11 August 2006
Schroders
Interim Results 2006
29220
Interim Results 2006
Forward-Looking Statements
These presentation slides contain forward-looking statements and
forecasts with respect to the financial condition, 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
Interim Results 2006
Overview
Profit before tax £132.3 million
(H1 2005: £123.5 million, £103.1 million underlying)
Asset Management profit before tax £96.8 million
(H1 2005: £99.8 million, £79.7 million underlying)
Private Banking profit before tax £11.2 million
(H1 2005: £2.2 million, £1.9 million underlying)
Private Equity profit before tax £17.7 million
(H1 2005: £18.0 million)
Funds under management £122.3 billion
(31 December 2005: £122.5 billion)
Interim dividend of 7.5 pence per share
(Interim dividend 2005: 7.0 pence per share)
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
(20.4)
100
50
123.5
103.1
132.3
0
H1 2005 pre tax
profit
Gain on
Underlying H1 2005 Asset Management Asset Management
discontinued
pre tax profit
net income
costs
outsourcing project
Private Banking
H1 2006 pre tax
profit
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Private Banking
Private Equity
Underlying Asset Management net
income (£mn)
Revenue
External cost of sales
Asset Management gross profit
Net interest and other income
Underlying net income
Group Net
Incom e/(Cos ts )
H1 2005
H2 2005
311.9
(61.6)
250.3
3.4
253.7
355.9
(67.2)
288.7
5.4
294.1
H1 2006 pre tax
profit
H1 2006 Difference
377.3
(76.9)
300.4
4.8
305.2
65.4
(15.3)
50.1
1.4
51.5
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Private Banking
Private Equity
Group Net
Incom e/(Cos ts )
H1 2006 pre tax
profit
Asset Management costs (£mn)
H1 2005
H2 2005
H1 2006 Difference
Asset Management staff costs
Asset Management other costs
Asset Management total costs
(126.7)
(47.3)
(174.0)
(137.8)
(62.2)
(200.0)
(143.0)
(65.4)
(208.4)
(16.3)
(18.1)
(34.4)
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
17.1
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Underlying Private
Banking
Private Equity
Group Net
Incom e/(Cos ts )
H1 2006 pre tax
profit
H1 2005 H2 2005 H1 2006 Difference
Underlying Asset Management profit
(£mn)
99.8
94.1
96.8
(3.0)
Asset Management profit before tax
0.0
0.0
20.1
Gain on discontinued outsourcing project (20.1)
79.7
94.1
96.8
17.1
Underlying Asset Management PBT
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
9.3
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Underlying Private
Banking
Underlying Private Banking profit
(£mn)
Revenue
External cost of sales
Gross profit
Costs
Underlying profit before tax
Private Equity
Group Net
Incom e/(Cos ts )
H1 2005
H2 2005
35.2
(0.9)
34.3
(32.4)
1.9
38.9
(1.1)
37.8
(33.7)
4.1
H1 2006 pre tax
profit
H1 2006 Difference
46.2
(1.0)
45.2
(34.0)
11.2
11.0
(0.1)
10.9
(1.6)
9.3
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
9.3
(0.3)
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Underlying Private
Banking
Private Equity (£mn)
Private Equity profit before tax
Private Equity
Group Net
Incom e/(Cos ts )
H1 2005
H2 2005
18.0
22.3
H1 2006 pre tax
profit
H1 2006 Difference
17.7
(0.3)
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
9.3
(0.3)
3.1
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Underlying Private
Banking
Group Net Income/(Costs) (£mn)
Gross profit
Surplus space
Administrative expenses
Net interest and other income
Group Net Income/(Costs)
Private Equity
Group Net
Incom e/(Cos ts )
H1 2005
H2 2005
7.9
(0.5)
(15.5)
11.6
3.5
22.9
(8.7)
(16.5)
9.0
6.7
H1 2006 pre tax
profit
H1 2006 Difference
