Schroder Asian Total Return Investment Company plc · LSE:ATR
Schroder Asian Total Return Investment — Henderson Group — H1 2016 Earnings Presentation
50 slides from Schroder Asian Total Return Investment's earnings presentation, Jul 28, 2016
Slide 1: 1H16 interim results
1H16 interim results Thursday 28 July 2016 Andrew Formica Chief Executive Roger Thompson Chief Financial Officer
Slide 2: Agenda
Agenda • 1H16 overview • EU referendum update • 1H16 financial results • Strategy and outlook 2
Slide 3: 1H16 overview
1H16 overview Widespread market uncertainty; operational and strategic resilience • Investment performance remains solid 1H16 1H15 • June Retail outflows were c.90% of the 3 year investment 77% 83% 1H16 Retail outflow of £1.4bn performance¹ Net flows £(2.0)bn £5.6bn • Institutional flows resilient i
Slide 4: EU referendum – the aftermath
EU referendum – the aftermath Four key areas of focus • Clear and open communication with clients • Monitoring investment performance and operational metrics • Taking action where necessary to ensure fair treatment of all clients • Engaging with regulators, industry peers and policy makers 4
Slide 5: EU referendum – engagement with clients
EU referendum – engagement with clients “This was the best piece yet on the subject. Bravo.” 5
Slide 6: EU referendum – investment performance
EU referendum – investment performance Relatively modest impact Top 20 Retail funds by AUM Relative performance¹ Fund Fund range Capability 11 mths to 12 mths to 12 mths 22 days Closing AUM 31 May 2016 30 Jun 2016 to 22 Jul 2016 30 Jun 2016 Henderson Gartmore Continental European SICAVs European Equ
Slide 7: Consistently strong investment performance
Consistently strong investment performance 77% of funds outperformed over three years Capability Closing AUM 1 year1 3 years1 3 year investment performance (FY10 – 1H16) % 30 Jun 2016 100 European Equities £19.4bn 45% 93% 90 Global Equities £28.9bn 59% 76% 80 Global Fixed £27.5bn 63% 65% Income 70 M
Slide 8: Henderson UK Property PAIF
Henderson UK Property PAIF Suspension of trading – balancing pricing and liquidity Henderson UK Property PAIF daily flows – 1 Jun to 5 Jul 2016 • Suspension safeguards the interests of all investors and 6 Jul: Henderson, Columbia 23 Jun: EU Threadneedle and Canada allows for an orderly sale of some
Slide 9: EU referendum – operational considerations
EU referendum – operational considerations Minimal change currently expected to the way we operate our business • Client relationships Clients served primarily by local teams from 7 European offices, with support from London No change • UK OEIC product range – £32.6bn 95% of clients are UK based alt
Slide 10: Macro events and their effect on Retail flows
Macro events and their effect on Retail flows Strategic initiatives have improved Henderson’s resilience Cumulative effect of Retail flows on AUM as at 1 Jan 2008¹ Total number of quarters 34 Industry² Severe Greek austerity package. Total number of positive quarters 22 Henderson Highest ever Europe
Slide 11: EU referendum – impact on Retail flows
EU referendum – impact on Retail flows Outflows moderating in July Retail weekly net flows¹ – 30 May 2016 to 22 Jul 2016 £m 200 23 Jun: EU referendum 0 (200) (400) (600) w/c 30 May w/c 6 Jun w/c 13 Jun w/c 20 Jun w/c 27 Jun w/c 4 Jul w/c 11 Jul w/c 18 Jul 1 Includes flows from UK OEICs, SICAVs and U
Slide 12: Post referendum summary
Post referendum summary • High levels of political and market uncertainty • Increased communication with clients to continue to provide excellent service and market insight • Minimal change currently expected to the way we operate our business 12
Slide 13: Financial results
1H16 interim results Financial results Roger Thompson Chief Financial Officer
Slide 14: Financial highlights
