linked liabilities
Total equity and liabilities
29220
Annual Results 2006
Capital Allocation
Asset
Management
£mn
31 Dec 2006
147.2
Regulatory
187.9
Other operating
68.5
Goodwill
10.3
Liquid funds
0.0
Third party hedge funds
0.0
Other Schroders funds
0.0
Private equity
0.0
Leasing
413.9
31 Dec 2005
122.5
Regulatory
90.1
Other operating
21.0
Goodwill
45.0
Liquid funds
0.0
Third party hedge funds
0.0
Other Schroders funds
0.0
Private equity
0.0
Leasing
278.6
Private
Banking
£mn
111.4
76.9
5.0
0.0
0.0
0.0
0.0
0.0
193.3
107.5
59.9
3.6
0.0
0.0
0.0
0.0
0.0
171.0
Private
Equity
£mn
Group
£mn
0.0
0.0
0.0
0.0
0.0
0.0
168.2
0.0
168.2
Total
£mn
0.0
57.5
0.0
301.5
138.4
163.7
0.0
6.9
668.0
0.0
0.0
0.0
0.0
0.0
0.0
160.9
0.0
160.9
0.0
58.2
0.0
366.9
134.3
165.9
0.0
7.0
732.3
29220
Annual Results 2006
Reconciliation of Movement in Capital
2006
£mn
Opening balance at 1 January 2006
Movements in respect of shares and share-based payments
Net movement in share capital
Net movement in own shares
Share-based payments net of tax
Shares to be issued
Movements in respect of current year profits and unrealised items of income
and expense
Profit for the year after dividends and minority interests
Exchange differences net of hedging
Actuarial gains net of tax
Gains on investment net of amounts recycled through the income statement
Closing balance at 31 December 2006
1,342.8
(56.5)
(60.2)
35.8
15.1
(65.8)
157.9
(33.7)
3.8
38.4
166.4
1,443.4
29220
Annual Results 2006
Private Equity Interests
Schroders plc
Investments
Carried Interest
(Total £128 mn)
(Total £40 mn)
SVG Capital plc
£59mn
Funds I + II
Quoted Investment Trust
SVIL
£21mn
Co-investment vehicle
GP & LP Interests
Permira*
£31mn
Other SV funds*
US, Canada, Japan,
Life Sciences, Asia Pacific
Permira and other funds
Fund of Funds I, II, III
£13mn
Stand-alone portfolio
Other
£4mn
*Share of carry between 7.5% and 36%
29220
Annual Results 2006
Private Equity Results
31 Dec 2005
31 Dec 2006
16%
12%
Gains through P&L
£40mn
£35mn
Movement in unrealised gains
£11mn
£25mn
Total gains
£51mn
£60mn
Percentage of Group profit
29220
Annual Results 2006
Gross New Business 2006
£38.0 billion
Clients
Institutional
Retail
Private Banking
Total
2005
£bn
2006
£bn
8.3
9.2
20.3
Products
2005
£bn
2006
£bn
Equities
18.4
24.1
26.1
Fixed income
10.5
12.2
2.1
2.7
Alternative
investments
1.8
1.7
30.7
38.0
30.7
38.0
Total
29220
Annual Results 2006
Net Change in Business
£bn
Institutional
Retail
Private Banking
Total
2005
2006
In
Out
Net
In
Out
Net
8.3
(14.2)
(5.9)
9.2
(17.2)
(8.0)
20.3
(20.3)
0.0
26.1
(22.3)
3.8
2.1
(1.5)
0.6
2.7
(2.3)
0.4
30.7
(36.0)
(5.3)
38.0
(41.8)
(3.8)
29220
Annual Results 2006
Gross Client Flows
Current disclosures
Institutional
– Flows from same client netted within the month
– Inflows and outflows in different months not netted
– Approximately 50% of total outflows occur within ongoing client relationships
Retail
– Sub-advisory and Branded Funds – inflows and outflows from the same
distributor clients in the same month are reported gross; no netting
– Switching activity netted – but this relates to in specie switches only, which
are small
29220
Annual Results 2006
Retail Alternative Disclosures
£bn
Gross Disclosure
Retail
In
Out
Net
26.1
(22.3)
3.8
Sub-advisory and Branded Funds – inflows and outflows from the
same distributor clients netted within month
£bn
Revised Retail Disclosure
Retail
In
Out
Net
11.4
(7.6)
3.8
29220