Final Results

RNS Number : 3187G

Schroders PLC

01 March 2018

 

Schroders plc

Full-year results

1 March 2018

‒     Profit before tax and exceptional items* up 24% to £800.3 million (2016: £644.7 million)

‒     Profit before tax up 23% to £760.2 million (2016: £618.1 million)

‒     Net income before exceptional items up 15% to £2,068.9 million (2016: £1,793.1 million)

‒     Assets under management and administration up 13% to £447.0 billion (31 December 2016: £395.3 billion**)

‒     Net inflows of £9.6 billion (2016: £1.1 billion)

‒     Full-year dividend up 22% to 113.0 pence per share (2016: 93.0 pence)

	2017 £m	2016 £m
Net income	2,068.9	1,793.1
Operating expenses	(1,268.6)	(1,148.4)
Profit before tax and exceptional items	800.3	644.7
Profit before tax	760.2	618.1
Basic earnings per share before exceptional items (pence)*	226.9	186.3
Basic earnings per share (pence)	215.3	178.3
Ratio of total costs to net income (%)*	61%	64%
Total dividend (pence per share)†	113.0	93.0

*Defined and explained in the glossary.

**Assets under administration has been restated to exclude assets from which we only derive transactional non-recurring revenues.

^†Current year interim dividend paid and final dividend proposed.

Peter Harrison, Group Chief Executive, commented:  "Schroders has again delivered strong results in 2017, with our diversified business model and client-centric approach generating growth across the Group. Underlying organic growth and selective acquisitions combined with rigorous cost discipline led to a 24% increase in pre-exceptional profit. Assets under management and administration rose to a new high of £447.0 billion.

Focusing on the longer term, we have continued to see good progress in a number of key strategic areas, with the expansion of our investment capabilities in private assets, an improvement in Wealth Management and strong underlying momentum in North America.

There are headwinds facing the industry but we continue to believe that there remain opportunities for growth. Our diversified business model, ongoing focus on costs, strong financial position and willingness to invest mean that we continue to be well placed."

Management statement

Schroders has again delivered strong results in 2017, with our diversified business model and client-centric approach generating growth across the Group. Underlying organic growth and selective acquisitions combined with rigorous cost discipline led to a 24% increase in pre-exceptional profit to £800.3 million (2016: £644.7 million) and a 23% increase in profit before tax to £760.2 million (2016: £618.1 million). 

Net operating revenue increased by 17% to £2,010.2 million (2016: £1,712.8 million) and net income before exceptional items rose by 15% to £2,068.9 million (2016: £1,793.1 million), driven by higher assets under management and administration (AUMA) and performance fees.

This was achieved whilst maintaining cost discipline, with the ratio of total costs to net income reducing by three percentage points to 61% (2016: 64%).

At 31 December 2017 AUMA was £447.0 billion, a 13% increase from the prior year end (31 December 2016: £395.3 billion). This was driven by strong investment performance, acquisitions aligned with our strategic priorities and net new business from clients of £9.6 billion, which generates around £63 million of annualised net new revenue*, around £24 million of which is in these results.

Weakness in sterling in the first half of the year, compared to 2016, contributed positively to profit before tax and exceptional items by around £27 million.  However, as sterling strengthened in the second half, the impact at 31 December 2017 was to reduce assets under management (AUM) by around £12 billion.

We have seen good underlying growth in key strategic areas and have continued to invest in the future growth of the business.  In Asia Pacific we have continued to generate positive net new business from clients in Japan and we are expanding our distribution reach in mainland China. There has also been good underlying momentum in North America, with strong demand from Institutional clients and an encouraging first year in our relationship with Hartford.

We have expanded our capabilities in Private Assets and Alternatives with the acquisition of Adveq, a Swiss-based private equity firm.  This acquisition, along with organic growth, brought total AUM in Private Assets and Alternatives to £33.3 billion (2016: £24.4 billion).  Within Wealth Management, we acquired the discretionary client assets of C. Hoare & Co. and benefited from a full year's contribution from Benchmark Capital, which we acquired in December 2016.

*Defined and explained in the glossary.

Asset Management

Asset Management profit before tax and exceptional items rose 23% to £705.9 million (2016: £572.4 million) and profit before tax was up 24% to £688.7 million (2016: £553.9 million).  Assets under management at the end of December were £389.8 billion (31 December 2016: £346.4 billion). We generated net inflows from clients of £7.6 billion (2016: £1.4 billion).

Net operating revenue increased by 17% to £1,743.3 million (2016: £1,489.5 million). We generated performance fees of £77.5 million (2016: £38.8 million), £57.6 million (2016: £27.2 million) of which came from Institutional clients and £19.9 million (2016: £11.6 million) through the Intermediary sales channel. The net operating revenue margin before performance fees for Asset Management was 45 basis points (FY 2016: 46 basis points).

Our Institutional client business generated a net operating revenue margin before performance fees of 32 basis points, which was unchanged from 2016. Growth in higher margin Private Assets and Alternatives through the acquisition of Adveq offset the impact of margin declines, particularly through the outflows from Equity strategies.

Institutional clients invested net new money of £4.2 billion, driven by demand for Multi-asset and Private Assets and Alternatives strategies and from clients in North America and the UK. AUM for Institutional clients at the end of December were £255.8 billion (31 December 2016: £226.3 billion).

The net operating revenue margin in Intermediary (before performance fees) declined by one basis point to 72 basis points (2016: 73 basis points). The combined impact of the loss of a low margin sub-advised mandate and inflows into Equity funds partially offset structural changes to fee rates in the UK and Luxembourg which were reported last year.

In the Intermediary sales channel, we generated net new business of £3.4 billion. Branded funds saw particularly high demand with net inflows of £7.6 billion, more than offsetting £4.2 billion of net outflows from sub-advisory mandates.  There was positive net new business within branded funds across all asset classes, with demand led by Fixed Income and Equity products. AUM in the Intermediary sales channel at the end of December were £134.0 billion (31 December 2016: £120.1 billion).

Wealth Management

Wealth Management profit before tax and exceptional items was up 36% to £90.3 million (2016: £66.4 million) and profit before tax rose 20% to £67.4 million (2016: £56.3 million).  Net operating revenue increased by 20% to £266.9 million (2016: £223.3 million), including performance fees of £0.9 million (2016: £2.4 million).  AUM in Wealth Management at 31 December 2017 was £45.9 billion (2016: £39.6 billion) and AUA increased by 22% to £11.3 billion (2016: £9.3 billion).

Wealth Management clients introduced £2.0 billion of net new money in 2017 (2016: net outflows of £0.3 billion).  There was client demand from each division within Wealth Management, with £1.1 billion through the Cazenove Capital business and £0.9 billion through Benchmark Capital.

The net operating revenue margin before performance fees was 61 basis points (2016: 65 basis points), with the reduction primarily due to the full year impact of Benchmark Capital.

Group

The Group segment comprises central costs and returns on investment capital.  Profit before tax and exceptional items in 2017 was £4.1 million (2016: £5.9 million).  Total equity at 31 December 2017 was £3.5 billion (31 December 2016: £3.2 billion).

