Interim Results
Schroders PLC
16 August 2005
Press Release 16 August 2005
Schroders plc
Interim Results to 30 June 2005
Schroders plc today announces its interim results to 30 June 2005 prepared under
the International Financial Reporting Standards (IFRS) regime. Results for
comparative periods have been restated from UK GAAP to IFRS. As part of the
transition to IFRS, these results provide further analysis of the asset
management segmental results, showing for the first time the results of the
Asset Management and Private Banking functions separately (see + below).
Continued growth in profits
• Group profit before tax £123.5 million (H1 2004: £72.6 million)
• Asset Management profit before tax £99.8 million (H1 2004: £55.3
million)
• Private Banking profit before tax £2.2 million (H1 2004: £2.0 million)
• Private Equity profit before tax £18.0 million (H1 2004: £13.9 million)
• Funds under management £112.1 billion (31 December 2004: £105.6 billion)
• Interim dividend of 7.0 pence per share (interim dividend 2004: 6.5
pence per share)
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2005 2004 2004
(unaudited) (unaudited) (unaudited)
£mn £mn £mn
_________________________________________________________________________
Asset Management profit 99.8* 55.3 119.8
Private Banking profit 2.2* 2.0 4.6
Private Equity profit 18.0 13.9 83.8
Group Net Income/(Costs) 3.5 1.4 3.4
_________________________________________________________________________
Profit before tax 123.5* 72.6 211.6
_________________________________________________________________________
* Profit before tax includes a gain on a discontinued outsourcing contract of
£20.4 million of which £20.1 million arises in Asset Management and £0.3 million
in Private Banking.
+ As part of the transition to IFRS, there are two principal changes to the
segmental disclosures:
(i) the segment previously described as 'Asset Management' has been divided into
two: the majority part, being the Institutional and Retail Distribution and
Investment functions, remains in the Asset Management segment; the balance,
comprising the Group's Private Banking activities, is shown separately;
(ii) gains or losses on seed capital investments previously included in the
Asset Management segment are now included in Group Net Income/(Costs), together
with all other income and expenses associated with the Group's investment
capital. The effect of this is to reduce Asset Management revenues and increase
Group Net Income by £6.8 million (H1 2004: £2.6 million; FY 2004: £6.6 million).
Contacts:
Schroders
Michael Dobson Chief Executive +44 (0) 20 7658 6962
Jonathan Asquith Chief Financial Officer +44 (0) 20 7658 6565
Corina Blum Evans Interim Head of Corporate +44 (0) 20 7658 2589
Communications
The Maitland Consultancy
William Clutterbuck +44 (0) 20 7379 5151
Management Statement
The sharp improvement in underlying profitability seen in recent years continued
in the first half of 2005. Profit before tax increased 70 per cent. to £123.5
million (H1 2004: £72.6 million), including a one off gain of £20.4 million due
to the discontinuation of a joint project with JPMorgan to outsource Schroders
UK custody and portfolio accounting services, as announced on 1 July 2005.
Asset Management
Asset Management total revenues increased 28 per cent. to £313.6 million (H1
2004: £245.5 million) reflecting a further improvement in gross margins as the
business mix continues to evolve in favour of retail and higher margin business
within institutional. Gross profit increased to £252.0 million (H1 2004: £205.4
million).
Asset Management administrative expenses and depreciation were £174.0 million
(H1 2004: £151.5 million), the increase driven principally by higher variable
compensation costs linked to revenue growth. As a result of the discontinuation
of the outsourcing project, Asset Management costs will increase from the fourth
quarter of 2005 by approximately £2.5 million per quarter, but we expect to
absorb this increase over the next two years as part of our continuing programme
of controlling operating costs.
Asset Management profit before tax was £99.8 million (H1 2004: £55.3 million)
after including the gain on the discontinued outsourcing contract, a share of
profit of associates and net interest receivable.
