16th Aug 2005 17:51
Schroders PLC16 August 2005 Press Release 16 August 2005 Schroders plcInterim Results to 30 June 2005 Schroders plc today announces its interim results to 30 June 2005 prepared underthe International Financial Reporting Standards (IFRS) regime. Results forcomparative periods have been restated from UK GAAP to IFRS. As part of thetransition to IFRS, these results provide further analysis of the assetmanagement segmental results, showing for the first time the results of theAsset 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* 55.3 119.8Private Banking profit 2.2* 2.0 4.6Private Equity profit 18.0 13.9 83.8Group 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 millionin Private Banking. + As part of the transition to IFRS, there are two principal changes to thesegmental disclosures:(i) the segment previously described as 'Asset Management' has been divided intotwo: the majority part, being the Institutional and Retail Distribution andInvestment 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 theAsset Management segment are now included in Group Net Income/(Costs), togetherwith all other income and expenses associated with the Group's investmentcapital. The effect of this is to reduce Asset Management revenues and increaseGroup 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 6962Jonathan Asquith Chief Financial Officer +44 (0) 20 7658 6565Corina 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 continuedin the first half of 2005. Profit before tax increased 70 per cent. to £123.5million (H1 2004: £72.6 million), including a one off gain of £20.4 million dueto the discontinuation of a joint project with JPMorgan to outsource SchrodersUK custody and portfolio accounting services, as announced on 1 July 2005. Asset ManagementAsset Management total revenues increased 28 per cent. to £313.6 million (H12004: £245.5 million) reflecting a further improvement in gross margins as thebusiness mix continues to evolve in favour of retail and higher margin businesswithin institutional. Gross profit increased to £252.0 million (H1 2004: £205.4million). Asset Management administrative expenses and depreciation were £174.0 million(H1 2004: £151.5 million), the increase driven principally by higher variablecompensation costs linked to revenue growth. As a result of the discontinuationof the outsourcing project, Asset Management costs will increase from the fourthquarter of 2005 by approximately £2.5 million per quarter, but we expect toabsorb this increase over the next two years as part of our continuing programmeof 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 ofprofit of associates and net interest receivable. We achieved strong investment performance across a wide range of equity andfixed income asset classes, with 64 per cent. of institutional assetsoutperforming their benchmarks and over two thirds of our Luxembourg mutualfunds 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 UKinstitutions continued to move from balanced to specialist mandates.Institutional funds under management were £71.7 billion at the end of June (End2004: £69.1 billion). In Retail, net sales for the first half were £1.6 billion (H1 2004: £2.9billion). Following the strong first quarter, net sales were marginally positivein 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 managementcompany in China with Bank of Communications with the intention of offeringdomestic funds to Chinese retail and institutional investors. Schroders has a 30per cent. share in the joint venture which expects to launch its first fund thismonth. Private BankingIn the first half of 2005, Private Banking total revenues were £34.4 million (H12004: £30.8 million*). Profit before tax was £2.2 million (H1 2004: £2.0million). 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 toreclassify all Private Banking interest receivable to revenue (see Note 1 to theConsolidated Income Statement). Private EquityRealised gains and carried interest participations resulted in Private Equityprofits 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 principallyto higher earnings on seed capital. DividendThe Board has decided to increase the interim dividend by 0.5 pence to 7.0 penceper share. The dividend will be paid on 28 September 2005 to shareholders on theregister at 26 August 2005. The Board has also approved the introduction of aDividend Reinvestment Plan to enable shareholders to exchange their dividendsfor additional shares. This will be in place in time for the interim dividend. OutlookRevenue and profit margins have continued to improve, benefiting from furtherchanges in the business mix. A major upward shift in revenue margins has beenachieved over the last three years, but we still see some further scope forimprovement. More importantly, we see good medium-term growth prospects for ourretail business and encouraging signs in institutional. In pursuing theseopportunities we continue to invest in talent across the firm and in upgradingour infrastructure. Michael DobsonChief 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 statementsThis interim announcement contains certain forward-looking statements with respectto the financial condition, results of operations and businesses of Schroders plc.These statements and forecasts involve risk and uncertainty because they relate toevents and depend upon circumstances that will occur in the future. There are anumber of factors that could cause actual results or developments to differmaterially from those expressed or implied by these forward-looking statements andforecasts. 