Dividend

The Board will recommend to shareholders at the Annual General Meeting a final dividend of 79.0 pence (2016: 64.0 pence), which represents an increase of 23%. This will bring the total dividend for the year to 113.0 pence (2016: 93.0 pence), an increase of 22%. The final dividend will be paid on 3 May 2018 to shareholders on the register at 23 March 2018.

Outlook

Looking ahead, our core focus will remain on helping our clients to achieve their financial goals and build their future prosperity.

We will continue to invest for long-term future growth, whether in allocating more resources to further diversifying our product offering, expanding our geographical footprint or leveraging the opportunities created by the latest technology.

There are challenges facing the industry, although we believe that there remain opportunities for growth and that our diversified business model is well placed to take advantage of these.

For further information, please contact:

Investors
Alex James	Investor Relations	Tel: [phone]	[e-mail]
Press
Beth Saint	Head of Communications	Tel: [phone]	[e-mail]
Anita Scott	Brunswick	Tel: [phone]	[e-mail]

Additional information

Assets under management and administration (AUMA)

Year ended 31 December 2017

AUM
£bn	Institutional	Intermediary	Asset Management	Wealth Management	Total	AUA1	AUMA2
1 January 2017	226.3	120.1	346.4	39.6	386.0	9.3	395.3
Gross inflows	38.4	56.7	95.1	8.2	103.3
Gross outflows	(34.2)	(53.3)	(87.5)	(6.2)	(93.7)
Net flows	4.2	3.4	7.6	2.0	9.6
Acquisitions	6.0	-	6.0	2.5	8.5
Investment returns	19.3	10.5	29.8	1.8	31.6
31 December 2017	255.8	134.0	389.8	45.9	435.7	11.3	447.0

¹Assets under administration has been restated to exclude assets from which we only derive transactional non-recurring revenues.

²Assets under management and administration comprise assets managed or advised on behalf of clients (assets under management) and assets where Schroders solely provides administrative support through the Benchmark Capital business (assets under administration or AUA).

Client investment performance

Client investment performance is calculated internally by Schroders to give shareholders and financial analysts general guidance on how our AUM is performing. The data is aggregated and is intended to provide information for comparison to prior reporting periods only. It is not intended for clients or potential clients investing in our products.

	Percentage of assets outperforming
	One year	Three years	Five years
To 31 December 2017	70%	74%	84%
To 31 December 2016	75%	74%	85%

Investment performance has remained strong to 31 December 2017, with 70% of Asset Management assets outperforming over one year, 74% over three years and 84% over five years. This compares to 75%, 74% and 85% respectively at 31 December 2016.

All calculations for investment performance in this statement are made gross of fees with the exception of those for which the stated comparator is a net of fees competitor ranking. When a product's investment performance is discussed or shared with a client or potential client it is specific to the strategy or product: for Intermediary clients, performance will be shown net of fees at the relevant fund share-class level; for Institutional clients, it will typically be shown gross of fees with a fee schedule for the strategy supplied.

The calculation includes 100% of internally-managed Asset Management assets, excluding Liability-Driven Investment (LDI) strategies, that have a complete track record over the respective reporting period. Assets held in LDI strategies, which currently amount to £25 billion, are excluded as these are not seeking to outperform a stated objective but to match the liability profile of pension funds. Assets managed by third parties are excluded and primarily comprise the Luxembourg-domiciled GAIA fund range of £6.4 billion and legacy private equity assets, but include Schroder Adveq managed private equity assets, of £1.6 billion.

Performance is calculated relative to the relevant stated comparator for each strategy as below. These fall into one of four categories, the percentages for each of which refer to the three year calculation:

‒     For 79% of assets included in the calculation, the stated comparator is the benchmark.

‒     If the stated comparator is to competitor rankings, the relative position of the fund to its peer group on a like-for-like basis is used to calculate performance. This applies to 5% of assets in the calculation.

‒     Assets for which the stated comparator is to an absolute return target are measured against that absolute target. This applies to 10% of assets in the calculation.

‒     Assets with no stated objective are measured against a cash return, if applicable. This applies to 6% of assets in the calculation.

Metrics for the Group

	2017	2016
Ratio of total costs to net income*	61%	64%
Total compensation ratio*	43%	44%

^*Before exceptional items and defined and explained in the glossary.

Copies of this announcement are available on the Schroders website: www.schroders.com. Peter Harrison, Group Chief Executive, and Richard Keers, Chief Financial Officer, will host a presentation and webcast for the investment community, to discuss the Group's results at 9.00 a.m. GMT on Thursday, 1 March 2018 at 31 Gresham Street, London, EC2V 7QA. The webcast can be viewed live at www.schroders.com/ir. For individuals unable to attend the presentation or participate in the live webcast, a replay will be available from midday on Thursday, 1 March 2018 at www.schroders.com/ir. The Annual Report and Accounts will be available on the Schroders website: www.schroders.com on 16 March 2018.

This announcement contains inside information, Legal Entity Identifier: 2138001YYBULX5SZ2H24.

Forward-looking statements

This announcement, the Annual Report and Accounts for 2017, and the Schroders website may contain forward-looking statements with respect to the financial condition, performance and position, strategy, results of operations and businesses of the Schroders Group. Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and depend upon circumstances in the future and you should not place reliance on them. Without limitation, any statements preceded or followed by or that include the words 'targets', 'plans', 'sees', 'believes', 'expects', 'aims', 'confident', 'will have', 'will be', 'will ensure', 'likely', 'estimates' or 'anticipates' or the negative of these terms or other similar terms are intended to identify such forward-looking statements. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in this announcement or in the Annual Report and Accounts or on the Schroders website should be construed as a forecast, estimate or projection of future financial performance.

Consolidated income statement
for the year ended 31 December 2017

			2017			2016
		Notes	Before exceptional items £m	Exceptional items3 £m	Total £m	Before exceptional items £m	Exceptional items3 £m	Total £m
Revenue		3	2,511.7	-	2,511.7	2,144.9	-	2,144.9
Cost of sales			(501.5)	-	(501.5)	(432.1)	-	(432.1)
Net operating revenue			2,010.2	-	2,010.2	1,712.8	-	1,712.8
Net gains on financial instruments and other income		4	35.2	(3.5)	31.7	58.8	(1.4)	57.4
Share of profit of associates and joint ventures			23.5	(1.8)	21.7	21.5	(2.0)	19.5
Net income			2,068.9	(5.3)	2,063.6	1,793.1	(3.4)	1,789.7
Operating expenses		5	(1,268.6)	(34.8)	(1,303.4)	(1,148.4)	(23.2)	(1,171.6)
Profit before tax			800.3	(40.1)	760.2	644.7	(26.6)	618.1
Tax		6	(171.6)	5.8	(165.8)	(132.4)	4.5	(127.9)
Profit after tax1			628.7	(34.3)	594.4	512.3	(22.1)	490.2
Earnings per share
Basic		7	226.9p	(11.6)p	215.3p	186.3p	(8.0)p	178.3p
Diluted		7	222.4p	(11.4)p	211.0p	182.4p	(7.9)p	174.5p
Dividends per share2		8			98.0p			87.0p

¹Non-controlling interest is presented in the Consolidated statement of changes in equity.