We achieved strong investment performance across a wide range of equity and
fixed income asset classes, with 64 per cent. of institutional assets
outperforming their benchmarks and over two thirds of our Luxembourg mutual
funds range ahead of the peer group median over three years.
Net business outflows in Institutional were £2.0 billion (H1 2004: £4.5 billion)
as we restructured our business towards higher margin products and as UK
institutions continued to move from balanced to specialist mandates.
Institutional funds under management were £71.7 billion at the end of June (End
2004: £69.1 billion).
In Retail, net sales for the first half were £1.6 billion (H1 2004: £2.9
billion). Following the strong first quarter, net sales were marginally positive
in the second quarter reflecting lower activity in the industry generally.
Retail funds under management at the end of June were £33.5 billion (End 2004:
£30.2 billion).
We announced in June that we were forming a joint venture asset management
company in China with Bank of Communications with the intention of offering
domestic funds to Chinese retail and institutional investors. Schroders has a 30
per cent. share in the joint venture which expects to launch its first fund this
month.
Private Banking
In the first half of 2005, Private Banking total revenues were £34.4 million (H1
2004: £30.8 million*). Profit before tax was £2.2 million (H1 2004: £2.0
million). Net new business inflows for the period were £0.4 billion (H1 2004:
£0.3 billion) and funds under management at the end of June were £6.9 billion
(End 2004: £6.3 billion).
* The comparative revenue and interest receivable figures have been restated to
reclassify all Private Banking interest receivable to revenue (see Note 1 to the
Consolidated Income Statement).
Private Equity
Realised gains and carried interest participations resulted in Private Equity
profits in the first half of £18.0 million (H1 2004: £13.9 million).
Group Net Income/(Costs)
Profits for the period were £3.5 million (H1 2004: £1.4 million) due principally
to higher earnings on seed capital.
Dividend
The Board has decided to increase the interim dividend by 0.5 pence to 7.0 pence
per share. The dividend will be paid on 28 September 2005 to shareholders on the
register at 26 August 2005. The Board has also approved the introduction of a
Dividend Reinvestment Plan to enable shareholders to exchange their dividends
for additional shares. This will be in place in time for the interim dividend.
Outlook
Revenue and profit margins have continued to improve, benefiting from further
changes in the business mix. A major upward shift in revenue margins has been
achieved over the last three years, but we still see some further scope for
improvement. More importantly, we see good medium-term growth prospects for our
retail business and encouraging signs in institutional. In pursuing these
opportunities we continue to invest in talent across the firm and in upgrading
our infrastructure.
Michael Dobson
Chief Executive
16 August 2005
This interim announcement does not constitute the full Interim Report for 2005.
The Interim Report is expected to be posted to shareholders on 22 August 2005.
Forward-looking statements
This interim announcement contains certain forward-looking statements with respect
to the financial condition, results of operations and businesses of Schroders plc.
These statements and forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future. There are a
number of factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking statements and
forecasts. Nothing in this announcement should be construed as a profit forecast.
Consolidated Income Statement (unaudited)
Six months Six months Year ended
ended 30 June ended 30 31 December
2005 June 2004 2004
£mn £mn £mn
_____________________________________________________________________________
Revenue 366.8 291.2 630.1
Profit on
disposal of
non-current
asset
investments - - 47.8
________________________________
Total revenue 366.8 291.2 677.9
Cost of sales (61.7) (40.5) (86.7)
________________________________
Gross profit 305.1 250.7 591.2
Gain on
discontinued
outsourcing
contract 20.4 - -
Administrative
expenses (218.4) (185.7) (396.2)
Depreciation (5.4) (5.5) (12.4)
________________________________
Operating
profit 101.7 59.5 182.6
Share of
profit of
associates 9.0 2.6 6.0
Interest
receivable and
similar income 13.2 10.8 23.7
Interest
payable and
similar
charges (0.4) (0.3) (0.7)
________________________________
Profit before
tax 123.5 72.6 211.6
UK tax (14.4) (2.8) (6.0)
Foreign tax (18.4) (13.1) (34.3)
Tax (32.8) (15.9) (40.3)
________________________________
Profit after
tax 90.7 56.7 171.3
________________________________
Attributable to:
Minority
interests 0.9 - 15.6
Equity holders
of the parent 89.8 56.7 155.7
________________________________
90.7 56.7 171.3
________________________________
Memo -
dividends (39.2) (37.6) (56.4)
Basic earnings
per share 30.8p 19.5p 53.5p
Diluted
earnings per
share 30.6p 19.4p 53.1p
Note 1: The comparative revenue and interest receivable figures have been
restated to reclassify all Private Banking interest receivable to revenue.
