Interim Results

Schroders PLC
03 September 2002

3rd September 2002

Schroders plc

Half Year Results to 30th June 2002

  • Underlying asset management profit £46.8 million (H1 2001: £74.2 million)
  • Profit before goodwill amortisation £25.9 million (H1 2001: £47.0 million)
  • Funds under management £102.7 billion at 30th June 2002 (31st December
    2001: £110.4 billion)
  • Interim dividend 5.5 pence per share (H1 2001: 5.5 pence)

                                                   Six months ended    Six months ended         Year ended
                                                     30th June 2002      30th June 2001
                                                        (unaudited)         (unaudited) 31st December 2001
                                                                                                 (audited)
                                                               £ mn                £ mn
                                                                                                       £mn
Underlying asset management profit                             46.8                74.2              105.7

Project expenditure                                          (15.0)              (15.0)             (30.0)

Redundancy costs                                              (7.0)               (6.9)              (9.6)

Asset management profit before exceptional item                24.8                52.3               66.1

Exceptional item - prior period error                             -                   -             (10.8)

Asset management profit                                        24.8                52.3               55.3

Private equity                                                  3.7               (8.5)             (19.6)

Group income/(costs)                                          (2.6)                 3.2                  -

Profit before goodwill                                         25.9                47.0               35.7

Goodwill:
     Amortisation                                             (5.4)               (5.5)             (10.4)

     Impairment                                                   -                   -             (23.4)
                                                              (5.4)               (5.5)             (33.8)

Profit before tax on continuing operations                     20.5                41.5                1.9

Provision for discontinued operations                             -                   -             (10.0)

Profit/(loss) before tax                                       20.5                41.5              (8.1)



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Contacts:

Schroders
Peter Sedgwick        Chairman                                     [phone]
Michael Dobson        Chief Executive                              [phone]
Jonathan Asquith      Chief Financial Officer                      [phone]
Julian Samways        Head of Corporate Communications             [phone]

The Maitland Consultancy
William Clutterbuck                                                [phone]



Management Statement

Underlying asset management profits were £46.8 million compared to £74.2 million
in the first half of 2001, a decrease of 37 per cent. Profit before goodwill
amortisation amounted to £25.9 million (2001: £47.0 million) down 45 per cent.
Revenues were £250.1 million, down from £276.6 million in the first half of
2001.

These results were adversely affected by sharp falls in equity markets in the
second quarter, but this is also a year of transition for the Group as we
restructure our business, upgrade our technology platform and outsource many of
our administrative and processing functions. In the short term, there are higher
costs arising from this strategy, particularly in the second half of the year,
so benefits will only be seen from 2003 onwards. Nevertheless, the trend in
underlying costs is encouraging.

Funds under management were £102.7 billion as at 30th June 2002, down from
£110.4 billion at the end of December 2001. Most of this decline was the result
of lower equity markets. Net outflows reduced from £5.6 billion in the first
half of 2001 to £2.3 billion in the first half of this year.

Funds under management
                                                        30th June 2002      31st December 2001*
                                                                   £bn                      £bn
Institutional                                                     83.7                     91.8
Retail                                                            12.6                     11.9
Private Banking                                                    6.4                      6.7
                                                                 102.7                    110.4

* Restated to reflect funded position at 31st December 2001 - previous total
£110.0 billion

Institutional Fund Management

Performance has continued above average in most asset classes with our flagship
UK institutional pooled fund recording its tenth consecutive quarter of
out-performance. Our UK fixed income business has been particularly strong, and
we are seeing a stream of new business opportunities as pension funds raise
their bond weightings. In the UK we continued to suffer from clients
restructuring away from balanced mandates but net outflows in our UK
institutional business were £2.3 billion, down from £7.3 billion in the first
half of 2001. Consultant upgrades on many of our products are reflected in an
increasing number of new business prospects.

We lost some client mandates in our North American business and have taken steps
to address the underlying performance issues. We saw negligible net outflows in
our Asia Pacific business and had a positive start to the second half with the
award of a $1 billion mandate in Japan. We are also winning a number of
important new equity mandates in Australia.