²Prior year final dividend and current year interim dividend paid during the year.

³Please refer to notes 1 and 2 for a definition and further details of exceptional items.

Consolidated statement of comprehensive income
for the year ended 31 December 2017

	Notes	2017 £m	2016 £m
Profit after tax		594.4	490.2
Items that may be reclassified to the income statement on fulfilment of specific conditions:
Net exchange differences on translation of foreign operations after hedging		(34.4)	101.3
Net fair value movement arising from available-for-sale financial assets	4	(8.9)	19.3
Net fair value movement arising from available-for-sale financial assets held by associates		(1.6)	(4.8)
Tax on items taken directly to other comprehensive income	6	0.7	(2.9)
		(44.2)	112.9
Items reclassified to the income statement:
Net realised gains on disposal of available-for-sale financial assets	4	(3.3)	(5.2)
Net realised gains on disposal of available-for-sale financial assets held by associates		(1.4)	(1.4)
		(4.7)	(6.6)
Items that will not be reclassified to the income statement:
Actuarial gains/(losses) on defined benefit pension schemes		42.3	(2.0)
Tax on items taken directly to other comprehensive income	6	(7.4)	(0.1)
		34.9	(2.1)
Other comprehensive (losses)/income for the year net of tax1		(14.0)	104.2
Total comprehensive income for the year net of tax1		580.4	594.4

¹Non-controlling interest is presented in the Consolidated statement of changes in equity.

Consolidated statement of financial position
at 31 December 2017

	Notes	2017 £m	2016 £m
Assets
Cash and cash equivalents		2,947.0	3,318.9
Trade and other receivables	9	739.0	648.2
Financial assets	9	3,480.8	3,105.0
Associates and joint ventures		143.9	125.0
Property, plant and equipment	10	162.8	66.4
Goodwill and intangible assets	11	825.8	607.1
Deferred tax		39.3	66.0
Retirement benefit scheme surplus		162.9	118.2
		8,501.5	8,054.8
Assets backing unit-linked liabilities
Cash and cash equivalents		572.5	466.7
Financial assets		13,413.9	12,460.9
	9	13,986.4	12,927.6
Total assets		22,487.9	20,982.4
Liabilities
Trade and other payables	9	937.7	883.3
Financial liabilities	9	3,955.3	3,902.0
Current tax		78.1	71.8
Provisions		44.0	33.1
Deferred tax		0.1	0.2
Retirement benefit scheme deficits		15.3	11.6
		5,030.5	4,902.0
Unit-linked liabilities	9	13,986.4	12,927.6
Total liabilities		19,016.9	17,829.6
Net assets		3,471.0	3,152.8
Total equity1		3,471.0	3,152.8

¹Non-controlling interest is presented in the Consolidated statement of changes in equity.

Consolidated statement of changes in equity
for the year ended 31 December 2017

	Attributable to owners of the parent
	Notes	Share capital £m	Share premium £m	Own shares £m	Net exchange differences reserve £m	Associates and joint ventures reserve £m	Fair value reserve £m	Profit and loss reserve £m	Total £m	Non- controlling interest £m	Total equity £m
At 1 January 2017		282.7	124.2	(163.6)	187.7	50.1	19.3	2,638.0	3,138.4	14.4	3,152.8
Profit for the year		-	-	-	-	21.7	-	571.3	593.0	1.4	594.4
Other comprehensive (losses)/income 1		-	-	-	(34.3)	(3.0)	(11.5)	34.9	(13.9)	(0.1)	(14.0)
Total comprehensive (losses)/income for the year		-	-	-	(34.3)	18.7	(11.5)	606.2	579.1	1.3	580.4
Shares cancelled	12	(0.2)	-	5.4	-	-	-	(5.2)	-	-	-
Own shares purchased	13	-	-	(56.6)	-	-	-	-	(56.6)	-	(56.6)
Share-based payments		-	-	-	-	-	-	60.5	60.5	-	60.5
Tax in respect of share schemes		-	-	-	-	-	-	5.2	5.2	-	5.2
Other movements		-	-	-	-	(0.3)	-	-	(0.3)	0.1	(0.2)
Dividends		-	-	-	-	-	-	(267.6)	(267.6)	(3.5)	(271.1)
Transactions with shareholders		(0.2)	-	(51.2)	-	(0.3)	-	(207.1)	(258.8)	(3.4)	(262.2)
Transfers		-	-	52.5	-	(2.7)	4.7	(54.5)	-	-	-
At 31 December 2017		282.5	124.2	(162.3)	153.4	65.8	12.5	2,982.6	3,458.7	12.3	3,471.0

¹Other comprehensive losses reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive losses reported in the associates and joint ventures reserve and the fair value reserve represent post-tax fair value movements on available-for-sale assets held. Other comprehensive income reported in the profit and loss reserve represent post-tax actuarial gains.

Consolidated statement of changes in equity
for the year ended 31 December 2016

	Attributable to owners of the parent
	Notes	Share capital £m	Share premium £m	Own shares £m	Net exchange differences reserve £m	Associates and joint ventures reserve £m	Fair value reserve £m	Profit and loss reserve £m	Total £m	Non- controlling interest £m	Total equity £m
At 1 January 2016		282.5	119.4	(175.5)	86.8	45.7	8.1	2,428.6	2,795.6	-	2,795.6
Profit for the year		-	-	-	-	19.5	-	470.2	489.7	0.5	490.2
Other comprehensive income/(losses)1		-	-	-	100.9	(6.2)	11.2	(2.1)	103.8	0.4	104.2
Total comprehensive income for the year		-	-	-	100.9	13.3	11.2	468.1	593.5	0.9	594.4
Shares issued	12	0.2	4.8	-	-	-	-	-	5.0	-	5.0
Own shares purchased	13	-	-	(59.1)	-	-	-	-	(59.1)	-	(59.1)
Share-based payments		-	-	-	-	-	-	51.5	51.5	-	51.5
Tax in respect of share schemes		-	-	-	-	-	-	0.9	0.9	-	0.9
Other movements		-	-	-	-	(0.9)	-	(11.5)	(12.4)	13.5	1.1
Dividends		-	-	-	-	-	-	(236.6)	(236.6)	-	(236.6)
Transactions with shareholders		0.2	4.8	(59.1)	-	(0.9)	-	(195.7)	(250.7)	13.5	(237.2)
Transfers		-	-	71.0	-	(8.0)	-	(63.0)	-	-	-
At 31 December 2016		282.7	124.2	(163.6)	187.7	50.1	19.3	2,638.0	3,138.4	14.4	3,152.8

¹Other comprehensive income reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive (losses)/income reported in the associates and joint ventures reserve and the fair value reserve represent post-tax fair value movements on available-for-sale assets held. Other comprehensive losses reported in the profit and loss reserve represent post-tax actuarial losses.