Previously, Private Banking interest receivable had been split between interest
earned on own capital and net interest generated through the deposit/loan book.
This new presentation has been adopted to align the accounting treatment more
closely to the way in which the function manages its business. The effect of
this has been to increase revenue by £4.6 million for the full year 2004, and by
£2.0 million for the six months to 30 June 2004, with corresponding decreases in
interest receivable.
Consolidated Balance Sheet (unaudited)
30 June 30 June 31 December
2005 2004 2004
£mn £mn £mn
_____________________________________________________________________________
Non-current assets
Intangible assets 32.1 37.5 35.8
Property, plant &
equipment 7.3 9.4 7.5
Associates 33.7 51.2 54.9
Other investments 113.9 69.2 64.9
Deferred tax 54.1 57.3 54.1
Trade and other
receivables 205.5 227.7 212.1
___________________________________
446.6 452.3 429.3
Current assets
Investments 1,676.3 1,327.5 1,346.6
Current tax 13.6 11.7 2.0
Trade and other
receivables 648.6 529.2 489.1
Cash and cash
equivalents 367.1 429.5 432.1
___________________________________
2,705.6 2,297.9 2,269.8
Non-current
assets
held-for-sale 15.8 25.0 31.2
___________________________________
Total assets 3,168.0 2,775.2 2,730.3
___________________________________
Equity
Called up share
capital 297.0 296.3 297.0
Share premium
account 26.8 22.1 26.7
Shares to be
issued - 4.9 -
Capital reserves 136.1 141.3 160.5
Own shares held (34.6) (30.7) (30.1)
Retained profits 818.5 611.0 681.9
___________________________________
Equity
attributable to
equity holders of
the parent 1,243.8 1,044.9 1,136.0
Minority
interests 3.7 - 11.4
___________________________________
Total equity 1,247.5 1,044.9 1,147.4
Non-current liabilities
Debt securities
in issue - 7.9 -
Deferred tax 2.0 4.1 4.2
Provisions 7.5 14.9 6.9
Current tax 0.3 6.6 5.2
Trade and other
payables 203.1 230.1 226.9
___________________________________
212.9 263.6 243.2
Current liabilities
Debt securities
in issue 4.2 40.7 34.3
Provisions 12.1 8.0 12.0
Current tax 37.4 29.0 30.4
Trade and other
payables 1,653.9 1,389.0 1,263.0
___________________________________
1,707.6 1,466.7 1,339.7
___________________________________
Total equity and
liabilities 3,168.0 2,775.2 2,730.3
_____________________________________________________________________________
Consolidated Statement Of Recognised Income And Expense
(unaudited)
Six Six Year
months months ended 31
ended 30 ended 30 December
June 2005 June 2004 2004
£mn £mn £mn
_____________________________________________________________________________
Exchange
differences on
translation of
foreign
operations 3.9 (8.4) (8.0)
Actuarial
(losses)/gains
on defined
benefit
pension
schemes (14.5) 2.3 (8.4)
Share-based
payments 10.0 5.0 14.5
Net gains on
first time
adoption of
IASs 32 and 39 47.8 - -
Net gains on
available-for-
sale
investments 5.2 - -
Tax on items
taken directly
to equity 4.5 (0.7) 4.3
___________________________________
Net
income/(expens
e) recognised
directly in
equity 56.9 (1.8) 2.4
Profit for the
period 90.7 56.7 171.3
___________________________________
Total
recognised
income and
expense for
the period 147.6 54.9 173.7
___________________________________
Attributable to:
Minority
interests 0.9 - 15.6
Equity holders
of the parent 146.7 54.9 158.1
