9th Aug 2007 07:01
Schroders PLC09 August 2007 9 August 2007 Schroders plc Interim Results to 30 June 2007 Profit before tax up 40 per cent. • Group profit before tax £185.6 million (H1 2006: £132.3 million) • Asset Management profit before tax £123.2 million (H1 2006: £96.8 million) • Private Banking profit before tax £15.9 million (H1 2006: £11.2 million) • Private Equity profit before tax £36.2 million (H1 2006: £17.7 million) • Funds under management £137.6 billion (31 December 2006: £128.5 billion) • Interim dividend 9.0 pence per share (interim dividend 2006: 7.5 pence per share) Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December (unaudited) (unaudited) 2006 £mn £mn £mn--------------------------------------------------------------------------------Asset Management profit 123.2 96.8 219.0Private Banking profit 15.9 11.2 26.9Private Equity profit 36.2 17.7 34.6Group 10.3 6.6 9.5--------------------------------------------------------------------------------Profit before tax 185.6 132.3 290.0-------------------------------------------------------------------------------- Contacts: SchrodersMichael Dobson Chief Executive +44 (0) 20 7658 6962Stephen Brooks Chief Financial Officer +44 (0) 20 7658 6600Henrietta Jowitt Head of Marketing and Communications +44 (0) 20 7658 6166 William Clutterbuck The Maitland Consultancy +44 (0) 20 7379 5151 Management Statement Group profit before tax increased by 40 per cent. to £185.6 million (H1 2006:£132.3 million) reflecting significantly higher profits from Asset Management,Private Banking and Private Equity investments. Funds under management at theend of June totalled £137.6 billion (31 December 2006: £128.5 billion). Netinflows in the second quarter were £0.7 billion after net outflows of £1.0billion in the first quarter to bring net outflows for the half year to £0.3billion. Asset Management Net inflows into higher margin products in 2006, which continued during theperiod, contributed to an 18 per cent. increase in Asset Management gross profitto £353.3 million (H1 2006: £300.4 million) and a 27 per cent. increase inprofit before tax to £123.2 million (H1 2006: £96.8 million). Net Retail sales were £3.6 billion in the first half (H1 2006: £2.3 billion) andwere broadly diversified. By region, we had a particularly strong result inAsia, with £1.7 billion of net sales, and in the UK with £1.3 billion of netsales. By product, we saw significant demand for a wide range of asset classesincluding emerging market equity and debt, European equities, global equities,property securities and multi-manager funds. Retail funds under management atthe end of June were £48.7 billion (31 December 2006: £42.5 billion). Institutional generated strong gross sales, up 36 per cent. on the first half of2006, with high levels of new business across quantitative equities, multi-assetmandates for UK pension funds, fixed income and funds of hedge funds. Outflowsin the UK and, to a lesser extent, Japanese equities led to net outflows of £4.1billion: despite this, Institutional revenues were up 15 per cent. on the firsthalf of 2006 and funds under management rose to £79.6 billion at the end of June(31 December 2006: £77.4 billion). Alternatives accounted for £14.9 billion of funds under management (31 December2006: £12.5 billion). Within alternatives, NewFinance Capital, our funds ofhedge funds business, had strong net inflows in the first half and funds undermanagement increased to £2.3 billion. Aareal Asset Management, the Europeanproperty business acquired in February 2007, has been integrated with ourexisting property business and we are preparing to launch further Europeanproperty funds. More than two thirds of our revenues are generated outside the UK with wellestablished positions in developed markets and rapidly growing businesses inemerging markets. In Latin America, funds under management reached £2.9 billionwith continuing growth in Argentina, Brazil and Chile and a developing businessin Mexico. In China, our joint venture asset management company had funds undermanagement of £1.9 billion at the end of June (not reported in total funds undermanagement) and is operating profitably. Private Banking Private Banking profit before tax increased by 42 per cent. to £15.9 million (H12006: £11.2 million). The establishment of the Private Banking service centrein Zurich was completed in April and we expect to see further efficiency gainsas a result, as well as improved client service. Net new business flows in thefirst half were £0.2 billion (H1 2006: £0.2 billion) and funds under managementat the end of June increased to £9.3 