Title: Schroders
1- Schroders
- Annual Results 2006
2Forward-Looking Statements
- These presentation slides contain forward-looking
statements and forecasts with respect to the
financial condition and results of the businesses
of Schroders plc and its subsidiaries - These statements and forecasts involve risk and
uncertainty because they relate to events and
depend upon circumstances that may 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
those forward-looking statements and forecasts.
Nothing in this announcement should be construed
as a profit forecast
3Michael DobsonChief Executive
4Jonathan AsquithChief Financial Officer
5Overview
- Profit before tax 290.0 million(2005 250.7
million) - Asset Management profit before tax 219.0
million(2005 193.9 million) - Private Banking profit before tax 26.9
million(2005 6.3 million) - Private Equity profit before tax 34.6
million(2005 40.3 million) - Funds under management 128.5 billion(31
December 2005 122.5 billion) - Total dividend for the year of 25.0 pence per
share (2005 21.5 pence per share)
6Profit Before Tax
mn
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
7Profit Before Tax
Asset Management
mn
193.9
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS Figures 2001-2003
include Private Banking
8Profit Before Tax
Private Banking
mn
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
9Profit Before Tax
Private Equity and Group
mn
IFP
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
10Profit Before Tax
Reconciliation 2005 to 2006
mn
350
300
(20.4)
250
200
150
250.7
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
11Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
350
300
107.8
250
200
150
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
Underlying Asset Management net income (mn)
Difference
2006
2005
Revenue External cost of sales Asset Management
gross profit Net interest and other
income Underlying net income
143.3 (37.4) 105.9 1.9 107.8
811.1 (166.2) 644.9 10.7 655.6
667.8 (128.8) 539.0 8.8 547.8
12Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
350
300
(62.6)
107.8
250
200
150
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
Asset Management costs (mn)
Difference
2006
2005
Asset Management staff costs Asset Management
other costs Asset Management total costs
(33.1) (29.5) (62.6)
(297.6) (139.0) (436.6)
(264.5) (109.5) (374.0)
13Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
mn
350
45.2
300
(62.6)
107.8
250
200
150
230.3
100
50
0
Underlying Asset
2005 pre tax profit
2006 pre tax profit
Management net
income
Underlying Asset Management profit (mn)
Difference
2006
2005
Underlying profit before tax
45.2
219.0
173.8
14Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
mn
mn
350
20.9
300
250
45.2
200
150
230.3
100
50
0
2006 pre tax profit
2005 pre tax profit
Underlying Private Banking profit(mn)
Difference
2006
2005
Revenue External cost of sales Gross
profit Costs Underlying profit before tax
24.4 (0.8) 23.6 (2.7) 20.9
98.5 (2.8) 95.7 (68.8) 26.9
74.1 (2.0) 72.1 (66.1) 6.0
15Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
mn
mn
mn
350
(5.7)
20.9
300
250
45.2
200
150
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
Private Equity profit
Private Equity (mn)
Difference
2006
2005
Profit before tax
(5.7)
34.6
40.3
16Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
mn
mn
mn
mn
350
(5.7)