14.3
0.0
(15.3)
7.6
6.6
6.4
0.5
0.2
(4.0)
3.1
29220
Interim Results 2006
Profit Before Tax
Reconciliation – H1 2005 to H1 2006
£mn
200
150
51.5
(34.4)
9.3
(0.3)
3.1
100
50
103.1
132.3
0
Underlying H1 2005
pre tax profit
Underlying As s et
Managem ent net
incom e
As s et Managem ent
cos ts
Underlying Private
Banking
Private Equity
Group Net
Incom e/(Cos ts )
H1 2006 pre tax
profit
29220
Interim Results 2006
Capital Allocation
£mn
30 June 2005
31 December 2005
30 June 2006
Regulatory
237.7
230.0
250.9
Other operating
130.4
208.2
249.6
24.5
24.6
77.9
Liquid funds
419.7
411.9
308.9
Third party hedge funds
126.0
134.3
132.7
Other Schroders funds
109.8
165.9
162.3
Private Equity
170.9
160.9
154.9
8.0
7.0
5.9
1,227.0
1,342.8
1,343.1
Goodwill
Leasing
Total
29220
Interim Results 2006
Dividends and Earnings Per Share
Interim
Final
Basic earnings per share
Diluted earnings per share
2004
2005
2006 Interim
Pence
£mn
per share
Pence
£mn
per share
Pence
£mn
per share
6.5
13.5
20.0
18.8
39.2
58.0
53.5p
53.1p
7.0
14.5
21.5
20.3
42.0
62.3
65.7p
65.1p
7.5
21.5
33.7p
33.2p
29220
Interim Results 2006
Gross Profit Margins
Asset Management
H1 2005
Gross profit on average AM FUM
Of which: performance fees
Costs on average AM FUM
Net
Average AM FUM
49bp
1bp
34bp
15bp
£102.3bn
H2 2005
H1 2006
52bp
3bp
36bp
16bp
£110.3bn
51bp
1bp
36bp
15bp
£117.2bn
29220
Interim Results 2006
Asset Management
Increased revenue, profit, gross margins
Higher costs linked to revenue growth
Strong inflows in retail
Institutional outflows
–
Japan
–
UK
Interim Results 2006
Retail
H1 inflows £2.3bn (H2 2005 outflows £1.6bn)
Strong flows in UK
Emerging markets, European, UK equities
Majority of reported flows balance out at distributor level
Progress in US intermediary business
Interim Results 2006
Institutional
Net outflows £4.6bn
Japanese equities, UK balanced
Performance issues in two big asset classes
Strong performance in 11 asset classes
Inflows in European equities, alternatives
Strengthened sales and marketing
Broadening client base
Interim Results 2006
Investment Performance
% of Institutional and Retail assets above and below benchmark
3 years to 30 June 2006
Retail
Institutional
35%
42%
58%
65%
Above benchmark
Below benchmark
29220
Interim Results 2006
Private Banking
Continued progress
Revenue up 31%, including transaction revenues
Profits £11.2mn (H1 2005: £2.2mn)
Positive business flows
Investment in back office consolidation
Leading to further efficiency gains
Interim Results 2006
NewFinance Capital
Deal completed 3rd May
Schroders business integrated
Combined AuM £1.7bn
New products - $370mn in commodities fund
New business pipeline building
Interim Results 2006
Summary
Underlying profits up 28%
Year of consolidation
Investment in talent, marketing, business development,
infrastructure
Good opportunities in Retail
Performance challenges in two asset classes impacting
Institutional
Expect further complementary acquisitions
11 August 2006
Appendices
29220
Interim Results 2006
New Business H1 2006
£19.6 billion
Clients
Institutional
Retail
Private banking
H1 05 H2 05 H1 06
£bn
£bn
£bn
4.8
4.3
4.2
11.2
9.1
1.0
1.1
Products
H1 05 H2 05 H1 06
£bn
£bn
£bn
Equities
9.7
8.7
12.3
14.0
Fixed income
5.6
4.9
6.4
1.4
Alternative
investments
1.7
0.9
0.9
29220
Interim Results 2006
Funds Under Management
30 June 06 (31 Dec 05)
By client type
By client domicile
Institutional 62% (64%)
UK 45% (43%)
Retail 31% (30%)
Continental Europe 23% (23%)
Private Banking 7% (6%)
Asia Pacific 21% (22%)
Americas 11% (12%)
29220
Interim Results 2006
Funds Under Management
