Schroders PLC · LSE:SDR
Schroders — FY2007 Earnings Presentation
31 slides from Schroders's earnings presentation, Mar 4, 2008
Slide 1: Schroders 2007 Annual Results
Schroders 2007 Annual Results trusted heritage advanced thinking Chief Executive Michael Dobson 4 March 2008
Slide 2: Overview: Record results
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 1
Slide 3: Overview
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
Slide 4: Strength of international business
Strength of international business • £86.4 billion funds under management • 70% of total income UK £52.7bn Continental Asia Europe Pacific North £29.8bn £36.0bn America South Middle £13.8bn America East £3.4bn £3.4bn £3.8bn China joint venture 2007 funds under management: Investment by client domici
Slide 5: Strength of international business
Strength of international business • £86.4 billion funds under management Amsterdam Rome Copenhagen Stockholm Frankfurt Vienna • 70% of total income Bermuda Geneva Guernsey Wiesbaden Zurich Beijing Gibraltar Cayman Islands Hong Kong Jersey Mexico City Jakarta • 37 offices in 28 countries New York Li
Slide 6: Diversity of product range
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
Slide 7: Diversity of product range
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 2.3 • Multi-asset property emerging market debt • Multi-manager fu
Slide 8: Focus on high margin products
Focus on high margin products Asset Management • Asset Management margins up 30% funds under management and margins since 2004 FUM (£bn) (bps) 140 70 • Growth in Retail 120 • Net inflows of £8.8bn 60 100 • New products in Institutional 80 50 • Alternatives 60 • Performance fees 40 40 20 30 2004 2005
Slide 9: Strength of international Retail
Strength of international Retail • Record sales of retail funds in Asia Retail investment performance • Leading position in rapidly growing Korean market 33% • £0.8 billion net inflows in China joint venture • Net inflows increasing in US intermediary business 67% (2006: 68%) • Net outflows in Conti
Slide 10: Growth in UK Retail
Growth in UK Retail Focus Result • Broadening product offering • No. 2 for net sales in UK • Maintaining market share with • No. 1 with discretionary managers discretionary managers • Strong position on key industry • Growing market share in advisory platforms • Developing sub-advised business • Top
Slide 11: Repositioning in Institutional
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
Slide 12: Transformed profitability in Private Banking
Transformed profitability in Private Banking • Turnaround complete £mn • Growing income, containing costs 120 • Focus on net new assets, revenue growth 100 • In the right jurisdictions • Completely client focussed 80 41.3 • Access to traditional and alternative 60 products 26.9 • First class executi
Slide 13: Schroders 2007 Annual Results: Chief Financial Officer
Schroders 2007 Annual Results Chief Financial Officer Stephen Brooks 4 March 2008
Slide 14: Continued progress across all business segments
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 prof
Slide 15: Group financial performance
Group financial performance Continued income growth £mn 1200 Total income £1,004.3mn ▲21% 1000 Costs £611.8mn ▲13% 800 392.5 600 290.0 400 230.3 200 0 2005 2006 2007 Income (lhs) Costs (lhs) PBT (£mn) 2005 underlying profit adjusted for £20.4mn gain on discontinued outsourcing project 14
Slide 16: Group income statement
Group income statement Strong financial performance £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 be
Slide 17: Group income statement
Group income statement Strong financial performance £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 Gross profit margins (bps) (611.8) (542.3) Operating profit 64 +36 347.6 255.9 59 54 Net finance income 22.6 18.7 Associates an
Slide 18: Group income statement
Group income statement Strong financial performance £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 Group cost: income ratio (%) Associates68 and joi
Slide 19: Group income statement
Group income statement Strong financial performance £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 Compensation costs: operating revenues ratio (%)
Slide 20: Group costs
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 Total 100 611.8 542.3 No of employees (year-end) 2,891 2,675 Key drivers • Compensation costs: operating revenue ratio reduced to 46% • Increased
Slide 21: Group costs: marketing and project expenditure
Group costs Marketing and project expenditure Marketing spend (£mn) Project spend (£mn) 47.3 33.4 30.2 29.1 27.9 27.9 24.7 19.9 14.5 2005 2006 2007 2005 2006 2007 Cash spend Income statement 20
Slide 22: Group income statement
Group income statement Strong financial performance £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 be
Slide 23: Segmental results
Segmental results ay &¢ Schroders
Slide 24: Asset Management
Asset Management Continued income growth Asset Management (£mn) Gross profit margins (bps) Total income £785.4 mn▲20% 800 Costs £518.9 mn▲19% 60 600 55 400 266.5 51 219.0 173.8 200 0 2005 2006 2007 2005 2006 2007 Income (lhs) Costs (lhs) PBT (£mn) 2005 underlying profit adjusted for £20.1mn gain on
Slide 25: Asset Management income
Asset Management Income growth in Institutional and Retail channels Income (£mn) 454.6 352.7 330.8 288.4 302.9 259.4 2005 2006 2007 Institutional Retail 24
Slide 26: Private Banking
Private Banking £mn 120 Total income £105.9 mn ▲ 11% Costs £64.6 mn ▼ 6% 100 80 41.3 60 26.9 40 6.0 20 2005 2006 2007 Income (lhs) Costs (lhs) PBT (£mn) 2005 underlying profit adjusted for £0.3mn gain on discontinued outsourcing project 25
Slide 27: Private Equity and Group
Private Equity and Group Profit before tax (£mn) £mn 2007 2006 2005 84.7 26.2 Total Private Equity 138.1 168.2 161.7 50.5 investments 44.1 10.2 9.5 58.5 of which 40.3 Unrealised profit 74.5 102.4 76.2 34.6 within reserves* 2005 2006 2007 * Unrealised profit represents the revaluation on Private Equi
Slide 28: Capital allocation
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 Leasing - 6.9 Shareholders’ equity 1,695.7 1,443.4 27
Slide 29: Outlook
Outlook Schroders
Slide 30: Outlook
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
Slide 31: Forward-Looking Statements
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 up