(0.7)
20.9
300
250
45.2
200
150
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
Private Equity profit
Group (mn)
Difference
2006
2005
Gross profit Surplus space Administrative
expenses Net interest and other income Profit
before tax
0.2 4.7 2.8 (8.4) (0.7)
31.0 (4.5) (29.2) 12.2 9.5
30.8 (9.2) (32.0) 20.6 10.2
17Profit Before Tax
Reconciliation 2005 to 2006
mn
mn
mn
mn
mn
mn
mn
350
(5.7)
(0.7)
20.9
300
250
45.2
200
150
230.3
100
50
0
2005 pre tax profit
2006 pre tax profit
Private Equity profit
18Costs
Total Group
mn
2006
2005
309.8 154.4 9.2 10.9 484.3
345.2 185.1 4.5 7.5 542.3
Staff costs Other costs Surplus space
provisions Depreciation and amortisation Total
administrative expenses
19Costs
Total Group
mn
700
542.3
600
520.0
484.3
470.1
500
408.6
406.2
400
300
200
100
0
2001
2002
2003
2004
2005
2006
Staff Costs
Non-staff Costs
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
20Compensation Costs Operating Revenues
70
57
56
56
60
51
51
47
50
40
30
20
10
0
2001
2002
2003
2004
2005
2006
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
21Cost Income Ratio
120
102
96
100
86
80
66
66
65
60
40
20
0
2001
2002
2003
2004
2005
2006
Figures 2001-2003 based on UK GAAP, figures to
2004 onwards based on IFRS
22Capital Allocation
31 December 2006
31 December 2005
mn
Regulatory Other operating Goodwill
Intangibles Liquid funds Third party hedge
funds Other Schroders funds Private
Equity Leasing Total
230.0 208.2 24.6 411.9 134.3 165.9 160.9 7.0 1,342
.8
258.6 322.3 73.5 311.8 138.4 163.7 168.2 6.9 1,443
.4
23Funds Under Management
31 Dec 2006 (31 Dec 2005)
By client type
By client domicile
24Funds Under Management
31 Dec 2006 (31 Dec 2005)
Equities
Fixed Income
By asset type
25Movements in Funds Under Management
Institutional
Retail
PrivateBanking
Total
bn
31 December 2005 Purchase of NFC Net asset
(losses)/gains Market movement 31 December 2006
78.7 1.4 (8.0) 5.3 77.4
36.0 0.0 3.8 2.7 42.5
7.8 0.0 0.4 0.4 8.6
122.5 1.4 (3.8) 8.4 128.5
26Gross Profits and Margin
2006
2005
Gross Profit
Margin (bps)
Gross Profit
Margin (bps)
mn
Institutional Retail Total Asset
Management Private Banking
254.1 284.9 539.0 72.1
295.6 349.3 644.9 95.7
35 85 51 105
38 89 55 117
27Dividends and Earnings Per Share
2005
2006
2004
Interim Final Basic earnings per share Diluted
earnings per share
18.8 39.2 58.0 53.5p 53.1p
6.5 13.5 20.0
7.0 14.5 21.5
20.3 42.0 62.3 65.7p 65.1p
21.449.7 71.1 76.9p 75.7p
7.517.525.0
28Massimo TosatoGlobal Head of Distribution
29The Market Long Term Trends
Demographics
Defined Benefit Schemes
Defined Contribution Schemes Personal Savings
Channels
- Growth of individual and instividual savings
Products
- Outcome oriented products
- Strategic solutions
30Schroders Positioning within these Trends
- Channel
- Product
- Geography
31An International Example
The Luxembourg mutual fund platform
FUM (bn) Headcount Subfunds Share
Classes Countries
Outsourced treasury, fund accounting, fund
custody, stock lending
32Gross Sales
bn
35.3
CAGR 35.6
28.6
23.7
20.3
10.7
7.7
33Alan BrownGlobal Head of Investment
34Investment Performance
of Institutional and Retail assets above and
below benchmark
3 years to 31 December 2006
Retail
Institutional
Above benchmark
Below benchmark
35Our Traditional Business
- Challenges
- UK Multi-Asset
- Japan Equities
Continued Restructuring Performance
36Harnessing Change
- Catalysts
