24th Apr 2008 07:01
Schroders PLC24 April 2008 Schroders plc Interim management statement 24 April 2008 Schroders plc is today issuing an interim management statement for the threemonths to 31 March 2008. • Asset Management and Private Banking profit before tax increased 9 per cent. to £76.5 million (Q1 2007: £70.0 million) • Positive net sales in Retail despite difficult market conditions; reduced net outflows in Institutional • Total profit before tax was £42.2 million (Q1 2007: £93.2 million) reflecting lower Private Equity realisations and unrealised fair value write downs on investments within Group capital Asset Management Asset Management income for the quarter was £197.1 million (Q1 2007: £177.3million), costs were £131.5 million (Q1 2007: £114.8 million) and profit beforetax was up 5 per cent. to £65.6 million (Q1 2007: £62.5 million). In March we announced that we had reached agreement to acquire Swiss Re AssetManagement Funds (Switzerland) AG, the Swiss third party institutional fundmanagement business of Swiss Re, which is expected to complete in the secondquarter. The business, which had assets under management of £0.9 billion splitbetween European equities and Swiss property, will broaden our offering to Swissinstitutional clients. Private Banking Private Banking income for the quarter was £27.4 million (Q1 2007: £23.1million), costs were £16.5 million (Q1 2007: £15.6 million) and profit beforetax was up 45 per cent. to £10.9 million (Q1 2007: £7.5 million). Private Equity and Group As anticipated at the time of the 2007 preliminary results announcement, morechallenging market conditions have reduced the level of Private Equityrealisations. Profit from Private Equity for the quarter was £2.4 million (Q12007: £19.9 million) with unrealised gains in our Private Equity portfoliounchanged on the quarter at £74.5 million. The loss in Group for the quarter was £36.7 million (Q1 2007: profit £3.3million). Lower equity markets and the dislocation in fixed income markets inthe first quarter, particularly in March, led to reduced valuations for certainassets held within Group capital and we took unrealised fair value write downsof £7.7 million on seed capital investments and £25.8 million on fixed incomesecurities. Although further write downs cannot be ruled out if current marketuncertainties persist, detailed review of our holdings leads us to expect arecovery in valuations over time. Further details of the deployment of Groupcapital are set out in the appendix. Group capital at 31 March 2008 was £1,704 million (31 December 2007: £1,696million) after spending £58.8 million during the quarter on the repurchase andcancellation of 7 million non-voting ordinary shares. Funds under management Funds under management at 31 March 2008 were £130.6 billion (31 December 2007:£139.1 billion) with net inflows in the quarter of £0.5 billion in Retail and£0.3 billion in Private Banking. Net outflows in Institutional amounted to £1.7billion. Outlook As we indicated at the time of our 2007 preliminary results, the setback inequity markets and high levels of volatility in financial markets have led to aless favourable environment for our business. Despite this, the performance ofour Asset Management and Private Banking businesses is proving resilient,benefiting from our strategy of geographic, product and channel diversification. We have seen positive inflows into our Retail business and a reduced level ofInstitutional outflows in the first quarter of 2008. We continue to see thismore challenging period as an opportunity to position Schroders for furthergrowth in the longer-term. Michael Dobson, Chief Executive, and Stephen Brooks, Chief Financial Officer,will host a conference call for the investment community, to discuss the firstquarter interim management statement at 9 am BST on Thursday, 24 April 2008. Theconference call telephone number is 0800 694 1503 (International: +44 (0)1452586 513), conference ID 44479692. For individuals unable to participate in theconference call, a telephone replay will be available until Wednesday 30 April2008. Please telephone 0800 953 1533 (International: +44(0) 1452 550 000),conference ID 44479692#. For further information please contact: SchrodersEmma Tovey - Head of Corporate Communications +44 20 7658 2329 [email protected] MaitlandWilliam Clutterbuck +44 20 7379 5151 [email protected] Forward-looking statements This interim management statement may contain forward-looking statements withrespect to the financial condition, results, operations and businesses ofSchroders plc. Such statements and forecasts involve risk and uncertaintybecause they relate to events and depend upon circumstances that will occur inthe future. There are a number of factors that could cause actual results ordevelopments to differ materially from those expressed or implied byforward-looking statements and forecasts. Forward-looking statements andforecasts are based on the Directors' current view and information known to themat the date of this statement. The Directors do not make any undertaking toupdate or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. Nothing in this interim managementstatement should be construed as a profit forecast. Appendix - Group capital as at 31 March 2008 The following table summarises the deployment of Group capital: £ million 31 December 31 March 2007 2008 Cash and cash equivalents 582 492Fixed income: mortgage and asset backed securities 249 209Third party hedge funds 208 208Seed capital 191 182Private Banking net assets 213 218Private Equity 138 139Pension fund surplus 43 44Other net assets 72 212Total Group capital 1,696 1,704 Within Group capital, we hold US mortgage and asset backed securities, with theobjective of delivering a LIBOR+ return, as part of a diversified portfoliowhich includes investments in seed capital, private equity and hedge funds.Financial market conditions in the first quarter have resulted in an unrealisedfair value write down on these fixed income securities of £25.8 million, 80 percent. of which occurred in March. Of these investments, 90 per cent. are ratedAAA and two-thirds were originated before 2006. An analysis of these mortgageand asset backed securities is provided below: Origination date Pre 2006 2006 2007 Total % of totalCredit rating £mn £mn £mn £mnAAA 120 51 18 189 90Related Shares:
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