billion (31 December 2006: £8.6 billion). Private Equity and Group Returns on our investment capital reflected in the income statement in the firsthalf were £56.8 million, representing an annualised return of 15 per cent. Thisincluded realised gains and carried interest participations on Private Equityinvestments of £38.4 million (H1 2006: £19.3 million). Unrealised profit oninvestment capital included within shareholders' equity totalled £103.2 millionat 30 June 2007 (31 December 2006: £103.7 million). Dividend In the light of these results the Board has declared an increased interimdividend of 9.0 pence per share (H1 2006: 7.5 pence per share). The dividendwill be paid on 21 September 2007 to shareholders on the register at the closeof business on 17 August 2007. Summary The first half of 2007 has been another strong period for the Group with asignificant increase in profit before tax and substantial inflows of highermargin business. Our diversified product set and broad geographicalrepresentation position us well for more challenging conditions in equity andfixed income markets. We continue to see a wide range of future growthopportunities for the Group. Michael DobsonChief Executive 9 August 2007 Forward-looking statements This interim results announcement contains certain forward-looking statementsand forecasts with respect to the financial condition, results of operations andbusinesses of Schroders plc. These statements and forecasts involve risk anduncertainty because they relate to events and depend upon circumstances that mayoccur in the future. There are a number of factors that could cause actualresults or developments to differ materially from those expressed or implied bythese forward-looking statements and forecasts. The forward-looking statementsand forecasts are based on the Directors' current view and information known tothem at the date of this announcement. The Directors do not make anyundertaking to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise. Nothing in thisannouncement should be construed as a profit forecast. Condensed Consolidated Income Statement Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December (unaudited) (unaudited) 2006 £mn £mn £mn----------------------------------------------------------------------------------------------Revenue 558.6 451.3 967.2Cost of sales (109.1) (77.9) (169.0) ---------------------------------------------------Gross profit 449.5 373.4 798.2 Administrative expenses (285.9) (259.3) (542.3) ---------------------------------------------------Operating profit 163.6 114.1 255.9 Share of profit of associates 9.0 9.1 15.6Share of profit/(loss) of joint ventures 3.0 0.1 (0.2) 12.0 9.2 15.4Interest receivable and similar income 10.4 9.8 20.1Interest payable and similar charges (0.4) (0.8) (1.4) ---------------------------------------------------Profit before tax 185.6 132.3 290.0 UK tax (18.4) (11.6) (23.5)Foreign tax (27.2) (22.4) (44.6)Tax (45.6) (34.0) (68.1) ---------------------------------------------------Profit after tax 140.0 98.3 221.9 ---------------------------------------------------Attributable to:Minority interests 0.3 0.3 0.6Equity holders of the parent 139.7 98.0 221.3 --------------------------------------------------- 140.0 98.3 221.9 --------------------------------------------------- Memo - dividends (49.5) (42.0) (63.4) Basic earnings per share 49.0p 33.7p 76.9pDiluted earnings per share 48.2p 33.2p 75.7p --------------------------------------------------- The interim dividend payable for 2007 is 9.0 pence per share, amounting to adistribution of £25.8 million Condensed Consolidated Balance Sheet 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) £mn £mn £mn------------------------------------------------------------------------------------------------Non-current assetsGoodwill 75.3 67.2 65.3Intangible assets 21.0 14.2 15.0Property, plant and equipment 19.3 9.9 12.7Associates 16.1 30.2 21.7Joint ventures 10.5 4.0 3.6Financial assets 248.0 144.7 198.6Deferred tax 35.1 56.0 44.4Retirement benefit scheme asset 68.3 8.7 16.8Trade and other receivables 397.8 343.5 404.0 ------------------------------------------------ 891.4 678.4 782.1Current assetsFinancial assets 1,681.8 1,568.4 1,664.0Current tax 7.0 13.8 16.5Trade and other receivables 641.0 795.3 617.0Cash and cash equivalents 415.8 504.8 439.2 ------------------------------------------------ 2,745.6 2,882.3 2,736.7 Non-current assets held for sale 65.3 31.8 60.1 Assets backing insurance unit-linked liabilitiesInvestments in authorised unit trusts 1,624.7 40.9 1,307.4Other financial assets 592.5 - 211.7Cash