- Accounting Rules and Regulation
- Defined Benefit Defined Contribution
Two Themes Diversification Outcome Oriented
Strategies
37Diversification
Multi-Asset team
Schroder Property
Alternative Investments Group NewFinance
Capital
- DGF Equity return at
lower volatility - Property Securities Global
diversification and liquidity - Commodities Diversification and real asset
- Hedge Fund of Funds Best of breed
diversification
38Outcome Oriented Strategies
- LDI Liability matching
portfolios - Structured Products Capital guarantees, income
products - Absolute and Total Return Credit
notes, strategic bond - Benchmark Unaware
Global active value, improved Sharpe ratios
Multi-Asset team
Multi-Asset team Fixed
Income Quantitative Equity
39Philip MallinckrodtGlobal Head of Private Banking
40Private Banking Summary
- Considerable progress in 2006
- Positioning for growth over next five years
- Integrated business model for our banks in UK,
Guernsey and Switzerland
41Management Priorities in 2006/7
- Integrate back office in Zurich
- Sharpen our client proposition
42Michael DobsonChief Executive
43 44Income Statement Progression
Profit before tax
mn
Q3 2005
Q42005
Q12006
Q22006
Q32006
Q42006
Asset Management income Asset Management
cost Asset Management profit Private Banking
profit Private Equity Group Profit before tax
141.2 (95.1) 46.1 1.5 5.5 10.5 63.6
152.9 (104.9) 48.0 2.6 16.8 (3.8) 63.6
152.8 (102.9) 49.9 3.7 7.2 10.6 71.4
152.4 (105.5) 46.9 7.5 10.5 (4.0) 60.9
157.2 (108.9) 48.3 6.9 6.2 2.6 64.0
193.2 (119.3) 73.9 8.8 10.7 0.3 93.7
452006 Business Segment Profits
mn
9.5
290.0
34.6
26.9
219.0
46Gross Profit Margins
Asset Management gross profit 644.9
million(2005 539.0 million)
Asset Management
2005
2006
Gross profit on average AM FUM Of which
performance fees Costs on average AM FUM Net
Average AM FUM
51bps 2bps 35bps 16bps 106.5bn
55bps 4bps 37bps 18bps 116.6bn
47Gross Profit Margins
Asset Management gross profit 644.9
million(2005 539.0 million)
Private Bank gross profit 95.7 million(2005
72.1 million)
Asset Management Private Bank
2005
2006
Gross profit on average AM FUM Gross profit on
average PB FUM Gross profit on average AM PB
FUM Average combined FUM
51bps 104bps 54bps 113.4bn
55bps 117bps 59bps 124.8bn
48Comparison of Costs
Asset Management
mn
2006
2005
Staff costs Other costs Depreciation and
amortisation Total administrative expenses
264.5 102.8 6.7 374.0
297.6 134.0 5.0 436.6
49Comparison of Costs
Private Banking
mn
2006
2005
Staff costs Other costs Depreciation and
amortisation Total administrative expenses
34.0 27.9 4.2 66.1
35.8 30.5 2.5 68.8
50Headcount
No. employees
51Balance Sheet
mn
31 Dec 2006
31 Dec 2005
80.3 701.8 2,736.7 60.1 1,532.0 5,110.9 1,443.6 3
38.4 1,796.9 1,532.0 5,110.9
Intangible assets Other non-current
assets Current assets Non-current assets held for
sale Assets backing insurance unit-linked
liabilities Total assets Total
equity Non-current liabilities Current
liabilities Insurance unit-linked
liabilities Total equity and liabilities
30.2 526.9 2,760.9 23.4 0.0 3,341.4 1,343.1 210.2
1,788.1 0.0 3,341.4
52Asset Management Balance Sheet
mn
31 Dec 2005
31 Dec 2006
23.3 109.6 514.9 0.0 647.8 278.6 59.6 309.6 0.0 6
47.8
75.0 98.9 721.4 1,532.0 2,427.3 414.0 86.2 395.1
1,532.0 2,427.3
Intangible assets Other non-current
assets Current assets Assets backing insurance