Consolidated cash flow statement
for the year ended 31 December 2017

	Notes		2017 £m	2016 £m
Net cash from operating activities	14		585.1	563.7
Cash flows from investing activities
Net acquisition of businesses and associates			(185.1)	(84.8)
Net acquisition of property, plant and equipment and intangible assets			(172.6)	(65.2)
Acquisition of financial assets			(2,004.5)	(1,398.6)
Disposal of financial assets			1,853.5	1,215.6
Non-banking interest received			26.1	29.4
Distributions received from associates and joint ventures			2.7	8.7
Net cash used in investing activities			(479.9)	(294.9)
Cash flows from financing activities
Acquisition of own shares	13		(56.6)	(59.1)
Dividends paid	8		(271.1)	(236.6)
Other flows			(0.9)	(0.3)
Net cash used in financing activities			(328.6)	(296.0)
Net decrease in cash and cash equivalents			(223.4)	(27.2)
Opening cash and cash equivalents			3,785.6	3,622.1
Net decrease in cash and cash equivalents			(223.4)	(27.2)
Effect of exchange rate changes			(42.7)	190.7
Closing cash and cash equivalents			3,519.5	3,785.6
Closing cash and cash equivalents consists of:
Cash and cash equivalents available for use by the Group			2,909.8	3,286.9
Cash held in consolidated pooled investment vehicles			37.2	32.0
Cash and cash equivalents presented within assets			2,947.0	3,318.9
Cash and cash equivalents presented within assets backing unit-linked liabilities			572.5	466.7
Closing total cash and cash equivalents			3,519.5	3,785.6

Basis of preparation

The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006 (Act). The statutory accounts for 2016 have been delivered to the Registrar of Companies and the auditors' opinion on those accounts was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Act. An unqualified auditors' opinion has also been issued on the statutory accounts for the year ended 31 December 2017, which will be delivered to the Registrar of Companies in due course.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), which comprise Standards and Interpretations approved by either the International Accounting Standards Board or the IFRS Interpretations Committee or their predecessors, as adopted by the European Union (EU), and with those parts of the Act applicable to companies reporting under IFRS.

The presentation of the income statement includes separate disclosure of exceptional items. The policy for exceptional items is set out in note 2.

1. Segmental reporting

Operating segments

The Group has three business segments: Asset Management, Wealth Management and the Group segment. The Asset Management segment principally comprises investment management including advisory services in respect of equity, fixed income, multi-asset, real estate and private assets and alternatives products. The Wealth Management segment principally comprises investment management, wealth planning and banking services provided to high net worth individuals and charities within the Cazenove Capital business and the Benchmark Capital business which includes an independent financial adviser network. The Group segment principally comprises the Group's investment capital and treasury management activities, corporate development and strategy activities and the management costs associated with governance and corporate management.

Segment information is presented on the same basis as that provided for internal reporting purposes to the Group's chief operating decision maker, the Group Chief Executive.

Operating expenses include an allocation of costs between the individual business segments on a basis that aligns the charge with the resources employed by the Group in particular business areas. This allocation provides management information on the business performance to manage and control expenditure.

Year ended 31 December 2017	Asset Management £m	Wealth Management £m	Group £m	Total £m
Fee income	2,223.1	256.3	-	2,479.4
Wealth Management interest income earned	-	32.3	-	32.3
Revenue	2,223.1	288.6	-	2,511.7
Fee expense	(479.8)	(10.8)	-	(490.6)
Wealth Management interest expense incurred	-	(10.9)	-	(10.9)
Cost of sales	(479.8)	(21.7)	-	(501.5)
Net operating revenue	1,743.3	266.9	-	2,010.2
Net (losses)/gains on financial instruments and other income	(6.2)	6.3	35.1	35.2
Share of profit of associates and joint ventures	20.8	0.1	2.6	23.5
Net income	1,757.9	273.3	37.7	2,068.9
Operating expenses	(1,052.0)	(183.0)	(33.6)	(1,268.6)
Profit before tax and exceptional items	705.9	90.3	4.1	800.3
Exceptional items within net income:
Net gains on financial instruments and other income	(3.5)	-	-	(3.5)
Amortisation of acquired intangible assets relating to associates and joint ventures	(1.6)	(0.2)	-	(1.8)
	(5.1)	(0.2)	-	(5.3)
Exceptional items within operating expenses:
Amortisation of acquired intangible assets	(9.4)	(18.3)	-	(27.7)
Other expenses	(2.7)	(4.4)	-	(7.1)
	(12.1)	(22.7)	-	(34.8)
Profit before tax and after exceptional items	688.7	67.4	4.1	760.2

Year ended 31 December 2016	Asset Management £m	Wealth Management £m	Group £m	Total £m
Fee income	1,902.7	210.6	-	2,113.3
Wealth Management interest income earned	-	31.6	-	31.6
Revenue	1,902.7	242.2	-	2,144.9
Fee expense	(413.2)	(7.9)	-	(421.1)
Wealth Management interest expense incurred	-	(11.0)	-	(11.0)
Cost of sales	(413.2)	(18.9)	-	(432.1)
Net operating revenue	1,489.5	223.3	-	1,712.8
Net gains on financial instruments and other income	28.2	0.7	29.9	58.8
Share of profit of associates and joint ventures	16.7	-	4.8	21.5
Net income	1,534.4	224.0	34.7	1,793.1
Operating expenses	(962.0)	(157.6)	(28.8)	(1,148.4)
Profit before tax and exceptional items	572.4	66.4	5.9	644.7
Exceptional items within net income:
Net gains on financial instruments and other income	(1.4)	-	-	(1.4)
Amortisation of acquired intangible assets relating to associates and joint ventures	(2.0)	-	-	(2.0)
	(3.4)	-	-	(3.4)
Exceptional items within operating expenses:
Amortisation of acquired intangible assets	(11.5)	(8.1)	-	(19.6)
Deferred compensation arising directly from acquisitions	-	-	2.0	2.0
Other expenses	(3.6)	(2.0)	-	(5.6)
	(15.1)	(10.1)	2.0	(23.2)
Profit before tax and after exceptional items	553.9	56.3	7.9	618.1

2. Exceptional items

Exceptional items are significant items of income and expenditure that have been separately presented by virtue of their nature to enable a better understanding of the Group's financial performance. Exceptional items relate principally to acquisitions undertaken by the Group, including amortisation of acquired intangible assets.