and cash equivalents 13.6 41.5 12.9 ------------------------------------------------ 2,230.8 82.4 1,532.0 ------------------------------------------------Total assets 5,933.1 3,674.9 5,110.9 ------------------------------------------------EquityCalled up share capital 294.0 296.6 293.9Share premium account 48.0 34.2 36.4Other reserves 10.1 15.1 15.1Capital reserves 160.5 150.2 156.3Own shares held (75.9) (90.6) (90.9)Net exchange differences (65.3) (17.9) (53.7)Retained profits 1,204.2 955.5 1,086.3 ------------------------------------------------Equity attributable to equity holders of the parent 1,575.6 1,343.1 1,443.4 Minority interests 0.4 0.1 0.2 ------------------------------------------------Total equity 1,576.0 1,343.2 1,443.6 Non-current liabilitiesFinancial liabilities - 15.2 -Deferred tax 2.4 2.8 2.4Provisions 10.7 9.4 10.8Trade and other payables 316.5 378.7 325.2 ------------------------------------------------ 329.6 406.1 338.4Current liabilitiesFinancial liabilities 0.3 0.4 0.3Provisions 9.3 12.4 13.9Current tax 45.7 43.7 31.9Trade and other payables 1,741.4 1,786.7 1,750.8 ------------------------------------------------ 1,796.7 1,843.2 1,796.9 Insurance unit-linked liabilitiesLiability linked to life company investments 2,230.8 82.4 1,532.0 ------------------------------------------------Total equity and liabilities 5,933.1 3,674.9 5,110.9 ------------------------------------------------ Condensed Consolidated Statement of Recognised Income and Expense Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December (unaudited) (unaudited) 2006 £mn £mn £mn------------------------------------------------------------------------------------------------Exchange differences on translation of foreign operations (11.6) (30.1) (65.9)Net gains on hedges recognised directly in equity 8.2 18.0 32.2Actuarial gains/(losses) on defined benefit pension 40.5 (1.2) 5.5schemesNet gains on available-for-sale financial assets 26.3 17.7 65.2Amounts recycled through the income statement (21.0) (12.9) (26.8)Tax on items taken directly to equity (9.8) 6.4 6.6 ------------------------------------------------Net income and expense recognised directly in equity 32.6 (2.1) 16.8 Profit for the period 140.0 98.3 221.9 ------------------------------------------------Total recognised income and expense for the period 172.6 96.2 238.7 ------------------------------------------------ Attributable to:Minority interests 0.3 0.3 0.6Equity holders of the parent 172.3 95.9 238.1 ------------------------------------------------ 172.6 96.2 238.7 ------------------------------------------------ Condensed Consolidated Cash Flow Statement Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December (unaudited) (unaudited) 2006 £mn £mn £mn------------------------------------------------------------------------------------------------Net cash from operating activities 196.0 210.8 209.2 Investing activitiesAcquisition of subsidiaries (27.7) (19.3) (19.8)Cash acquired with acquisitions 6.2 6.8 6.8Purchase of joint ventures (1.4) - -Purchase of intangible assets (6.1) (0.9) (4.6)Purchase of property, plant and equipment (8.6) (2.6) (7.1)Purchase of non-current financial assets (70.1) (13.8) (62.9)Purchase of non-current assets held for sale (28.1) (38.8) (90.1)Disposal of non-current assets held for sale 9.6 26.6 50.8Proceeds from sale of non-current financial assets 22.2 18.3 64.1Proceeds from sale of property, plant and equipment - 0.3 0.4Net proceeds from (purchase)/sale of current financial assets (81.5) 72.0 58.6Interest received 9.6 6.6 9.0Dividends/capital distributions received from associates and joint ventures 14.7 8.4 23.6 ----------------------------------------------- Net cash (used in)/from investing activities (161.2) 63.6 28.8 Financing activitiesProceeds from issue of share capital 16.7 24.7 27.8Acquisition of own shares (17.7) (86.8) (90.8)Disposal of own shares 19.0 34.5 37.3Redemption of ordinary share capital (21.8) (56.3) (84.3)Dividends paid (49.5) (42.0) (63.4) -----------------------------------------------Net cash used in financing (53.3) (125.9) (173.4) -----------------------------------------------Net (decrease)/increase in cash and cash equivalents (18.5) 148.5 64.6 ----------------------------------------------- Opening cash and cash equivalents 452.1 402.4 402.4Net (decrease)/increase in cash and cash equivalents (18.5) 148.5 64.6Effect of exchange rate changes (4.2) (4.6) (14.9) -----------------------------------------------Closing cash and cash equivalents 429.4 546.3 452.1 ----------------------------------------------- Closing cash and cash equivalents