Financial highlights Diversification and discipline in a tough first half 1H16 1H15 Change £m £m Management fees (net of commissions) 239.7 230.4 4% Performance fees 20.1 48.8 (59%) Other income 19.0 16.9 12% Net fee income 278.8 296.1 (6%) Income from associates and joint ventures 0.5 0.4 25% Finan
Slide 15: Retail net flows
Retail net flows Outflows concentrated in the immediate aftermath of the EU referendum Retail US Mutuals 2,875 2,898 Retail SICAVs UK Retail/Other¹ 1,863 1,791 1,832 1,511 1,170 902 90 £m (1,444) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1 Includes flows from UK OEICs, Unit Trusts, Investmen
Slide 16: Institutional net flows
Institutional net flows Increasingly international client base 656 • UK is our most established business • Developing pipeline in Continental Europe 249 • Positive flows in Australia into Fixed Interest and Australian Equities 85 • Positive flows in the US in 2Q16 driven by £m mandate wins for Hende
Slide 17: Management fee drivers
Management fee drivers Strong flows offset by one-off and recurring adjustments £m 260 1.8 (5.6) 16.0 2.4 (2.1) (3.2) 230 246.4 248.8 245 242.9 239.7 239.7 230.4 200 1H15 Net flows Acquisitions/ Markets/ One-off US Mutual fee Fee 1H16 disposals FX adjustments reclassification pressure 17
Slide 18: Management fee margins
Management fee margins 1H16 total management fee exit margin: 54bps (Retail 72bps; Instl 26bps) bps 80.0 FY12 FY13 70.0 FY14 60.0 FY15 1H16 50.0 40.0 75.0 74.0 74.0 73.6 69.7 30.0 56.5 56.3 57.8 56.0 52.9 20.0 38.9 29.5 30.2 26.8 25.7 10.0 0.0 Total management fee margin Management fee margin - Reta
Slide 19: Performance fees
Performance fees Performance fees from 29 funds in 1H16 £m 60 £54.1m £48.8m £49.9m £45.2m £40.4m 40 £37.6m £6.3m £20.1m 20 £11.3m £19.1m 0 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 SICAVs Offshore Absolute Return Segregated Mandates UK OEICs/UTs Investment Trusts Other Held 19
Slide 20: Operating cost drivers and action
Operating cost drivers and action Cost control to protect our investments 2H14 1H15 Change 2H15 Change 1H16 Change (1H15 vs 2H14) (2H15 vs 1H15) (1H16 vs 2H15) Headcount¹ 922 928 1% 1,016 9% 1,011 - Fixed staff costs £45.4m £47.6m 5% £52.3m 10% £55.7m 7% Variable staff costs £72.6m £84.3m 16% £84.4m
Slide 21: Operating margin and compensation ratio
Operating margin and compensation ratio Focus remains on absolute profit growth Total income and underlying profit before tax (£m) Operating margin and compensation ratio (%) Compensation ratio1 Operating margin 2 311.8 307.1 44.8 44.7 44.5 44.7 284.8 44.0 272.1 261.9 117.4 102.6 100.5 36.0 36.3 90.
Slide 22: Tax, EPS and dividend
Tax, EPS and dividend Tax rate increase as forecast 1H16 1H15 Change Total underlying profit before tax £100.5m £117.4m (14%) Tax on underlying profit (£21.0m) (£15.6m) 35% Total underlying profit after tax £79.5m £101.8m (22%) Underlying effective tax rate on operations 20.9% 13.3% 57% Weighted ave
Slide 23: Capital management
Capital management Active management of capital resources 30 Jun 2016 31 Dec 2015 £m £m Unrestricted cash 150.8 352.6 Net cash 150.8 202.6 Total capital 250 238 Group capital requirement1 (145) (138) Capital above regulatory requirement 105 100 Capital and cash management • £150m senior notes repaid
Slide 24: Strategy and outlook
1H16 interim results Strategy and outlook Andrew Formica Chief Executive
Slide 25: Growth and globalisation – mid-point review
Growth and globalisation – mid-point review A fundamentally stronger, more diverse business • At the mid-point of our five year plan, £95.0bn we have executed well on our strategy Target: 2-4% pa • Strong performance in an increasingly 30 mths to Jun 16: diverse range of investment styles 3% pa Targ
Slide 26: Continued strong performance in new funds