3. Revenue

Revenue comprises:

	2017 £m	2016 £m
Management fees	2,155.6	1,848.3
Performance fees	78.4	41.2
Other income	245.4	223.8
Wealth Management interest income earned	32.3	31.6
	2,511.7	2,144.9

4. Net gains on financial instruments and other income

	2017			2016
	Income statement £m	Other comprehensive income £m	Total £m	Income statement £m	Other comprehensive income £m	Total £m
Net gains on financial instruments held at fair value through profit or loss	5.6	-	5.6	14.2	-	14.2
Net fair value movements on available-for-sale financial assets	-	(8.6)	(8.6)	-	18.5	18.5
Net exchange differences on available-for-sale financial assets	-	(0.3)	(0.3)	-	0.8	0.8
Net transfers on disposal of available-for-sale financial assets	3.3	(3.3)	-	5.2	(5.2)	-
Net gains/(losses) on available-for-sale financial assets	3.3	(12.2)	(8.9)	5.2	14.1	19.3
Net finance income	9.7	-	9.7	18.8	-	18.8
Other income	13.1	-	13.1	19.2	-	19.2
Net gains/(losses) on financial instruments and other income	31.7	(12.2)	19.5	57.4	14.1	71.5
Net gains on financial instruments held to hedge deferred cash awards - presented within operating expenses	13.2	-	13.2	25.6	-	25.6
Net gains/(losses) on financial instruments and other income -net of hedging	44.9	(12.2)	32.7	83.0	14.1	97.1

5. Operating expenses

Operating expenses include:

	2017 £m	2016 £m
Salaries, wages and other remuneration	784.0	714.9
Social security costs	71.3	63.7
Pension costs	41.5	37.9
Employee benefits expense	896.8	816.5
Net gains on financial instruments held to hedge deferred cash awards	(13.2)	(25.6)
Employee benefits expense net of hedging	883.6	790.9

The employee benefits expense net of hedging of £883.6 million (2016: £790.9 million) includes a £2.3 million charge (2016: credit of £0.7 million) that is presented within exceptional items, which comprises £2.1 million (2016: £1.3 million) of restructuring costs and £0.2 million (2016: credit of £2.0 million) in relation to deferred compensation costs relating to acquisitions.

6. Tax expense

Analysis of tax charge reported in the income statement:

	2017 £m	2016 £m
UK current year charge	79.9	54.0
Rest of the world current year charge	84.2	89.0
Adjustments in respect of prior year estimates	(5.0)	(0.3)
Total current tax	159.1	142.7
Origination and reversal of temporary differences	(4.9)	(10.4)
Adjustments in respect of prior year estimates	0.9	(2.0)
Effect of changes in Corporation Tax rates	10.7	(2.4)
Total deferred tax	6.7	(14.8)
Tax charge reported in the income statement	165.8	127.9

Analysis of tax charge reported in other comprehensive income:

	2017 £m	2016 £m
Current income tax on movements in available-for-sale financial assets	(0.7)	2.9
Deferred tax on actuarial gains/(losses) on defined benefit pension schemes	7.1	(0.3)
Deferred tax on other movements through other comprehensive income	0.3	-
Deferred tax - effect of changes in Corporation Tax rates	-	0.4
Tax charge reported in other comprehensive income	6.7	3.0

Analysis of tax credit reported in equity:

	2017 £m	2016 £m
Current income tax credit on Equity Compensation Plan and other share-based remuneration	(4.2)	(4.2)
Deferred tax (credit)/charge on Equity Compensation Plan and other share-based remuneration	(1.6)	3.6
Deferred tax - effect of changes in Corporation Tax rates	0.6	(0.3)
Total credit reported in equity	(5.2)	(0.9)

The UK standard rate of corporation tax reduced from 20% to 19% on 1 April 2017 resulting in a UK effective tax rate of 19.25% (2016: standard rate of 20%). The tax charge for the year is higher (2016: higher) than a charge based on the UK effective rate.  The differences are explained below:

	2017 £m	2016 £m
Profit before tax	760.2	618.1
Less post-tax profits of associates and joint ventures	(21.7)	(19.5)
Profit before tax of Group entities	738.5	598.6
Profit before tax of consolidated Group entities multiplied by corporation tax at the UK effective rate of 19.25% (2016: standard rate of 20%)	142.2	119.7
Effects of:
Different statutory tax rates of overseas jurisdictions	12.4	12.1
Permanent differences including non-taxable income and non-deductible expenses	3.5	1.7
Net movement in timing differences for which no deferred tax is recognised	1.1	(0.9)
Deferred tax adjustments in respect of changes in Corporation Tax rates	10.7	(2.4)
Prior year adjustments	(4.1)	(2.3)
Tax charge reported in the income statement	165.8	127.9

7. Earnings per share

Reconciliation of the figures used in calculating basic and diluted earnings per share:

	2017 Number Millions	2016 Number Millions
Weighted average number of shares used in calculation of basic earnings per share	275.4	274.7
Effect of dilutive potential shares - share options	5.6	5.6
Effect of dilutive potential shares - contingently issuable shares	0.1	0.2
Weighted average number of shares used in calculation of diluted earnings per share	281.1	280.5

The pre-exceptional earnings per share calculations are based on profit after tax excluding non-controlling interest of £3.7 million (2016: £0.5 million). After exceptional items, the profit after tax attributable to non-controlling interest was £1.4 million (2016: £0.5 million).

8. Dividends

	2018			2017			2016
	£m	Pence per share		£m	Pence per share		£m	Pence per share
Prior years final dividend paid				174.7	64.0		157.7	58.0
Interim dividend paid				92.9	34.0		78.9	29.0
Total dividends paid				267.6	98.0		236.6	87.0
Current year final dividend recommended	216.0	79.0

Dividends of £9.3 million (2016: £9.2 million) on shares held by employee trusts have been waived; dividends may not be paid on treasury shares. The Board has recommended a 2017 final dividend of 79.0 pence per share (2016 final dividend: 64.0 pence), amounting to £216.0 million (2016 final dividend: £174.7 million). The dividend will be paid on 3 May 2018 to shareholders on the register at 23 March 2018 and will be accounted for in 2018.

In addition, the Group paid £3.5 million of dividends to holders of non-controlling interests in subsidiaries of the Group during 2017 (2016: nil), resulting in total dividends paid of £271.1 million (2016: £236.6 million).

The Company offers a dividend reinvestment plan (DRIP). The last date for shareholders to elect to participate in the DRIP for the purposes of the 2017 final dividend is 12 April 2018. Further details are contained on the Group's website.

9. Fair value measurement disclosures

The Group holds financial instruments that are measured at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

The fair value of financial instruments may require some estimation or may be derived from readily available sources. The degree of estimation involved is reflected below, although this does not necessarily indicate that the fair value is more or less likely to be realised.

For investments that are actively traded in financial markets, fair value is determined by reference to official quoted market prices. For investments that are not actively traded, fair value is determined by using quoted prices from third parties such as brokers, market makers and pricing agencies.

Financial assets that have no quoted price principally consist of investments in private equity funds, derivatives and client loans in Wealth Management. The determination of fair value for these instruments requires significant estimation, particularly in determining whether changes in fair value have occurred since the last formal valuation.

The Group's financial instruments have been categorised using a fair value hierarchy that reflects the extent of judgements used in the valuation. These judgements may include determining which valuation approach to apply as well as determining appropriate assumptions. For level 2 and 3 investments, the judgement applied by the Group gives rise to an estimate of fair value. The fair value estimate of level 2 and 3 investments are set out below, with no individual input giving rise to a material component of the carrying value for the Group. These levels are based on the degree to which the fair value is observable and are defined as follows:

‒     Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities and principally comprise investments in quoted equities and government debt, daily-priced funds and exchange-traded derivatives;

‒     Level 2 fair value measurements are those derived from prices that are not traded in an active market but are determined using valuation techniques, which make maximum use of observable market data. The Group's level 2 financial instruments principally comprise foreign exchange contracts, certain debt securities, asset and mortgage backed securities, and loans held at fair value. Valuation techniques may include using a broker quote in an inactive market or an evaluated price based on a compilation of primarily observable market information utilising information readily available via external sources. For funds not priced on a daily basis, the net asset value which is issued monthly or quarterly is used; and

‒     Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. Financial assets principally comprise investments in private equity funds. These are measured by applying appropriate valuation techniques in accordance with International Private Equity and Venture Capital Guidelines. Financial liabilities principally comprise contingent consideration and other financial liabilities arising from acquisitions completed by the Group.  The valuation review is a continual process throughout the year.