consists of:Cash and cash equivalents backing insurance-unit linked liabilities 13.6 41.5 12.9 Other cash and cash equivalents held by the Group 415.8 504.8 439.2 ----------------------------------------------- 429.4 546.3 452.1 ----------------------------------------------- Notes to the Accounts Basis of Preparation The interim report, expected to be forwarded to shareholders on 17 August, isunaudited and does not constitute statutory accounts within the meaning of s240of the Companies Act 1985. The statutory accounts for 2006, which were preparedin accordance with International Financial Reporting Standards, as endorsed bythe European Union ('IFRS'), and with those parts of the Companies Act 1985applicable to companies reporting under IFRS, have been delivered to theRegistrar of Companies. The auditors' opinion on these accounts was unqualifiedand did not contain a statement made under s237 (2) or s237 (3) of the CompaniesAct 1985. The interim report has been prepared in accordance with IAS 34 'InterimFinancial Reporting' and the Listing Rules of the Financial Services Authority('FSA'). The accounting policies applied in these interim financial statements areconsistent with those applied in the Group's statutory accounts for 2006. Segmental Reporting Primary reporting format - business segmentsThe Group has four continuing classes of business: Asset Management, PrivateBanking, Private Equity and Group. Asset Management principally comprisesinvestment management including advisory services, property, life companybusiness and alternative assets; Private Banking principally comprisesinvestment management and banking services provided to high net worthindividuals and certain smaller institutions; Private Equity principallycomprises the Group's investments in private equity, venture and buyout fundsand related vehicles; Group consists of income on the Group's liquid and seedcapital less Group costs and provisions, and the results of the leasingbusiness. The allocation of costs to individual business segments is undertaken in orderto provide management information on the cost of providing services and toprovide managers with a tool to manage and control expenditure. Costs areallocated on a basis that aligns the charge with the resources employed by theGroup in a particular area of its business. Typical dynamic allocation bases aresquare footage occupied and number of staff employed by particular businesssegments. Six months ended 30 June 2007 Asset Private Private Group Inter-segment Total Management Banking Equity £mn elimination £mn £mn £mn £mn £mn-------------------------------------------------------------------------------------------------------------External revenue 460.9 38.6 29.4 18.4 - 547.3External net interest - 11.3 - - - 11.3Inter-segment interest payable - (0.9) - - 0.9 -Total revenue 460.9 49.0 29.4 18.4 0.9 558.6 Cost of sales (107.6) (1.5) - - - (109.1) ------------------------------------------------------------------------Gross profit 353.3 47.5 29.4 18.4 0.9 449.5 Administrative expenses (240.5) (31.6) (2.2) (11.6) - (285.9) ------------------------------------------------------------------------Operating profit 112.8 15.9 27.2 6.8 0.9 163.6 Share of profit of associates - - 9.0 - - 9.0Share of profit of joint ventures 3.0 - - - - 3.0 3.0 - 9.0 - - 12.0 External interest receivable and 3.5 - - 6.9 - 10.4similar incomeInter-segment interest receivable 4.1 - - (3.2) (0.9) -Interest receivable and similar income 7.6 - - 3.7 (0.9) 10.4Interest payable and similar charges (0.2) - - (0.2) - (0.4) ------------------------------------------------------------------------Profit before tax 123.2 15.9 36.2 10.3 - 185.6 ------------------------------------------------------------------------ Inter-segment amounts represent interest payable and receivable oninter-segmental loans and cash balances held by Private Banking on behalf ofGroup companies. Segmental Reporting (continued)Six months ended 30 June 2006 Asset Private Private Inter-segment Management Banking Equity Group elimination Total £mn £mn £mn £mn £mn £mn---------------------------------------------------------------------------------------------------------External revenue 377.3 37.7 10.2 14.3 - 439.5External net interest - 11.8 - - - 11.8Inter-segment interest payable - (3.3) - - 3.3 -Total revenue 377.3 46.2 10.2 14.3 3.3 451.3 Cost of sales (76.9) (1.0) - - - (77.9) ------------------------------------------------------------------------Gross profit 300.4 45.2 10.2 14.3 3.3 373.4 Administrative expenses (208.4) (34.0) (1.6) (15.3) - (259.3) ------------------------------------------------------------------------Operating