Schroders 2007 Annual Results
Chief Executive
Michael Dobson
4 March 2008
trusted heritage
advanced thinking
1
Overview
Record results
• Strength of international business
• Diversity of product range
• Focus on high margin products
• Growth in Retail
• Repositioning in Institutional
• Transformed profitability in Private Banking
2
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 8% ▲
(2006: £128.5 billion)
Overview
3
£3.8bn China joint venture
Strength of international business
2007 funds under management: Investment by client domicile
China joint venture funds under management are not reported within Group funds under management
North
America
£13.8bn
South
America
£3.4bn
Continental
Europe
£29.8bn
UK
£52.7bn
Asia
Pacific
£36.0bn Middle
East
£3.4bn
• £86.4 billion funds under management
• 70% of total income
4
Strength of international business
• £86.4 billion funds under management
• 70% of total income
• 37 offices in 28 countries
• Investment operations in 16 locations
• 4 in Americas
• 5 in Europe
• 7 in Asia
• New offices in Dubai and Mumbai
• Negotiating to acquire SITE licence in Taiwan
Bermuda Cayman Islands Mexico City New York Philadelphia
Amsterdam Copenhagen Frankfurt Geneva Guernsey Gibraltar Jersey Lisbon London Luxembourg Madrid Milan Paris
Rome Stockholm Vienna Wiesbaden Zurich
Beijing Hong Kong Jakarta Melbourne Mumbai Seoul Shanghai Singapore Sydney Taipei Tokyo
Buenos Aires São Paulo
Dubai
5
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
6
Diversity of product range
Alternative FUM £15.9bn • 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
8.8
2.3
2.2
1.7
0.9
property emerging market debt
funds of hedge funds commodities
private equity funds of funds
7
Focus on high margin products
20
40
60
80
100
120
140
2004 2005 2006 2007
30
40
50
60
70
• Asset Management margins up 30%
since 2004
• Growth in Retail
• Net inflows of £8.8bn
• New products in Institutional
• Alternatives
• Performance fees
Institutional (lhs) Retail (lhs) margin (rhs)
(bps) FUM (£bn)
Asset Management funds under management and margins
20
40
60
80
100
120
140
2004 2005 2006 2007
30
40
50
60
70
8
Strength of international Retail
• Record sales of retail funds in Asia
• Leading position in rapidly growing
Korean market
• £0.8 billion net inflows in China joint
venture
• Net inflows increasing in US intermediary
business
• Net outflows in Continental Europe
• Performance
• Industry
(2006: 68%)
67%
33%
Retail investment performance
Above peer group 3 years Dec 2007
Below peer group 3 years Dec 2007
9
Result
• No. 2 for net sales in UK
• No. 1 with discretionary managers
• Strong position on key industry
platforms
• Top 5 with financial advisers
Growth in UK Retail
Focus
• Broadening product offering
• Maintaining market share with
discretionary managers
• Growing market share in advisory
• Developing sub-advised business
10
69%
31%
Above benchmark 3 years Dec 2007
Below benchmark 3 years Dec 2007
Repositioning in Institutional
• Focus on new products
• Gross sales up 25% to £11.6bn
• 100 new UK clients in 2007
• Fourth year of increasing income
• Net outflows £10.6 billion
• Positive net notified inflows
• Improved investment performance
Institutional investment performance
(2006: 60%)
11
Transformed profitability in Private Banking
• Turnaround complete
• Growing income, containing costs
• Focus on net new assets, revenue
growth
• In the right jurisdictions
• Completely client focussed
• Access to traditional and alternative
products
• First class execution, administration
and IT
• Good environment for private bankers
and clients
2005 underlying profit adjusted for £0.3mn gain on discontinued outsourcing project
41.3
26.9
6.0
20
40
60
80
100
120
2005 2006 2007
0
10
20
30
40
50
PBT (£mn) Income (lhs) Costs (lhs)
£mn
41.3
26.9
6.0 20
40
60
80
100
120
2005 2006 2007
Schroders 2007 Annual Results
Chief Financial Officer
Stephen Brooks
4 March 2008
13
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 20% ▲
(2006: 25.0 pence per share)
14
392.5
230.3
290.0
PBT (£mn)
0
200
400
600
800
1000
1200
2005 2006 2007
Group financial performance
2005 underlying profit adjusted for £20.4mn gain on discontinued outsourcing project
Costs (lhs) Income (lhs)
Total income £1,004.3mn ▲21%
£mn
Costs £611.8mn ▲13%
392.5
230.3
290.0
0
200
400
600
800
1000
1200
2005 2006 2007
0
100
200
300
400
Continued income growth
15
£mn % 2007 2006
Revenue 1,191.8 967.2
Cost of sales (232.4) (169.0)
Gross profit +20 959.4 798.2
Administrative expenses (611.8) (542.3)
Operating profit +36 347.6 255.9