___________________________________
147.6 54.9 173.7
_____________________________________________________________________________
Consolidated Cash Flow Statement (unaudited)
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2005 2004 2004
£mn £mn £mn
______________________________________________________________________________
Operating activities
Operating
profit 101.7 59.5 182.6
Depreciation 5.4 5.5 12.4
(Increase)/decrease in
debtors (147.7) (39.8) 35.0
Increase/(decr
ease) in
creditors and
other
provisions 384.8 102.0 (20.3)
Net decrease
in debt
securities in
issue (30.1) (0.3) (6.4)
Profit on
disposal of
business (0.2) (2.7) (2.6)
Profit on
disposal of
non-current
asset
investments - - (47.8)
Gain on
discontinued
outsourcing
contract (20.4) - -
Reversal of
impairment of
non-current
asset
investments (0.1) - (1.3)
Provisions 1.0 (1.1) 2.2
Net gains on
current asset
investments (6.9) (3.9) (16.0)
Share-based
payments
expensed 10.0 (3.8) (9.3)
Other non-cash
movements (6.1) (2.0) 14.8
Special
payment made
to UK pension
scheme (30.3) - -
United Kingdom
corporation
tax paid (6.9) - (1.5)
Overseas tax
paid (21.4) (8.3) (17.0)
Interest paid (0.4) (0.3) (0.7)
Net increase
in current
asset
investments (276.9) (88.6) (113.2)
_____________________________________
Net cash (used
in)/from
operating
activities (44.5) 16.2 10.9
Investing activities
Proceeds from
disposal of
business - 2.5 2.8
Purchase of
intangible
assets - (1.8) (3.8)
Purchase of
property,
plant &
equipment (1.7) (1.2) (3.4)
Purchase of
non-current
asset
investments (29.1) (31.1) (59.4)
Proceeds from
sale of
property,
plant &
equipment 0.2 0.1 1.0
Proceeds from
sale of
non-current
asset
investments 25.8 28.4 57.2
Proceeds from
repayment of
loans by
associates 30.3 - -
Net (purchase
of)/proceeds
from current
asset
investments (4.6) 5.9 (5.8)
Interest
received 14.3 12.6 24.8
Dividends/capi
tal
distributions
received from
associates &
joint ventures 0.1 0.1 0.2
Disposal of
non-current
asset
investments - - 42.2
_____________________________________
Net cash from
investing
activities 35.3 15.5 55.8
Financing activities
Proceeds from
issue of share
capital 0.1 0.1 0.6
Net
(acquisition)/
disposal of
own shares (7.5) 4.8 (8.9)
Redemption of
ordinary share
capital (0.2) - (0.6)
Distributions
made to
minority
interests (8.3) - (4.4)
Dividends paid (39.2) (37.7) (56.4)
_____________________________________
Net cash used
in financing (55.1) (32.8) (69.7)
_____________________________________
Net decrease
in cash and
cash
equivalents (64.3) (1.1) (3.0)
_____________________________________
Opening cash
and cash
equivalents 432.1 438.5 438.5
Net decrease
in cash and
cash
equivalents (64.3) (1.1) (3.0)
Effect of
exchange rate
changes (0.7) (7.9) (3.4)
_____________________________________
Closing cash
and cash
equivalents 367.1 429.5 432.1
_______________________________________________________________________________
Segmental Reporting (unaudited)
Six months ended Asset Private Private Group Net Total
30 June 2005 Management Banking Equity Income/ £mn
£mn £mn £mn (Costs)
£mn
_______________________________________________________________________________
External
revenue 311.9 37.2 9.8 7.9 366.8
Inter-segment
revenue 1.7 (2.8) - 1.1 -
________________________________________________________
Total revenue 313.6 34.4 9.8 9.0 366.8
Cost of sales (61.6) (0.1) - - (61.7)