profit 92.0 11.2 8.6 (1.0) 3.3 114.1 Share of profit of associates - - 9.1 - - 9.1Share of profit of joint ventures 0.1 - - - - 0.1 0.1 - 9.1 - - 9.2 External interest receivable and 2.8 - - 7.0 - 9.8similar incomeInter-segment interest receivable 2.4 - - 0.9 (3.3) -Interest receivable and similar income 5.2 - - 7.9 (3.3) 9.8Interest payable and similar charges (0.5) - - (0.3) - (0.8) ------------------------------------------------------------------------Profit before tax 96.8 11.2 17.7 6.6 - 132.3---------------------------------------------------------------------------------------------------------Inter-segment amounts represent interest payable and receivable oninter-segmental loans and cash balances held by Private Banking on behalf ofGroup companies. Tax Expense Six months Six months Year ended ended ended 31 December 30 June 2007 30 June 2006 2006 £mn £mn £mn------------------------------------------------------------------------------------------------------Current taxUK corporation tax on profits of the period 55.2 28.3 38.7Double taxation relief (36.1) (15.1) (20.8) ------------------------------------ 19.1 13.2 17.9 Adjustments in respect of prior periods 0.2 0.1 (6.2) ------------------------------------ 19.3 13.3 11.7 Foreign tax - current 27.2 22.0 47.1Foreign tax - adjustments in respect of prior periods - (0.8) (0.8) ------------------------------------Total current tax 46.5 34.5 58.0 Deferred tax - origination and reversal of temporary differences (0.5) (4.2) 6.5Adjustments in respect of prior periods (0.4) 3.7 3.6 ------------------------------------Total tax charge for the period 45.6 34.0 68.1 ------------------------------------ Reconciliation of Net Cash from Operating Activities Six months Six months Year ended ended ended 31 December 30 June 2007 30 June 2006 2006 £mn £mn £mn-------------------------------------------------------------------------------------------------------Operating profit 163.6 114.1 255.9 Adjustments for:Depreciation and amortisation of software 3.7 4.2 7.5Amortisation of fund management contracts 0.8 - 1.0Impairment of available-for-sale financial assets recycled through the income statement - 6.4 1.4Other amounts recycled through the income statement in respect of (21.0) (16.5) (24.7)financial assetsIncrease in trade and other receivables (38.0) (277.5) (238.5)(Decrease)/increase in trade and other payables and provisions (17.8) 214.7 195.1Increase in insurance unit-linked liabilities 698.8 82.4 1,532.0Net decrease in financial liabilities - (0.5) (15.9)Profit on disposal of business - (2.7) (2.7)(Credit)/charge for provisions (0.8) 1.0 5.8Impairment of non-current assets held for sale 0.2 2.2 -Net gains on financial assets held at fair value through profit or loss (28.1) (19.5) (30.3)Share-based payments expensed 13.0 15.2 27.5Other non-cash movements 21.4 13.5 42.7United Kingdom corporation tax (paid)/recovered (1.4) 4.2 5.1Overseas tax paid (34.2) (18.2) (36.2)Interest received 0.4 4.0 10.6Interest paid (0.4) (0.8) (1.4)Net purchase of assets backing insurance unit-linked liabilities (698.1) (40.9) (1,519.1)Net disposal/(purchase) of current financial assets 133.9 125.5 (6.6) ------------------------------------Net cash from operating activities 196.0 210.8 209.2------------------------------------------------------------------------------------------------------- Funds under Management - 2007 Flows Institutional Retail Private Banking Total £bn £bn £bn £bn31 December 2006 77.4 42.5 8.6 128.5Inflows 5.7 8.1 1.6 15.4Outflows (9.8) (4.5) (1.4) (15.7)Net asset (losses)/gains (4.1) 3.6 0.2 (0.3)Investment returns 5.0 2.6 0.5 8.1Adjustment on purchase of Aareal Asset Management 1.3 - - 1.3 -------------------------------------------------30 June 2007 79.6 48.7 9.3 137.6--------------------------------------------------------------------------------------------- Income and Cost Metrics for the Group Six months ended Six months ended 30 June 2007 30 June 2006---------------------------------------------------------------------------------------------------Group cost: income ratio 61% 66%Group cost: gross profit 64% 69%Return on average capital (pre-tax) 25% 20%Return on average capital (post-tax) 19% 15%Asset Management cost: gross profit 68% 69%Asset Management gross profit on average funds under management 57bps 51bpsAsset Management costs on average funds under management 39bps 36bpsAsset Management costs on closing funds under management 38bps 37bps This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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