Net finance income 22.6 18.7
Associates and joint ventures 22.3 15.4
Profit before tax +35 392.5 290.0
Tax (88.8) (68.1)
Effective tax rate (%) 22.6 23.5
Profit after tax 303.7 221.9
Basic earnings per share +36 104.8p 76.9p
Group income statement Strong financial performance
16
£mn % 2007 2006
Revenue 1,191.8 967.2
Cost of sales (232.4) (169.0)
Gross profit +20 959.4 798.2
Administrative expenses (611.8) (542.3)
Operating profit +36 347.6 255.9
Net finance income 22.6 18.7
Associates and joint ventures 22.3 15.4
Profit before tax +35 392.5 290.0
Tax (88.8) (68.1)
Effective tax rate (%) 22.6 23.5
Profit after tax 303.7 221.9
Basic earnings per share +36 104.8p 76.9p
Gross profit margins (bps)
54 59
64
2005 2006 2007
Group income statement Strong financial performance
17
£mn % 2007 2006
Revenue 1,191.8 967.2
Cost of sales (232.4) (169.0)
Gross profit +20 959.4 798.2
Administrative expenses (611.8) (542.3)
Operating profit +36 347.6 255.9
Net finance income 22.6 18.7
Associates and joint ventures 22.3 15.4
Profit before tax +35 392.5 290.0
Tax (88.8) (68.1)
Effective tax rate (%) 22.6 23.5
Profit after tax 303.7 221.9
Basic earnings per share +36 104.8p 76.9p
2005 underlying figures adjusted for £20.4mn gain on discontinued outsourcing project
Group cost: income ratio (%)
68 65
61
2005 2006 2007
Group income statement Strong financial performance
18
£mn % 2007 2006
Revenue 1,191.8 967.2
Cost of sales (232.4) (169.0)
Gross profit +20 959.4 798.2
Administrative expenses (611.8) (542.3)
Operating profit +36 347.6 255.9
Net finance income 22.6 18.7
Associates and joint ventures 22.3 15.4
Profit before tax +35 392.5 290.0
Tax (88.8) (68.1)
Effective tax rate (%) 22.6 23.5
Profit after tax 303.7 221.9
Basic earnings per share +36 104.8p 76.9p
Compensation costs: operating revenues ratio (%)
51
47 46
2005 2006 2007
Group income statement Strong financial performance
19
Key drivers
• Compensation costs: operating revenue ratio reduced to 46%
• Increased marketing and brand expenditure
• Investment in key infrastructure projects
£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
Total 100 611.8 542.3
No of employees (year-end) 2,891 2,675
Group costs Administrative expenses
20
Marketing spend (£mn)
14.5
19.9
27.9
2005 2006 2007
Project spend (£mn)
30.2
24.7
29.1
33.4
27.9
47.3
2005 2006 2007
Income statement Cash spend
Group costs Marketing and project expenditure
21
£mn % 2007 2006
Revenue 1,191.8 967.2
Cost of sales (232.4) (169.0)
Gross profit +20 959.4 798.2
Administrative expenses (611.8) (542.3)
Operating profit +36 347.6 255.9
Net finance income 22.6 18.7
Associates and joint ventures 22.3 15.4
Profit before tax +35 392.5 290.0
Tax (88.8) (68.1)
Effective tax rate (%) 22.6 23.5
Profit after tax 303.7 221.9
Basic earnings per share +36 104.8p 76.9p
Group income statement Strong financial performance
Segmental results
23
PBT (£mn)
173.8
266.5
219.0
2005 underlying profit adjusted for £20.1mn gain on discontinued outsourcing project
Income (lhs)
Asset Management (£mn)
0
200
400
600
800
2005 2006 2007
Costs (lhs)
Asset Management (£ million)
173.8
266.5
219.0
0
200
400
600
800
2005 2006 2007
0
100
200
300
Gross profit margins (bps)
51
55
61
2005 2006 2007
Total income £785.4 mn ▲20%
Costs £518.9 mn ▲19%
Gross profit margins (bps)
51
55
60
2005 2006 2007
Asset Management Continued income growth
24
Gross margins (bps)
35 38 41
8589 91
2005 2006 2007
Income (£mn)
259.4
302.9 330.8
288.4
352.7
454.6
2005 2006 2007
Institutional Retail
Asset Management Income growth in Institutional and Retail channels
25
Private Banking
2005 underlying profit adjusted for £0.3mn gain on discontinued outsourcing project
41.3
26.9
6.0 20
40
60
80
100
120
2005 2006 2007
Costs £64.6 mn ▼ 6%
Total income £105.9 mn ▲ 11%
41.3
26.9
6.020
40
60
80
100
120
2005 2006 2007
0
10
20
30
40
50
PBT (£mn) Income (lhs) Costs (lhs)
£mn
26
Private Equity and Group
£mn 2007 2006 2005
Total Private Equity
investments 138.1 168.2 161.7
of which
Unrealised profit
within reserves*
74.5 102.4 76.2
* Unrealised profit represents the revaluation on Private Equity investments classified under
IFRS as available-for-sale
Profit before tax (£mn)
84.7
58.5
26.2
44.1
34.6
9.5
50.5
40.3
10.2
2005 2006 2007
Private Equity Group
27
£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
Leasing - 6.9
Shareholders’ equity 1,695.7 1,443.4
Capital allocation
Outlook
29
Outlook
• 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
30
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
Top Related