Continued strong performance in new funds Relative performance as at 30 Jun 2016¹ Team Inception Acquisition Since inception 1 year 3 years Equities Global Equities² 2012 0.9% (2.3%) (0.3%) Asia Growth³ 2014 1.8% 5.2% – Global Emerging Markets² 2015 3.9% 7.5% – Global Natural Resources³ 2012 2013⁵ 3
Slide 27: Increasingly global client base
Increasingly global client base c.50% of AUM now managed for clients outside the UK Group AUM by client geography UK 100% Pan-Asia • Well balanced Retail business North Pan-Asia • Institutional well positioned America Continental North Continental Europe and LatAm America Europe and • Strong organic
Slide 28: Outlook
Outlook • Retail net outflow starting to moderate in July • Positive Institutional pipeline • Stronger and better positioned as a result of growth and globalisation • Remain vigilant on costs • Strategy, direction and focus reconfirmed 28
Slide 29: Q&A
QSuVHS ‘4ISds MON) Q&A Henderson oe
Slide 30: Appendix
Appendix SHARED - KNOWLEDGE. GROUP PLE
Slide 31: AUM and fund flows
AUM and fund flows £m 1H16 Opening AUM Net flows Market/ Closing AUM Closing AUM net 1 Jan 2016 FX 30 Jun 2016 mgmt fee1 (bps) UK OEICs/Unit Trusts/Other2 23,358 (584) 424 23,198 SICAVs 19,328 (817) 1,190 19,701 US Mutuals 8,647 14 454 9,115 Investment Trusts 5,582 33 (52) 5,563 Total Retail 56,915
Slide 32: AUM and fund flows by asset class
AUM and fund flows By asset class £m 1H16 Opening AUM Net flows Market/ Closing AUM Closing AUM net mgmt 1 Jan 2016 FX 30 Jun 2016 fee1 (bps) Equity 60,891 (1,928) 2,772 61,735 67 Fixed Income 26,841 331 2,422 29,594 27 Property 4,171 (425) (103) 3,643 n/a Private Equity 82 (16) 1 67 n/a Total Group
Slide 33: Henderson net flows
Henderson net flows Institutional Retail US Mutuals Retail SICAVs UK Retail/Other¹ 3,554 2,988 2,042 2,040 1,643 1,366 1,305 742 £m (679) (1,359) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1 Includes flows from UK OEICs, Unit Trusts, Investment Trusts, Australian Managed Investment Schemes, S
Slide 34: Retail funds with AUM of £1bn+ at Jun 2016
16 Retail funds with AUM of £1bn+ at 30 Jun 2016 Fund Fund range Capability 1H16 net flows AUM 30 Jun 2016 Henderson Gartmore Continental European SICAVs European Equities (£189m) £3.7bn Henderson Gartmore UK Absolute Return SICAVs Alternatives £731m £3.7bn Henderson UK Property PAIF UK OEICs/UTs Al
Slide 35: Investment management capabilities
Investment management capabilities European Equities Alternatives • Diverse, high performance business £14.3bn European Equities Institutional £19.4bn Global Equities Retail Retail • Strong specialist franchises, building high Multi-Asset £4.9bn capacity global products Institutional Retail Institut
Slide 36: European Equities
European Equities AUM: £19.4bn (Retail £17.1bn; Institutional: £2.3bn) 1 year outperformance: 45% 1H16 net flows: (£1.2bn) 3 years outperformance: 93% Key funds Product Investment Fund 1H16 performance AUM net flows 1 year 3 years Henderson Gartmore Continental European SICAV £3.7bn (£0.2bn) Henders
Slide 37: Global Equities
Global Equities AUM: £28.9bn (Retail £19.9bn; Institutional £9.0bn) 1 year outperformance: 59% 1H16 net flows: (£1.0bn) 3 years outperformance: 76% Selected key Desk Key funds Product Investment Fund 1H16 desks AUM performance AUM net flows 1 year 3 years Global Equity Global Equity Income US Mutual
Slide 38: Global Fixed Income
Global Fixed Income AUM: £27.5bn (Retail £8.5bn; Institutional £19.0bn) 1 year outperformance: 63% 1H16 net flows: £0.4bn 3 years outperformance: 65% Selected key desks Desk 1H16 Key funds Product Investment AUM net flows performance 1 year 3 years Henderson Horizon Euro Corporate Bond SICAV Corpora
Slide 39: Multi-Asset