30 June 06 (31 Dec 05)
By asset type
Equities 69% (69%)
Fixed income 21% (22%)
Alternative investments 10% (9%)
Equities
UK 36% (35%)
Continental Europe 19% (16%)
Asia Pacific 37% (41%)
Americas 8% (8%)
Fixed Income
UK 31% (30%)
Continental Europe 22% (24%)
Asia Pacific 20% (19%)
Americas 27% (27%)
29220
Interim Results 2006
Income and Cost Metrics for the Group
Group cost : income ratio
Group cost : gross profits
Return on average capital (pre-tax)
Return on average capital (post-tax)
H1
2005
H1
2006
64%
73%
21%
15%
66%
69%
20%
15%
29220
Interim Results 2006
Movements in Funds Under Management
£bn
31 Dec 2005
Institutional
Retail
Private
Banking
Total
78.7
36.0
7.8
122.5
Adjustment on purchase of NFC
1.2
0.0
0.0
1.2
Inflows
4.2
14.0
1.4
19.6
Outflows
(8.8)
(11.7)
(1.1)
(21.6)
Net asset (losses)/gains
(4.6)
2.3
0.3
(2.0)
0.4
0.2
0.0
0.6
75.7
38.5
8.1
122.3
Market movement
30 June 2006
29220
Interim Results 2006
Net Change in Business
£bn
Institutional
Retail
Private Banking
Total
H1 2005
H2 2005
H1 2006
In
Out
Net
In
Out
Net
In
Out
Net
4.8
(6.8)
(2.0)
4.3
(7.9)
(3.6)
4.2
(8.8)
(4.6)
11.2
(9.6)
1.6
9.1
(10.7)
(1.6)
14.0
(11.7)
2.3
1.0
(0.6)
0.4
1.1
(0.9)
0.2
1.4
(1.1)
0.3
17.0
(17.0)
0.0
14.5
(19.5)
(5.0)
19.6
(21.6)
(2.0)
29220
Interim Results 2006
Gross Profits
£mn
Retail
Institutional
Total Asset Management
Private Banking
H1 2005 %
134.0
116.3
250.3
34.3
54
46
H2 2005
%
150.9
137.8
288.7
52
48
37.8
H1 2006 %
167.1
133.3
300.4
56
44
45.2
29220
Interim Results 2006
Gross Profit Margins
Asset Management and Private Banking
Gross profit
Average FUM
Gross profit margin
H1 2005
FY 2005
£284.6mn
£108.9bn
52bp
£611.1mn
£113.1bn
54bp
H1 2006
£345.6mn
£125.4bn
55bp
29220
Interim Results 2006
Income Statement Progression
Profit before tax
£mn
Asset Management income
Gain on discontinued contract
Asset Management cost
Asset Management profit
Private Banking profit
Private Equity
Group Net Income/(Costs)
Profit before tax
Q1
2005
123.5
Q2
2005
130.2
Q3
2005
141.2
Q4
2005
152.9
Q1
2006
152.8
Q2
2006
152.4
0.0
20.1
0.0
0.0
0.0
0.0
(89.2)
(84.8)
(95.1)
(104.9)
(102.9)
(105.5)
34.3
65.5
46.1
48.0
49.9
46.9
1.7
0.5
1.5
2.6
3.7
7.5
10.5
7.5
5.5
16.8
7.2
10.5
3.9
(0.4)
10.5
(3.8)
10.6
(4.0)
50.4
73.1
63.6
63.6
71.4
60.9
29220
Interim Results 2006
Headcount
No. employees
3,000
2,750
2,637
2,539
2,500
2,423
2,250
2,000
30 June 05
31 Dec 05
30 June 06
29220
Interim Results 2006
Comparison of Costs
Total Group
£mn
Staff costs
Other costs
Surplus space provisions
Total administrative expenses
Depreciation and amortisation
Total
H1 2005
H2 2005
148.3
69.6
0.5
218.4
5.4
223.8
H1 2006
161.5
84.8
8.7
255.0
5.5
260.5
29220
Interim Results 2006
Comparison of Costs
Asset Management
£mn
Staff costs
Other costs
Total administrative expenses
Depreciation and amortisation
Total
H1 2005
H2 2005
126.7
43.9
170.6
3.4
174.0
H1 2006
137.8
58.9
196.7
3.3
200.0
29220
Interim Results 2006
Comparison of Costs
Private Banking
£mn
Staff costs
Other costs
Total administrative expenses
Depreciation and amortisation
Total
H1 2005
H2 2005
16.7
13.7
30.4
2.0
32.4
H1 2006
17.3
14.2
31.5
2.2
33.7
29220
Interim Results 2006
Balance Sheet
£mn
30 June 2005
31 Dec 2005
30 June 2006
32.1
30.2
81.4
414.5
526.9
679.4
2,705.6
2,760.9
2,882.3
15.8
23.4
31.8
3,168.0
3,341.4
3,674.9
1,230.7
1,343.1
1,343.2
212.9
210.2
488.5
Current liabilities
1,724.4
1,788.1
1,843.2
Total equity and liabilities
3,168.0
3,341.4
3,674.9
Intangible assets
Other non-current assets
Current assets
Non-current assets held for sale
Total equity
Non-current liabilities
29220
Interim Results 2006