Retail Fund Management

The retail business has continued to grow despite difficult market conditions
and poor investor sentiment. Net sales were £2.0 billion, equivalent to some 17
per cent. of retail funds under management at the start of the year.

In the UK, gross sales were up 25 per cent. despite a fall in overall industry
sales of almost 6 per cent. We also saw good growth in continental Europe where
sales held up well and where we are increasingly participating in growth in the
European savings market through third party funds of funds.

In Japan we have seen a significant upturn in inflows into our retail funds
which are running well ahead of last year thanks to strong product performance
and a closer relationship with distributors. Elsewhere in Asia we have benefited
from continued demand for capital protected products.

Our sales activity has been underpinned by solid investment performance with 75
per cent. of our UK and Luxembourg fund ranges outperforming their benchmarks
over three years.

In the UK we are in advanced negotiations for the sale of Schroder Pensions, our
defined contribution administration platform. We have also reached agreement for
the outsourcing of the UK unit trust transfer agency business which will result
in significant cost savings beginning in 2003.

Private Banking

We are making important changes to our private banking business by re-focusing
our strategy towards an asset management-led offering, supported by wealth
structuring and banking products. We wish to capitalise on our brand strength in
the UK and continental Europe by providing high net worth individuals and family
offices with a superior asset management capability, drawing on the full range
of Schroder products in traditional and alternative asset classes, and third
party products. We will substantially reduce our cost base, but we are
continuing nevertheless to invest in our infrastructure in order to improve the
service we offer to clients and to enhance profitability.

Private Equity and Alternative Assets

We remain the largest manager of property unit trusts in the UK with a combined
value of almost £4.0 billion across a number of specialist funds.

With the addition of Beaumont we now manage £350 million in long/short equity
funds and funds of hedge funds. We also raised approximately €250 million for 
our first private equity fund of funds.

Interim Dividend

An unchanged interim dividend of 5.5 pence per share has been declared and will
be paid on 25th October 2002 to shareholders on the register at 20th September
2002.

Board

Having delayed his retirement to assist with the senior management changes which
have taken place during the past year, Peter Sedgwick has expressed the wish to
retire and will do so on 31st December this year. The Board expresses its
gratitude for the major contribution he has made during his 32 years with the
Group.

Outlook

We are on track in making the necessary changes to our business. We have a
strengthened management team, a more focused strategy and a sustained drive to
reduce costs. We continue to seek attractive opportunities to re-deploy the
Group's surplus capital in areas of strategic relevance to our business. In the
meantime our healthy capital position is a strength in current market
conditions.

Short term, the environment is very challenging and if markets remain at current
levels revenues will be lower in the second half. Longer term, we remain
encouraged by the range of opportunities available to us.



Consolidated Profit and Loss Account

                            Six months    Six months ended       Six months ended 31st December 2001         Year ended
                            ended 30th      30th June 2001                                                         31st
                             June 2002                                                                         December
                                                                                                                   2001
                                 Total               Total      Before exceptional Exceptional        Total       Total
                           (unaudited)         (unaudited)                   items       items  (unaudited)   (audited)
                                   £mn                 £mn                     £mn         £mn          £mn         £mn
Revenues                         250.1               276.6                   243.2      (10.8)        232.4       509.0

Gains/(losses) on current          0.2              (10.6)                   (3.0)           -        (3.0)      (13.6)
asset investments
Administrative expenses        (219.2)             (224.3)                 (222.2)           -      (222.2)     (446.5)