Multi-Asset AUM: £4.9bn (Retail £1.7bn; Institutional £3.2bn) 1 year outperformance: 47% 1H16 net flows: (£0.3bn) 3 years outperformance: 91% Selected key funds Product Investment Fund 1H16 performance AUM net flows 1 year 3 years Institutional Henderson Diversified Growth Fund OEIC £0.2bn (£0.01bn)
Slide 40: Alternatives
Alternatives AUM¹: £14.3bn (Retail £10.3bn; Institutional £4.0bn) 1 year outperformance: 50% 1H16 net flows: £0.1bn 3 years outperformance: 72% Selected key desks Desk Key funds Product Investment Fund 1H16 AUM performance AUM net flows 1 year 3 years Henderson Gartmore UK SICAV £3.7bn £0.7bn Absolu
Slide 41: Profit and loss
Profit and loss £m 1H16 1H15 Change 2H15 FY15 Management fees (net of commissions) 239.7 230.4 4% 237.9 468.3 Performance fees 20.1 48.8 (59%) 49.9 98.7 Other income 19.0 16.9 12% 17.9 34.8 Net fee income 278.8 296.1 (6%) 305.7 601.8 Income from associates and joint ventures 0.5 0.4 25% (0.6) (0.2)
Slide 42: Performance fees
Performance fees • Funds generating a performance fee: 29 • Performance fees as a percentage of net fee income: 7% 1H16 1H15 £m £m SICAVs 6.7 26.6 Offshore Absolute Return Funds 2.9 7.8 Segregated Mandates 2.5 1.6 UK OEICs & Unit Trusts 5.6 8.0 Investment Trusts 1.3 4.0 Other 1.1 0.8 Total performan
Slide 43: Performance fees
Performance fees UK OEICs & Unit SICAVs Investment Offshore Seg. Mandates/ Non-perf. fee Total Trusts Trusts Abs. Return Mgd CDOs/PE/ ranges² Funds¹ Australian MIS AUM 30 Jun 2016 (£bn) 32.5 21.1 5.6 2.2 24.4 9.2 95.0 Performance fees gross 1H16 (£m) 5.6 6.7 1.3 2.9 3.6 – 20.1 Number of funds genera
Slide 44: Cost drivers
Cost drivers 1H16 1H15 Change £m £m Fixed staff expenses 55.7 47.6 17% Variable staff expenses 67.0 84.3 (21%) Total staff expenses 122.7 131.9 (7%) Non-staff operating expenses 58.3 56.7 3% Total operating expenses 181.0 188.6 (4%) Finance expenses 3.3 5.8 (43%) Total expenses 184.3 194.4 (5%) 44
Slide 45: Non-staff operating expenses
Non-staff operating expenses 1H16 1H15 Change Change £m £m £m Investment administration 17.1 15.4 1.7 11% Information technology 11.7 9.8 1.9 19% Office expenses 8.8 8.1 0.7 9% Depreciation 2.6 2.6 – – Other expenses 18.1 20.8 (2.7) (13%) Non-staff operating expenses 58.3 56.7 1.6 3% 45
Slide 46: Effective tax rate (ETR) movements
Effective tax rate (ETR) movements % 25 1.1% (0.7%) 0.5% 20.9% 20.0% 20.4% 20 15 10 5 0 1H16 UK Tax impact of Normalised 1H16 ETR pre Normalised share 1H16 ETR corporate tax rate other jurisdictions tax rate/accounting one-off impacts scheme and tax and one-off impacts treatment differences 46
Slide 47: EPS calculation
EPS calculation 1H16 1H15 2H15 FY15 Underlying profit before tax £100.5m £117.4m £102.6m £220.0m Less: tax on underlying profit (£21.0m) (£15.6m) (£7.3m) (£22.9m) Total underlying profit after tax attributable to equity holders of the parent £79.5m £101.8m £95.3m £197.1m Acquisition related items po
Slide 48: Net cash generation
Net cash generation £m 300 58.2 (80.9) 250 202.6 200 3.1 (32.2) 150.8 150 100 50 0 31 Dec 2015¹ Operating cash Dividends Net seed capital Purchase of own 30 Jun 2016¹ flows paid investments shares for staff share schemes 1 Net cash amounts exclude non-Group cash held in manager dealing accounts and
Slide 49: Contacts
Contacts Investor enquiries Miriam McKay +44 (0) 20 7818 2106 Head of Investor Relations miriam.mckay@henderson.com Louise Curran +44 (0) 20 7818 5927 Investor Relations Manager louise.curran@henderson.com Investor Relations +44 (0) 20 7818 5310 investor.relations@henderson.com Media enquiries Angel
Slide 50: Important information
Henderson Group plc 201 Bishopsgate, London EC2M 3AE Important information This presentation issued by Henderson Group plc (or the “Group”) is a summary of certain information contained in the stock exchange announcements dated 28 July 2016 (relating to the Group’s interim results to 30 June 2016) a