unit-linked liabilities Total assets Total
equity Non-current liabilities Current
liabilities Insurance unit-linked
liabilities Total equity and liabilities
53Capital Allocation
Asset Managementmn
PrivateBankingmn
PrivateEquitymn
Groupmn
Totalmn
31 Dec 2006
Regulatory Other operating Goodwill Liquid
funds Third party hedge funds Other Schroders
funds Private equity Leasing 31 Dec
2005 Regulatory Other operating Goodwill Liquid
funds Third party hedge funds Other Schroders
funds Private equity Leasing
258.6 322.3 73.5 311.8 138.4 163.7 168.2 6.9 1,443
.4 230.0 208.2 24.6 411.9 134.3 165.9 160.9 7.0 1
,342.8
111.4 76.9 5.0 0.0 0.0 0.0 0.0 0.0 193.3 107.5 59
.9 3.6 0.0 0.0 0.0 0.0 0.0 171.0
0.0 0.0 0.0 0.0 0.0 0.0 168.2 0.0 168.2 0.0 0.0 0
.0 0.0 0.0 0.0 160.9 0.0 160.9
0.0 57.5 0.0 301.5 138.4 163.7 0.0 6.9 668.0 0.0
58.2 0.0 366.9 134.3 165.9 0.0 7.0 732.3
147.2 187.9 68.5 10.3 0.0 0.0 0.0 0.0 413.9 122.5
90.1 21.0 45.0 0.0 0.0 0.0 0.0 278.6
54Reconciliation of Movement in Capital
2006
Opening balance at 1 January 2006 Movements in
respect of shares and share-based payments Net
movement in share capital Net movement in own
shares Share-based payments net of tax Shares to
be issued Movements in respect of current year
profits and unrealised items of income and
expense Profit for the year after dividends and
minority interests Exchange differences net of
hedging Actuarial gains net of tax Gains on
investment net of amounts recycled through the
income statement Closing balance at 31 December
2006
1,342.8 (56.5) (60.2) 35.8 15.1
(65.8) 157.9 (33.7) 3.8 38.4 166.4 1,443.4
55Private Equity Interests
Schroders plc
Carried Interest
Investments
(Total 128 mn)
(Total 40 mn)
SVG Capital plc
Permira
59mn
Funds I II
Quoted Investment Trust
Other SV funds
SVIL
21mn
US, Canada, Japan, Life Sciences, Asia Pacific
Co-investment vehicle
GP LP Interests
31mn
Permira and other funds
Fund of Funds I, II, III
13mn
Stand-alone portfolio
Other
4mn
Share of carry between 7.5 and 36
56Private Equity Results
31 Dec 2006
31 Dec 2005
16 40mn 11mn 51mn
12 35mn 25mn 60mn
Percentage of Group profit Gains through
PL Movement in unrealised gains Total gains
57Gross New Business 2006
38.0 billion
Clients
2006 bn
2005 bn
Products
2006 bn
2005 bn
Institutional
9.2
8.3
Equities
24.1
18.4
Retail
26.1
20.3
Fixed income
12.2
10.5
Private Banking
2.7
2.1
Alternative investments
1.7
1.8
Total
38.0
30.7
Total
38.0
30.7
58Net Change in Business
bn
2006
2005
In
Out
Net
In
Out
Net
Institutional Retail Private Banking Total
(17.2) (22.3) (2.3) (41.8)
9.2 26.1 2.7 38.0
(8.0) 3.8 0.4 (3.8)
(14.2) (20.3) (1.5) (36.0)
8.3 20.3 2.1 30.7
(5.9) 0.0 0.6 (5.3)
59Gross Client Flows
Current disclosures
- Institutional
- Flows from same client netted within the month
- Inflows and outflows in different months not
netted - Approximately 50 of total outflows occur within
ongoing client relationships - Retail
- Sub-advisory and Branded Funds inflows and
outflows from the same distributor clients in the
same month are reported gross no netting - Switching activity netted but this relates to
in specie switches only, which are small
60Retail Alternative Disclosures
bn
In
Out
Net
Gross Disclosure
Retail
(22.3)
26.1
3.8
Sub-advisory and Branded Funds inflows and
outflows from the same distributor clients netted
within month
bn
In
Out
Net
Revised Retail Disclosure
Retail
(7.6)
11.4
3.8