Depreciation                    (16.0)              (12.8)                  (26.9)           -       (26.9)      (39.7)
Amortisation of goodwill         (5.4)               (5.5)                   (4.9)           -        (4.9)      (10.4)
Impairment of goodwill               -                   -                       -      (23.4)       (23.4)      (23.4)
Group operating profit/            9.7                23.4                  (13.8)      (34.2)       (48.0)      (24.6)
(loss)
Share of operating profit          1.5                 1.3                     0.2           -          0.2         1.5
of associated undertakings
Total operating profit/           11.2                24.7                  (13.6)      (34.2)       (47.8)      (23.1)
(loss)
Loss on sale of the                  -                   -                       -      (10.0)       (10.0)      (10.0)
investment banking
business - discontinued
operations
Interest receivable and           10.9                18.3                    14.2           -         14.2        32.5
similar income
Amounts written off fixed        (1.3)               (0.8)                   (4.5)           -        (4.5)       (5.3)
asset investments
Interest payable and             (0.3)               (0.7)                   (1.5)           -        (1.5)       (2.2)
similar charges
Profit/(loss) on ordinary         20.5                41.5                   (5.4)      (44.2)       (49.6)       (8.1)
activities before tax
Tax on profit/(loss) on          (6.8)              (10.4)                   (7.4)         5.2        (2.2)      (12.6)
ordinary activities
Profit/(loss) on ordinary         13.7                31.1                  (12.8)      (39.0)       (51.8)      (20.7)
activities after tax
Minority interests               (0.4)                 0.2                                            (0.1)         0.1
Profit/(loss) attributable        13.3                31.3                                           (51.9)      (20.6)
to shareholders
Dividend                        (16.0)              (16.3)                                           (37.6)      (53.9)
Retained (loss)/profit           (2.7)                15.0                                           (89.5)      (74.5)
Basic earnings per share          4.4p               10.5p                                          (17.5p)      (7.0p)
Diluted earnings per share        4.4p               10.4p                                          (17.5p)      (7.0p)
Dividend per share                5.5p                5.5p                                            13.0p       18.5p



Statement of Total Consolidated Recognised Gains and Losses

                                                   Six months ended Six months ended          Year ended
                                                     30th June 2002   30th June 2001  31st December 2001

                                                        (unaudited)      (unaudited)           (audited)

                                                                £mn              £mn                 £mn

Profit/(loss) attributable to shareholders for                 13.3             31.3              (20.6)
the period
Exchange translation adjustments to foreign                   (0.3)             13.0               (3.1)
currency net investment
Total recognised gains and losses                              13.0             44.3              (23.7)


Reconciliation of Movements in Consolidated Shareholders' Funds

                                                   Six months ended  Six months ended          Year ended
                                                     30th June 2002    30th June 2001  31st December 2001
                                                        (unaudited)       (unaudited)           (audited)

                                                                £mn               £mn                 £mn
Profit /(loss) attributable to shareholders for                13.3              31.3              (20.6)
the period
Dividend                                                     (16.0)            (16.3)              (53.9)
                                                              (2.7)              15.0              (74.5)

New share capital subscribed                                      -                 -                16.0

Shares to be issued                                               -                 -                12.9
Cancellation of non-voting ordinary shares                    (8.1)                 -                   -

Exchange translation adjustments                              (0.3)              13.0               (3.1)
Net movement in shareholders' funds                          (11.1)              28.0              (48.7)

Opening shareholders' funds                                 1,112.5           1,161.2             1,161.2
Closing shareholders' funds                                 1,101.4           1,189.2             1,112.5



Consolidated Balance Sheet
                                                         30th June 2002      30th June 2001   31st December 2001
                                                            (unaudited)         (unaudited)            (audited)

                                                                    £mn                 £mn                  £mn
Fixed assets
Intangible assets- goodwill                                        40.5                37.1                 45.5
Tangible assets                                                   106.6               119.8                103.3
Investments                                                       101.0               334.2                 99.6
                                                                  248.1               491.1                248.4
Insurance assets attributable to unit linked                    2,482.2             3,155.0              2,912.1
policyholders
                                                                2,730.3             3,646.1              3,160.5
Current assets
Debtors due within one year                                       646.2               830.3                510.8
Debtors due after more than one year                              260.9               171.8                272.5
Investments                                                       778.9               424.5                806.1
Cash and balances with banks                                      686.3               951.8                809.0
                                                                2,372.3             2,378.4              2,398.4
Creditors - amounts falling due within one year               (1,202.3)           (1,589.9)            (1,242.2)
Net current assets                                              1,170.0               788.5              1,156.2
Total assets less current liabilities                           3,900.3             4,434.6              4,316.7
Creditors - amounts falling due after more than one             (242.2)              (56.4)              (228.7)
year
Insurance liabilities attributable to unit linked             (2,482.2)           (3,155.0)            (2,912.1)
policyholders
Provisions for liabilities and charges                           (74.2)              (33.6)               (62.9)
Net assets                                                      1,101.7             1,189.6              1,113.0
Capital and reserves
Called up share capital                                           297.6               296.9                299.0
Share premium account                                              15.2                 1.3                 15.2
Shares to be issued                                                12.9                   -                 12.9
Capital redemption reserve                                          1.4                   -                    -
Capital reserves                                                  130.0               149.9                130.0
Profit and loss account                                           644.3               741.1                655.4
Equity shareholders' funds                                      1,101.4             1,189.2              1,112.5
Minority interests                                                  0.3                 0.4                  0.5
Total shareholders' funds including minority                    1,101.7             1,189.6              1,113.0
interests