________________________________________________________
Gross profit 252.0 34.3 9.8 9.0 305.1
Gain on
discontinued
outsourcing
contract 20.1 0.3 - - 20.4
Administrative
expenses (170.6) (30.4) (1.4) (16.0) (218.4)
Depreciation (3.4) (2.0) - - (5.4)
________________________________________________________
Operating
profit 98.1 2.2 8.4 (7.0) 101.7
Share of
profit of
associates 0.1 - 8.9 - 9.0
Interest
receivable and
similar income 1.8 - 0.7 10.7 13.2
Interest
payable and
similar
charges (0.2) - - (0.2) (0.4)
________________________________________________________
Profit before
tax 99.8 2.2 18.0 3.5 123.5
________________________________________________________
Six months ended Asset Private Private Group Net Total
30 June 2004 Management Banking Equity Income/ £mn
£mn £mn £mn (Costs)
£mn
_______________________________________________________________________________
External
revenue 244.1 32.8 12.1 2.2 291.2
Inter-segment
revenue 1.4 (2.0) - 0.6 -
________________________________________________________
Total revenue 245.5 30.8 12.1 2.8 291.2
Cost of sales (40.1) (0.4) - - (40.5)
________________________________________________________
Gross profit 205.4 30.4 12.1 2.8 250.7
Administrative
expenses (147.2) (27.2) (1.2) (10.1) (185.7)
Depreciation (4.3) (1.2) - - (5.5)
________________________________________________________
Operating
profit 53.9 2.0 10.9 (7.3) 59.5
Share of
profit of
associates 0.2 - 2.4 - 2.6
Interest
receivable and
similar income 1.4 - 0.6 8.8 10.8
Interest
payable and
similar
charges (0.2) - - (0.1) (0.3)
________________________________________________________
Profit before
tax 55.3 2.0 13.9 1.4 72.6
________________________________________________________
Segmental Reporting (unaudited)
Year ended Asset Private Private Group Net Total
31 December 2004 Management Banking Equity Income/ £mn
£mn £mn £mn (Costs)
£mn
_______________________________________________________________________________
External
revenue 520.8 68.5 31.7 9.1 630.1
Inter-segment
revenue 3.0 (4.7) - 1.7 -
________________________________________________________
Revenue 523.8 63.8 31.7 10.8 630.1
Profit on
disposal of
non-current
asset
investments - - 47.8 - 47.8
________________________________________________________
Total revenue 523.8 63.8 79.5 10.8 677.9
Cost of sales (86.2) (0.5) - - (86.7)
________________________________________________________
Gross profit 437.6 63.3 79.5 10.8 591.2
Administrative
expenses (311.8) (56.0) (2.8) (25.6) (396.2)
Depreciation (9.2) (2.7) - (0.5) (12.4)
________________________________________________________
Operating
profit 116.6 4.6 76.7 (15.3) 182.6
Share of
profit of
associates 0.2 - 5.8 - 6.0
Interest
receivable and
similar income 3.4 - 1.3 19.0 23.7
Interest
payable and
similar
charges (0.4) - - (0.3) (0.7)
________________________________________________________
Profit before
tax 119.8 4.6 83.8 3.4 211.6
_______________________________________________________________________________
Note 2: The comparative revenue and interest receivable figures have been
restated to reclassify all Private Banking interest receivable to revenue (see
Note 1 to the Consolidated Income Statement). Inter-segment revenues represent
interest payable and receivable on cash balances held by Private Banking on
behalf of Group companies.
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