7th Mar 2019 09:02
LONDON (Alliance News) - Schroders PLC on Thursday reported a drop in profit and assets in 2018 as the asset manager undergoes restructuring to focus on areas of growth.
The asset and wealth management company reported that pretax profit decreased by 15% to GBP649.9 million from GBP760.2 million in 2017.
Schroders' revenue grew by 4.8% in 2018 to GBP2.63 billion from GBP2.51 billion in 2017, with net income increasing 2.4% to GBP2.12 billion.
The asset manager proposed a final dividend of 79.0 pence per share, flat on the year before, resulting in a slight increase in the total dividend to 114.0p from 113.0p in 2017.
Schroders ended 2018 with GBP363.5 billion in assets under management, down 6.7% from GBP389.8 billion at the start. Market consensus had forecast Schroders would end 2018 with GBP413.3 billion in assets under management.
The asset management unit saw GBP11.2 billion in net outflows, swung from GBP7.6 billion in inflows in 2017, with Schroders blaming "macro and political issues" which "impacted investor sentiment".
Schroders's total assets under management and administration, which includes its wealth management business, decreased 5.7% to GBP421.4 at December 31 billion from GBP447.0 billion at January 1. Schroders suffered net outflows of GBP9.5 billion, swung from GBP9.6 of net inflows in 2017.
Schroders said "declining markets" and foreign exchange movements shed GBP19.6 billion from its total assets under management and administration. In 2017, the same movements added GBP31.6 billion.
"We have been pleased with the underlying strength of the business and the resilience of our diversified business model in 2018. We were delighted to achieve over GBP85 billion of notified net new inflows at the year end, despite seeing net outflows of GBP9.5 billion," said Chief Executive Peter Harrison.
Schroders' net operating revenue increased slightly to GBP2.07 billion, marginally ahead of consensus of GBP2.06 billion. The company's pretax profit before exceptional items decreased 4.9% to GBP761.2 million, ahead of consensus of GBP756.8 million.
Schroders noted that investment performance "remained strong", with 43% of its asset management division's assets outperforming over one year - down from 70% in 2017, 74% over three years, and 76% over five years, as compared to 74% and 85%, respectively.
Looking ahead, Schroders said it has undertaken structural changes to the company to "realign its focus" on areas of growth. Schroders booked a one-off cost of GBP56.0 million as part of the restructuring.
Harrison said: "We continued to invest for growth and saw good progress in a number of strategically important areas. There was strong demand from Wealth Management clients and we announced that we would be entering into a partnership with Lloyds Banking Group PLC to expand our proposition in the UK savings market, under the brand of Schroders Personal Wealth.
"Through organic growth and selective acquisitions, we further increased our footprint and capabilities in North America and Private Assets and Alternatives, two key areas of strategic growth."
Schroders noted the "headwinds facing the industry" but is confident in its outlook.
Schroders shares were down 2.9% at 2,677.33p in early trading on Thursday.
Schroders also announced Thursday it has appointed Deborah Waterhouse and Leonie Schroder as independent non-executive directors, effective next Monday.
Leonie Schroder is a descendant of John Henry Schroder and currently runs Schroders Charity Trust.
Chair Michael Dobson said: "Leonie's appointment reflects the commitment to Schroders of the principal shareholder group, which has been an important part of Schroders' success over the long term. For over 40 years the board has included two directors with a connection to the principal shareholder group. We believe that having two members of the family serving on the board benefits the company in aligning interests and reinforcing long term thinking."
Waterhouse is chief executive of UK healthcare company ViiV Healthcare which focus on treatment for HIV patients. It was created in 2009 as a joint venture between Pfizer Inc and GlaxoSmithKline PLC.
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