Consolidated Cash Flow Statement
                                                 Six months ended     Six months ended           Year ended
                                                   30th June 2002       30th June 2001   31st December 2001
                                                      (unaudited)          (unaudited)            (audited)

                                                              £mn                  £mn                  £mn
Net cash (outflow)/inflow from operating                   (82.7)                152.6                187.0
activities
Dividends received from associates                              -                    -                  0.8
Returns on investments and servicing of                      10.4                 18.1                 32.2
finance
Taxation                                                      3.1               (11.6)                (2.1)
Capital expenditure and financial                          (26.3)               (80.1)              (133.0)
investments
Acquisitions and disposals                                  (0.3)                    -               (14.0)
Equity dividends paid                                      (37.6)               (37.8)               (54.1)
Management of liquid resources                            (105.5)               (97.6)              (312.2)
Financing                                                   (8.1)                    -                    -
Decrease in cash                                          (247.0)              (56.4)*              (295.4)


Reconciliation of operating profit to net cash (outflow)/inflow from operating
activities
                                                   Six months ended     Six months ended           Year ended
                                                     30th June 2002       30th June 2001   31st December 2001
                                                    (unaudited) £mn          (unaudited)            (audited)
                                                                                     £mn                  £mn
Operating profit/(loss)                                        11.2                 22.6               (23.1)
Depreciation of tangible fixed assets                          16.0                 18.3                 39.7
Amortisation and impairment of goodwill                         5.4                    -                 33.8
Other non-cash movements                                        2.6                  9.0                 16.8
Changes in working capital                                  (117.9)               102.7*                119.8
Net cash (outflow)/inflow from operating                     (82.7)                152.6                187.0
activities



Reconciliation of movement in cash
                                                  At 30th June 2002            Cash flow     At 31st December
                                                        (unaudited)          (unaudited)                 2001
                                                                £mn                  £mn            (audited)
                                                                                                          £mn
Cash and balances with banks - repayable on                   101.3              (247.3)                348.6
demand
Cash and balances with banks - other                          585.0                                     460.4
Cash and balances with banks                                  686.3                                     809.0
Exchange adjustments                                                                 0.3
Decrease in cash                                                                 (247.0)


* As noted in the 2001 Annual Report & Accounts, settlement accounts arising
from securities transactions on behalf of clients were no longer included in the
balance sheet where a Group company acts as agent, and, accordingly, the
comparative figures at 31st December 2000 were restated. This impacts the June
2001 figures in the Consolidated Cash Flow Statement above, increasing the
'Changes in working capital' and reducing the 'Decrease in cash' by £56.0m from
the amounts stated in the Interim Report 2001.

Financial information for the year ended 31st December 2001 is presented in
Format 1 of Schedule 4 to the Companies Act 1985, adapted to include an
additional item, 'Gains/(losses) on current asset investments'.

The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2001 Annual Report & Accounts.

The financial information for the year ended 31st December 2001 set out above
does not constitute full accounts within the meaning of s.240 of the Companies
Act 1985. The full statutory accounts for that year received an unqualified
audit report and have been delivered to the Registrar of Companies. The
financial information for the six months ended 30th June 2002 has been reviewed
by the auditors in accordance with guidance contained in Bulletin 1999/4 issued
by the Auditing Practices Board; the report by PricewaterhouseCoopers will be
included in the interim report sent to shareholders.

The interim report will be posted to shareholders on 10th September 2002.
Further copies of this statement are available from the Company Secretary at 31
Gresham Street, London, EC2V 7QA, (telephone [phone]) and on the Company's
website at www.schroders.com


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