The Group holds certain assets and liabilities at fair value. Their categorisation within the fair value hierarchy is shown below:

	2017
	Level 1 £m	Level 2 £m	Level 31 £m	Assets and liabilities not at fair value2 £m	Total £m
Financial assets:
Equities	135.1	0.2	12.4	-	147.7
Pooled investment vehicles	657.9	8.5	46.1	-	712.5
Debt securities	450.5	631.9	-	151.7	1,234.1
Derivative contracts	2.6	29.3	13.4	-	45.3
Loans and advances	-	0.7	-	1,340.5	1,341.2
	1,246.1	670.6	71.9	1,492.2	3,480.8
Trade and other receivables	26.5	-	-	712.5	739.0
Assets backing unit-linked liabilities	9,576.3	3,704.5	54.6	651.0	13,986.4
	10,848.9	4,375.1	126.5	2,855.7	18,206.2
Financial liabilities:
Derivative contracts	4.9	19.3	-	-	24.2
Client accounts	-	-	-	3,685.7	3,685.7
Deposits by banks	-	-	-	59.3	59.3
Other financial liabilities	87.3	-	72.4	26.4	186.1
	92.2	19.3	72.4	3,771.4	3,955.3
Trade and other payables	164.1	-	-	773.6	937.7
Unit-linked liabilities	13,906.1	42.8	-	37.5	13,986.4
	14,162.4	62.1	72.4	4,582.5	18,879.4

¹The movement in Level 3 financial liabilities during 2017 comprises £32.2 million with regards to the acquisition of Adveq Holding AG (see note 15), partly offset by other movements of £4.0 million.

²The fair value of financial instruments not held at fair value approximates to their carrying value.

	2016
	Level 1 £m	Level 2 £m	Level 3 £m	Assets and liabilities not at fair value1 £m	Total £m
Financial assets:
Equities	149.6	2.6	17.8	-	170.0
Pooled investment vehicles	461.0	8.5	20.6	-	490.1
Debt securities	176.7	722.7	1.3	368.4	1,269.1
Derivative contracts	0.6	22.7	17.1	-	40.4
Loans and advances	-	0.7	-	1,134.7	1,135.4
	787.9	757.2	56.8	1,503.1	3,105.0
Trade and other receivables	28.8	-	-	619.4	648.2
Assets backing unit-linked liabilities	9,063.0	3,289.2	44.5	530.9	12,927.6
	9,879.7	4,046.4	101.3	2,653.4	16,680.8
Financial liabilities:
Derivative contracts	1.4	20.9	-	-	22.3
Client accounts	-	-	-	3,700.3	3,700.3
Deposits by banks	-	-	-	62.5	62.5
Other financial liabilities	69.5	1.4	44.2	1.8	116.9
	70.9	22.3	44.2	3,764.6	3,902.0
Trade and other payables	151.1	-	-	732.2	883.3
Unit-linked liabilities	12,840.9	49.2	-	37.5	12,927.6
	13,062.9	71.5	44.2	4,534.3	17,712.9

¹The fair value of financial instruments not held at fair value approximates to their carrying value.

No financial assets or liabilities were transferred between levels during 2017. During 2016, £703.3 million of debt securities within Financial assets and £1,927.7 million of debt securities held within Assets backing unit-linked liabilities were transferred from level 1 to level 2 as a result of a change to the methodology applied by the Group's third party pricing provider. This change did not represent degradation in the quality of assets held.

Movements in assets categorised as level 3 during the year were:

	2017		2016
	Financial assets £m	Assets backing unit-linked liabilities £m	Financial assets £m	Assets backing unit-linked liabilities £m
At 1 January	56.8	44.5	33.6	43.4
Exchange translation adjustments	(0.1)	1.5	3.9	6.5
Total (losses)/gains recognised in the income statement	(3.0)	4.8	0.3	4.8
Total (losses)/gains recognised in other comprehensive income	(6.8)	-	1.9	-
Additions1	36.0	14.1	23.7	0.9
Disposals	(11.0)	(10.3)	(6.6)	(11.1)
At 31 December	71.9	54.6	56.8	44.5

¹Additions during 2017 primarily relate to the acquisition of Adveq Holding AG (see note 15).

10. Property, plant and equipment

	Leasehold improvements £m	Land and buildings £m	Other assets £m	Total £m
Cost
At 1 January 2017	89.7	3.9	61.2	154.8
Exchange translation adjustments	(1.1)	0.2	(0.8)	(1.7)
Additions	81.4	19.0	13.0	113.4
Disposals	(4.0)	-	(1.0)	(5.0)
At 31 December 2017	166.0	23.1	72.4	261.5
Accumulated depreciation
At 1 January 2017	(50.5)	-	(37.9)	(88.4)
Exchange translation adjustments	0.5	-	0.5	1.0
Depreciation charge for the year	(4.5)	(0.1)	(11.7)	(16.3)
Disposals	4.0	-	1.0	5.0
At 31 December 2017	(50.5)	(0.1)	(48.1)	(98.7)
Net book value at 31 December 2017	115.5	23.0	24.3	162.8

	Leasehold improvements £m	Land and buildings £m	Other assets £m	Total £m
Cost
At 1 January 2016	65.0	3.4	45.2	113.6
Exchange translation adjustments	3.8	0.5	4.0	8.3
Additions	21.2	-	12.3	33.5
Disposals	(0.3)	-	(0.3)	(0.6)
At 31 December 2016	89.7	3.9	61.2	154.8
Accumulated depreciation
At 1 January 2016	(45.0)	-	(26.8)	(71.8)
Exchange translation adjustments	(2.6)	-	(2.7)	(5.3)
Depreciation charge for the year	(3.0)	-	(8.7)	(11.7)
Disposals	0.1	-	0.3	0.4
At 31 December 2016	(50.5)	-	(37.9)	(88.4)
Net book value at 31 December 2016	39.2	3.9	23.3	66.4

11. Goodwill and intangible assets

Cost	Goodwill £m	Acquired intangible assets £m	Software £m	Total £m
At 1 January 2017	454.9	186.6	116.2	757.7
Exchange translation adjustments	(8.2)	(3.6)	(1.0)	(12.8)
Additions	148.4	64.3	63.7	276.4
Disposals	-	-	(1.5)	(1.5)
At 31 December 2017	595.1	247.3	177.4	1,019.8
Accumulated amortisation
At 1 January 2017	-	(97.3)	(53.3)	(150.6)
Exchange translation adjustments	-	1.7	0.5	2.2
Amortisation charge for the year	-	(27.7)	(19.4)	(47.1)
Disposals	-	-	1.5	1.5
At 31 December 2017	-	(123.3)	(70.7)	(194.0)
Carrying amount at 31 December 2017	595.1	124.0	106.7	825.8

Cost	Goodwill £m	Acquired   intangible assets £m	Software £m	Total £m
At 1 January 2016	359.1	136.7	80.8	576.6
Exchange translation adjustments	13.2	5.9	3.1	22.2
Additions	82.6	44.0	32.3	158.9
At 31 December 2016	454.9	186.6	116.2	757.7
Accumulated amortisation
At 1 January 2016	-	(73.9)	(35.3)	(109.2)
Exchange translation adjustments	-	(4.0)	(2.7)	(6.7)
Amortisation charge for the year	-	(19.4)	(15.3)	(34.7)
At 31 December 2016	-	(97.3)	(53.3)	(150.6)
Carrying amount at 31 December 2016	454.9	89.3	62.9	607.1

Of the total goodwill of £595.1 million (2016: £454.9 million), £410.8 million (2016: £320.2 million) is allocated to Asset Management and £184.3 million (2016: £134.7 million) to Wealth Management.