Asset Management Balance Sheet
£mn
30 June 2005
30 June 2006
Intangible assets
23.5
75.3
Other non-current assets
78.4
198.4
509.5
548.8
611.4
822.5
208.7
361.4
44.9
159.9
Current liabilities
357.8
301.2
Total equity and liabilities
611.4
822.5
Current assets
Total equity
Non-current liabilities
29220
Interim Results 2006
Private Equity Interests
Schroders plc
Investments
Carried Interest
(Total £120 mn)
(Total £35 mn)
SVG Capital plc
£51mn
Funds I + II
Quoted Investment Trust
SVIL
£25mn
Co-investment vehicle
GP & LP Interests
Permira*
£22mn
Other SV funds*
US, Canada, Japan,
Life Sciences, Asia Pacific
Permira and other funds
Fund of Funds I, II, III
£15mn
Stand-alone portfolio
Other
£7mn
*Share of carry between 7½% and 36%
29220
Interim Results 2006
Capital Allocation
Asset
Management
£mn
30 June 2006
141.5
Regulatory
143.8
Other operating
72.9
Goodwill
25.6
Liquid funds
0.0
Third party hedge funds
0.0
Other Schroders funds
0.0
Private equity
0.0
Leasing
383.8
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
109.4
68.6
5.0
0.0
0.0
0.0
0.0
0.0
183.0
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
154.9
0.0
154.9
Total
£mn
0.0
37.2
0.0
283.3
132.7
162.3
0.0
5.9
621.4
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
Interim Results 2006
Own Shares
Own shares: shares in Schroders plc purchased in the market to
hedge awards to employees of share-based payments
The cost of the shares purchased in the market and awarded at nil
cost to employees reduces the net assets of the Group
In the period to 30 June 2006, the Group increased its holding by a
net 2.9 million shares, partly in order to cover share awards
payable in respect of the NFC acquisition
The average cost of an own share increased from £6.43 to £9.06 in
the period
29220
Interim Results 2006
Underlying Profit Growth
H1 2005 to H1 2006
£mn
350
300
250
200
(20.4)
150
+28%
100
50
123.5
103.1
132.3
H1 Underlying 2005 pre
tax profit
H1 2006 pre tax profit
0
H1 2005 pre tax profit
Gain on discontinued
outsourcing project
29220
Interim Results 2006
Underlying Asset Management Profit Growth
H1 2005 to H1 2006
£mn
200
150
100
50
+21%
(20.1)
99.8
79.7
96.8
Underlying H1 2005
Asset Management
pre tax profit
H1 2006 Asset
Management pre tax
profit
0
H1 2005 Asset
Management pre tax
profit
Gain on discontinued
outsourcing project
29220
11 August 2006
Client Flows
29220
Interim Results 2006
Client Flows
Current disclosures
Institutional
– Flows from same client netted within the month
– Inflows and outflows in different months not netted
– Existing clients flows contribute approximately 50% of total outflows
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
Interim Results 2006
Client Flows
Alternative disclosures
Institutional
– Flows from the same clients netted within period?
– Figures not available at present but unlikely to be significant
Retail
– Sub-advisory and Branded Funds – inflows and outflows from the same
distributor clients netted within period?
OR
– Flows within period netted at fund level?
29220
Interim Results 2006
Retail Flows
Alternative disclosures
Inflows
£bn
Client basis
Gross
Net
Funds basis
Gross
Net
Outflows
£bn
Net flows
£bn
Outflows as % of av.
funds (annualised)
Implied
longevity*
14.0
5.8
(11.7)2.3
(3.5)2.3
60%
18%
14.0
6.7
(11.7)2.3
(4.4)2.3
60%
22%
– Inflows and outflows from the same clients account for £8.2bn (70%) of gross outflows
* Calculated as outflows divided by average funds
29220
Interim Results 2006
Total Flows
Standard disclosures
£bn
Retail
Institutional
Private Banking
Total
Net 2.3
Net (4.6)
Net 0.3
Net (2.0)
29220