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 366.8 291.2 630.1Profit ondisposal ofnon-currentassetinvestments - - 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 ondiscontinuedoutsourcingcontract 20.4 - -Administrativeexpenses (218.4) (185.7) (396.2)Depreciation (5.4) (5.5) (12.4) ________________________________Operatingprofit 101.7 59.5 182.6 Share ofprofit ofassociates 9.0 2.6 6.0Interestreceivable andsimilar income 13.2 10.8 23.7Interestpayable andsimilarcharges (0.4) (0.3) (0.7) ________________________________Profit beforetax 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 aftertax 90.7 56.7 171.3 ________________________________ Attributable to:Minorityinterests 0.9 - 15.6Equity holdersof the parent 89.8 56.7 155.7 ________________________________ 90.7 56.7 171.3 ________________________________ Memo -dividends (39.2) (37.6) (56.4) Basic earningsper share 30.8p 19.5p 53.5pDilutedearnings pershare 30.6p 19.4p 53.1p Note 1: The comparative revenue and interest receivable figures have beenrestated to reclassify all Private Banking interest receivable to revenue.Previously, Private Banking interest receivable had been split between interestearned on own capital and net interest generated through the deposit/loan book.This new presentation has been adopted to align the accounting treatment moreclosely to the way in which the function manages its business. The effect ofthis 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 ininterest receivable. Consolidated Balance Sheet (unaudited) 30 June 30 June 31 December 2005 2004 2004 £mn £mn £mn _____________________________________________________________________________Non-current assetsIntangible assets 32.1 37.5 35.8Property, plant &equipment 7.3 9.4 7.5Associates 33.7 51.2 54.9Other investments 113.9 69.2 64.9Deferred tax 54.1 57.3 54.1Trade and otherreceivables 205.5 227.7 212.1 ___________________________________ 446.6 452.3 429.3Current assetsInvestments 1,676.3 1,327.5 1,346.6Current tax 13.6 11.7 2.0Trade and otherreceivables 648.6 529.2 489.1Cash and cashequivalents 367.1 429.5 432.1 ___________________________________ 2,705.6 2,297.9 2,269.8 Non-currentassetsheld-for-sale 15.8 25.0 31.2 ___________________________________Total assets 3,168.0 2,775.2 2,730.3 ___________________________________ EquityCalled up sharecapital 297.0 296.3 297.0Share premiumaccount 26.8 22.1 26.7Shares to beissued - 4.9 -Capital reserves 136.1 141.3 160.5Own shares held (34.6) (30.7) (30.1)Retained profits 818.5 611.0 681.9 ___________________________________Equityattributable toequity holders ofthe parent 1,243.8 1,044.9 1,136.0 Minorityinterests 3.7 - 11.4 ___________________________________Total equity 1,247.5 1,044.9 1,147.4 Non-current liabilitiesDebt securitiesin issue - 7.9 -Deferred tax 2.0 4.1 4.2Provisions 7.5 14.9 6.9Current tax 0.3 6.6 5.2Trade and otherpayables 203.1 230.1 226.9 ___________________________________ 212.9 263.6 243.2Current liabilitiesDebt securitiesin issue 4.2 40.7 34.3Provisions 12.1 8.0 12.0Current tax 37.4 29.0 30.4Trade and otherpayables 1,653.9 1,389.0 1,263.0 ___________________________________ 1,707.6 1,466.7 1,339.7 ___________________________________Total equity andliabilities 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_____________________________________________________________________________Exchangedifferences ontranslation offoreignoperations 3.9 (8.4) (8.0)Actuarial(losses)/gainson definedbenefitpensionschemes (14.5) 2.3 (8.4)Share-basedpayments 10.0 5.0 14.5Net gains onfirst timeadoption ofIASs 32 and 39 47.8 - -Net gains onavailable-for-saleinvestments 5.2 - -Tax on itemstaken directlyto equity 4.5 (0.7) 4.3 ___________________________________Netincome/(expense) recogniseddirectly inequity 56.9 (1.8) 2.4Profit for theperiod 90.7 56.7 171.3 ___________________________________Totalrecognisedincome andexpense forthe period 147.6 54.9 173.7 ___________________________________ Attributable to:Minorityinterests 0.9 - 15.6Equity holdersof 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 activitiesOperatingprofit 101.7 59.5 182.6Depreciation 5.4 5.5 12.4(Increase)/decrease indebtors (147.7) (39.8) 35.0Increase/(decrease) increditors andotherprovisions 384.8 102.0 (20.3)Net decreasein debtsecurities inissue (30.1) (0.3) (6.4)Profit ondisposal ofbusiness (0.2) (2.7) (2.6)Profit ondisposal ofnon-currentassetinvestments - - (47.8)Gain ondiscontinuedoutsourcingcontract (20.4) - -Reversal ofimpairment ofnon-currentassetinvestments (0.1) - (1.3)Provisions 1.0 (1.1) 2.2Net gains oncurrent assetinvestments (6.9) (3.9) (16.0)Share-basedpaymentsexpensed 10.0 (3.8) (9.3)Other non-cashmovements (6.1) (2.0) 14.8Specialpayment madeto UK pensionscheme (30.3) - -United Kingdomcorporationtax paid (6.9) - (1.5)Overseas taxpaid (21.4) (8.3) (17.0)Interest paid (0.4) (0.3) (0.7)Net increasein currentassetinvestments (276.9) (88.6) (113.2) _____________________________________Net cash (usedin)/fromoperatingactivities (44.5) 16.2 10.9 Investing activitiesProceeds fromdisposal ofbusiness - 2.5 2.8Purchase ofintangibleassets - (1.8) (3.8)Purchase ofproperty,plant &equipment (1.7) (1.2) (3.4)Purchase ofnon-currentassetinvestments (29.1) (31.1) (59.4)Proceeds fromsale ofproperty,plant &equipment 0.2 0.1 1.0Proceeds fromsale ofnon-currentassetinvestments 25.8 28.4 57.2Proceeds fromrepayment ofloans byassociates 30.3 - -Net (purchaseof)/proceedsfrom currentassetinvestments (4.6) 5.9 (5.8)Interestreceived 14.3 12.6 24.8Dividends/capitaldistributionsreceived fromassociates &joint ventures 0.1 0.1 0.2Disposal ofnon-currentassetinvestments - - 42.2 _____________________________________Net cash frominvestingactivities 35.3 15.5 55.8 Financing activitiesProceeds fromissue of sharecapital 0.1 0.1 0.6Net(acquisition)/disposal ofown shares (7.5) 4.8 (8.9)Redemption ofordinary sharecapital (0.2) - (0.6)Distributionsmade tominorityinterests (8.3) - (4.4)Dividends paid (39.2) (37.7) (56.4) _____________________________________Net cash usedin financing (55.1) (32.8) (69.7) _____________________________________Net decreasein cash andcashequivalents (64.3) (1.1) (3.0) _____________________________________Opening cashand cashequivalents 432.1 438.5 438.5Net decreasein cash andcashequivalents (64.3) (1.1) (3.0)Effect ofexchange ratechanges (0.7) (7.9) (3.4) _____________________________________Closing cashand cashequivalents 367.1 429.5 432.1_______________________________________________________________________________ Segmental Reporting (unaudited) Six months ended Asset Private Private Group Net Total30 June 2005 Management Banking Equity Income/ £mn £mn £mn £mn (Costs) £mn_______________________________________________________________________________Externalrevenue 311.9 37.2 9.8 7.9 366.8Inter-segmentrevenue 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 ondiscontinuedoutsourcingcontract 20.1 0.3 - - 20.4Administrativeexpenses (170.6) (30.4) (1.4) (16.0) (218.4)Depreciation (3.4) (2.0) - - (5.4) ________________________________________________________Operatingprofit 98.1 2.2 8.4 (7.0) 101.7 Share ofprofit ofassociates 0.1 - 8.9 - 9.0Interestreceivable andsimilar income 1.8 - 0.7 10.7 13.2Interestpayable andsimilarcharges (0.2) - - (0.2) (0.4) ________________________________________________________Profit beforetax 99.8 2.2 18.0 3.5 123.5 ________________________________________________________ Six months ended Asset Private Private Group Net Total30 June 2004 Management Banking Equity Income/ £mn £mn £mn £mn (Costs) £mn_______________________________________________________________________________Externalrevenue 244.1 32.8 12.1 2.2 291.2Inter-segmentrevenue 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 Administrativeexpenses (147.2) (27.2) (1.2) (10.1) (185.7)Depreciation (4.3) (1.2) - - (5.5) ________________________________________________________Operatingprofit 53.9 2.0 10.9 (7.3) 59.5 Share ofprofit ofassociates 0.2 - 2.4 - 2.6Interestreceivable andsimilar income 1.4 - 0.6 8.8 10.8Interestpayable andsimilarcharges (0.2) - - (0.1) (0.3) ________________________________________________________Profit beforetax 55.3 2.0 13.9 1.4 72.6 ________________________________________________________ Segmental Reporting (unaudited) Year ended Asset Private Private Group Net Total31 December 2004 Management Banking Equity Income/ £mn £mn £mn £mn (Costs) £mn_______________________________________________________________________________Externalrevenue 520.8 68.5 31.7 9.1 630.1Inter-segmentrevenue 3.0 (4.7) - 1.7 - ________________________________________________________Revenue 523.8 63.8 31.7 10.8 630.1Profit ondisposal ofnon-currentassetinvestments - - 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 Administrativeexpenses (311.8) (56.0) (2.8) (25.6) (396.2)Depreciation (9.2) (2.7) - (0.5) (12.4) ________________________________________________________Operatingprofit 116.6 4.6 76.7 (15.3) 182.6 Share ofprofit ofassociates 0.2 - 5.8 - 6.0Interestreceivable andsimilar income 3.4 - 1.3 19.0 23.7Interestpayable andsimilarcharges (0.4) - - (0.3) (0.7) ________________________________________________________Profit beforetax 119.8 4.6 83.8 3.4 211.6_______________________________________________________________________________ Note 2: The comparative revenue and interest receivable figures have beenrestated to reclassify all Private Banking interest receivable to revenue (seeNote 1 to the Consolidated Income Statement). Inter-segment revenues representinterest payable and receivable on cash balances held by Private Banking onbehalf of Group companies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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