The Group acquired £64.3 million (2016: £44.0 million) of intangible assets as a result of business combinations completed in 2017, £33.9 million of which related to the acquisition of Adveq Holding AG in the Asset Management segment and £26.5 million of which related to the acquisition of the wealth management business of C. Hoare & Co. A further £3.9 million was added to the Wealth Management segment from other completed acquisitions (see note 15).

12. Share capital and share premium

	Number of shares Millions	Ordinary shares £m	Non-voting ordinary shares £m	Total shares £m	Share premium £m
At 1 January 2017	282.7	226.0	56.7	282.7	124.2
Shares cancelled	(0.2)	-	(0.2)	(0.2)	-
At 31 December 2017	282.5	226.0	56.5	282.5	124.2

During the year, 233,623 non-voting ordinary shares were bought back by the Group for a value of £5.4 million and cancelled.

	Number of shares Millions	Ordinary shares £m	Non-voting ordinary shares £m	Total shares  £m	Share premium £m
At 1 January 2016	282.5	226.0	56.5	282.5	119.4
Shares issued	0.2	-	0.2	0.2	4.8
At 31 December 2016	282.7	226.0	56.7	282.7	124.2

On 21 December 2016, Schroders plc issued 233,623 non-voting ordinary shares as part of the consideration paid for the acquisition of Benchmark Capital Limited.

					2017 Number of shares Millions	2016 Number of shares Millions
Issued and fully paid:
Ordinary shares of £1 each					226.0		226.0
Non-voting ordinary shares of £1 each					56.5		56.7
					282.5		282.7

13. Own shares

Own shares include the Group's shares (both ordinary and non-voting ordinary) that are held by employee benefit trusts.

Movements in own shares during the year were as follows:

	2017 £m	2016 £m
At 1 January	(163.6)	(175.5)
Own shares purchased	(56.6)	(59.1)
Own shares cancelled	5.4	-
Awards vested	52.5	71.0
At 31 December	(162.3)	(163.6)

During the year 1.8 million own shares (2016: 2.2 million own shares) were purchased and held for hedging share-based awards. 2.4 million shares (2016: 3.3 million shares) awarded to employees vested in the period and were transferred out of own shares.

The total number of shares in the Company held within the Group's employee benefit trusts comprise:

	2017				2016
	Number of vested shares Millions	Number of unvested shares Millions	Total Millions	Number of vested shares Millions		Number of unvested shares Millions	Total Millions
Ordinary shares	2.0	6.9	8.9	2.0		7.5	9.5
Non-voting ordinary shares	0.2	0.1	0.3	0.2		0.1	0.3
	2.2	7.0	9.2	2.2		7.6	9.8

14. Reconciliation of net cash from operating activities

	2017 £m	2016 £m
Profit before tax	760.2	618.1
Adjustments for income statement non-cash movements:
Depreciation of property, plant and equipment and amortisation of intangible assets	63.4	46.4
Net gains taken through the income statement on financial instruments	(22.1)	(45.0)
Share-based payments	60.5	51.5
Net charge of provisions	12.6	8.3
Other non-cash movements	(9.6)	(6.1)
	104.8	55.1
Adjustments for which the cash effects are investing activities:
Net finance income	(9.7)	(18.8)
Share of profit of associates and joint ventures	(21.7)	(19.5)
	(31.4)	(38.3)
Adjustments for statement of financial position movements:
Increase in loans and advances within Wealth Management	(236.4)	(232.9)
Increase in trade and other receivables	(43.2)	(70.7)
Increase in deposits and customer accounts within Wealth Management	38.9	550.4
Increase/(decrease) in trade and other payables, other financial liabilities and provisions	35.2	(42.2)
	(205.5)	204.6
Adjustments for Life Company movements:
Net increase in financial assets backing unit-linked liabilities	(953.0)	(1,744.1)
Net increase in unit-linked liabilities	1,058.8	1,607.7
	105.8	(136.4)
Tax paid	(148.8)	(139.4)
Net cash from operating activities	585.1	563.7

15. Business combinations

The Group completed five business combinations during the year.

The most significant of these transactions completed on 31 July 2017 when the Group acquired 100% of the issued share capital of Adveq Holding AG (Adveq), a Swiss-registered holding company of a private equity management group for a total consideration of £141.3 million. The acquisition contributed £6.0 billion of Asset Management AUM and strengthens the Group's private assets capabilities.

On 17 February 2017, the Group acquired the discretionary wealth management business of C. Hoare & Co. for a consideration of £72.0 million. The acquisition contributed £2.5 billion of discretionary Wealth Management AUM and increases the Group's scale and capability for its UK private clients.

On 1 September 2017 and 4 December 2017, Benchmark Capital, a 65% subsidiary of the Group, acquired 100% of the issued share capital of Brian Potter Consultants Limited and Alderbrook Financial Planning Limited respectively. The combined consideration for these transactions was £2.1 million.

On 1 November 2017, the Group acquired 100% of the issued share capital of Chilcomb Wealth Ltd, a UK-based wealth manager, for a consideration of £1.7 million.

Net assets acquired

The fair value of the net assets acquired in the transactions together with the goodwill and intangible assets arising are as follows:

Net assets acquired:		Adveq £m	C. Hoare & Co.2 £m	Other £m	Total £m
Cash		11.3	-	0.6	11.9
Trade and other receivables		26.4	-	0.1	26.5
Other assets		39.3	-	-	39.3
Trade and other payables		(23.8)	-	(0.1)	(23.9)
Other liabilities		(38.4)	-	(0.1)	(38.5)
Tangible net assets		14.8	-	0.5	15.3
Goodwill		98.4	50.0	-	148.4
Intangible assets arising on acquisition		33.9	26.5	3.9	64.3
Deferred tax arising on Intangible assets		(5.8)	(4.5)	(0.6)	(10.9)
Total		141.3	72.0	3.8	217.1

Satisfied by:		Adveq £m	C. Hoare & Co.2 £m	Other £m	Total £m
Cash		117.9	72.0	3.8	193.7
Contingent consideration1		23.4	-	-	23.4
Total		141.3	72.0	3.8	217.1

¹Contingent consideration of £23.4 million is payable under the terms of the share purchase agreement for Adveq. This amount is contingent upon 

the receipt of future revenues over a number of years. The estimated range of amounts that will ultimately be payable is between £16 million and

£114 million.

²The discretionary wealth management business of C. Hoare & Co.

Adveq

Goodwill arising on the acquisition of Adveq represents the value of the acquired business arising from:

‒     A broader platform for business growth;

‒     Talented management and employees; and

‒     Opportunities for synergies from combining certain activities.

Goodwill arising on the acquisition of Adveq will not be deductible for tax purposes.

In the period between the acquisition date on 31 July 2017 and 31 December 2017, Adveq contributed £19.8 million to the Group's net income. The contribution to profit before tax and exceptional items was £4.6 million and exceptional costs of £2.7 million were incurred, including charges in respect of amortisation of the acquired intangible assets, other interest charges and restructuring costs. Additionally, acquisition costs of £1.1 million were recorded within 'Operating expenses' and classified as exceptional in the Consolidated income statement.

If the acquisition had been completed on 1 January 2017, the Group's pre-exceptional net income for the year would have been £2,091.4 million, and the profit before tax and exceptional items for the year on the same basis would have been £801.6 million.

Discretionary wealth management business of C. Hoare & Co.

The goodwill arising on the acquisition represents the value of the acquired business arising from:

‒     A broader platform for business growth;

‒     Talented management and employees; and

‒     Opportunities for synergies from combining certain Wealth Management operations.

Goodwill arising on the acquisition will not be deductible for tax purposes.

In the period between the date of acquisition and 31 December 2017, the discretionary wealth management business of C. Hoare & Co. contributed £18.3 million to the Group's pre-exceptional net income within the Wealth Management segment. The contribution to profit before tax and exceptional items was £13.3 million and exceptional operating expenses of £3.3 million were incurred in respect of amortisation of acquired intangible assets.

If the acquisition had completed on 1 January 2017, the Group's pre-exceptional net income for the year would have been £2,071.5 million. Profit before tax and exceptional items for the year on the same basis would have been £802.4 million.

Key risks and mitigations

Our key risks and mitigations can be read by accessing the link below.

Click on or paste the following link into your web browser to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/3187G_-2018-2-28.pdf

Directors' responsibility statement

To the best of their knowledge and belief, each of the Directors listed below confirms that:

‒       The consolidated financial statements of Schroders plc, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of Schroders plc and the undertakings included in the consolidation taken as a whole;

‒       The announcement includes a fair summary of the development and performance of the business and the position of Schroders plc and the undertakings included in the consolidation taken as a whole and a description of the principal risks and uncertainties that they face;

‒       So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

‒       They have each taken all the steps that ought to have been taken by them as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Directors:

Michael Dobson	Chairman
Peter Harrison	Group Chief Executive
Richard Keers	Chief Financial Officer
Lord Howard of Penrith	Senior Independent Director
Robin Buchanan	Independent non-executive Director
Sir Damon Buffini	Independent non-executive Director
Rhian Davies	Independent non-executive Director
Rakhi Goss-Custard	Independent non-executive Director
Ian King	Independent non-executive Director
Nichola Pease	Independent non-executive Director
Philip Mallinckrodt	Non-executive Director
Bruno Schroder	Non-executive Director

28 February 2018

Five year consolidated financial summary

Before exceptional items	2017 £m	2016 £m	2015 £m	2014 £m	2013 £m
Profit before tax	800.3	644.7	609.7	565.2	507.8
Tax	(171.6)	(132.4)	(126.3)	(113.9)	(103.0)
Profit after tax	628.7	512.3	483.4	451.3	404.8
After exceptional items	2017 £m	2016 £m	2015 £m	2014 £m	2013 £m
Profit before tax	760.2	618.1	589.0	517.1	447.5
Tax	(165.8)	(127.9)	(121.6)	(103.9)	(94.8)
Profit after tax	594.4	490.2	467.4	413.2	352.7

Pre-exceptionals earnings per share:	2017 Pence	2016 Pence	2015 Pence	2014 Pence	2013 Pence
Basic earnings per share1	226.9	186.3	176.9	166.8	149.9
Diluted earnings per share1	222.4	182.4	172.2	161.5	144.6
Post-exceptional earnings per share:	2017 Pence	2016 Pence	2015 Pence	2014 Pence	2013 Pence
Basic earnings per share	215.3	178.3	171.1	152.7	130.6
Diluted earnings per share	211.0	174.5	166.5	147.8	126.0
Dividends	2017	2016	2015	2014	2013
Cost (£m)	267.6	236.6	226.3	177.7	123.5
Pence per share2	98.0	87.0	83.0	66.0	46.0
Total equity (£m)	3,471.0	3,152.8	2,795.6	2,537.8	2,268.6
Net assets per share (pence)3	1,229	1,115	990	898	802

¹See note 7 for the basis of this calculation.

²Dividends per share are those amounts approved by the shareholders to be paid within the year on a per share basis to the shareholders on the register at the specified dates.

³Net assets per share are calculated by using the actual number of shares in issue at the year-end date.

Exchange rates - closing

31 December	2017	2016	2015	2014	2013
Sterling:
Euro	1.13	1.17	1.36	1.29	1.20
US dollar	1.35	1.24	1.47	1.56	1.66
Swiss franc	1.32	1.26	1.48	1.55	1.47
Australian dollar	1.73	1.71	2.03	1.91	1.85
Hong Kong dollar	10.57	9.58	11.42	12.09	12.84
Japanese yen	152.39	144.12	177.30	186.95	174.08
Singaporean dollar	1.81	1.79	2.09	2.07	2.09

Glossary

Annualised net new revenue	The net operating revenue that would be earned over a one year timeframe if the net new business was all transacted on the same day and there were no market movements or other changes to assets under management or fee rates over that year. Calculated as gross new funds from clients multiplied by the applicable net operating revenue margin for each flow, less gross funds withdrawn multiplied by the applicable net operating revenue margin for each flow. This measure provides additional information to better assess the impact of net new business on the Group's net operating revenue.
Basic or diluted earnings per share before exceptional items	Profit after tax but before exceptional items divided by the relevant weighted average number of shares (see note 7). The presentation of earnings per share before exceptional items provides transparency of recurring revenue and expenditure to aid understanding of the financial performance of the Group.
Payout ratio	The total dividend per share in respect of the year (see note 8) divided by the pre-exceptional basic earnings per share.
Profit before tax and exceptional items	Profit before tax but excluding exceptional items. This presentation provides transparency of recurring revenue and expenditure to aid understanding of the financial performance of the Group.
Ratio of total costs to net income	Total Group costs before exceptional items divided by net income before exceptional items. A 65% ratio is targeted to ensure costs are aligned with net income, although we recognise that in weaker markets the ratio may be higher than our long-term target.
Total compensation ratio	Pre-exceptional compensation costs (note 5) divided by pre-exceptional net income. By targeting a total compensation ratio of 45 to 49%, depending upon market conditions, we align the interests of shareholders and employees.

 

END

 

 

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