Annual Results to 31 December 2015

RNS Number : 8733Q

Schroders PLC

03 March 2016

 

Schroders plc

Annual Results to 31 December 2015

3 March 2016

•    Profit before tax and exceptional items up 8 per cent. to £609.7 million (2014: £565.2 million)

•    Profit before tax up 14 per cent. to £589.0 million (2014: £517.1 million)

•    Earnings per share up 12 per cent. to 171.1 pence (2014: 152.7 pence)

•    Net inflows £13.0 billion (2014: £24.8 billion)

•    Assets under management £313.5 billion (2014: £300.0 billion)

•    Full-year dividend up 12 per cent. to 87.0 pence per share (2014: 78.0 pence)

•    See separate press release for details on Board succession

	2015 £m	2014 £m
Profit before tax and exceptional items
Asset Management	540.5	499.3
Wealth Management	61.3	61.7
	601.8	561.0
Group segment	7.9	4.2
Total profit before tax and exceptional items	609.7	565.2
Total profit before tax	589.0	517.1
Earnings per share before exceptional items (pence)	176.9	166.8
Earnings per share (pence)	171.1	152.7
Total dividend (pence per share)	87.0	78.0

Michael Dobson, Chief Executive, commented: "2015 was another good year for Schroders with profit before tax and exceptional items reaching a record £609.7 million. Competitive investment performance and strong distribution led to £13.0 billion of net new business and assets under management at the end of the year were £313.5 billion.

Reflecting these strong results, the Board is recommending a final dividend of 58.0 pence per share, bringing the dividend for the year to 87.0 pence per share, an increase of 12 per cent.

Schroders is well placed for a more challenging environment with a highly diversified business and a strong financial position. We see many interesting long-term growth opportunities and we will again be taking advantage of a period of dislocation to invest behind them." 

Contacts

For further information please contact:

Investors
James Grant	Investor Relations		[phone]	[e-mail]
Alex James	Investor Relations		[phone]	[e-mail]
Press
Beth Saint	Head of Communications		[phone]	[e-mail]
Anita Scott	Brunswick		[phone]	[e-mail]

Management Statement

2015 was another good year for Schroders despite a more challenging environment in financial markets, particularly in the second half. Revenues, profit and assets under management reached record levels and we made further moves to diversify our business and build growth opportunities for the future.

Net revenue before exceptional items increased by 7 per cent. to £1,658.5 million (2014: £1,549.5 million), profit before tax and exceptional items increased by 8 per cent. to £609.7 million (2014: £565.2 million) and profit before tax increased by 14 per cent. to £589.0 million (2014: £517.1 million).

We won net new business of £13.0 billion (2014: £24.8 billion) and assets under management ended the year at £313.5 billion (2014: £300.0 billion).

Asset Management

Asset Management net revenue increased 8 per cent. to £1,412.5 million (2014: £1,308.3 million), including performance fees of £35.7 million (2014: £34.2 million).  Net operating revenue margins, excluding performance fees, were 49 basis points (2014: 51 basis points) as we generated significant inflows in Institutional and we had the full year effect of a very large mandate win in the UK at the end of 2014. Our net operating revenue margins have declined over recent years, reflecting both fee pressures across the industry and changes to our business mix. Growing our business in lower margin areas such as Institutional, Multi-asset and Fixed Income remains core to our strategy as we see good diversification benefits in these areas which often comprise large mandates with higher than average longevity.

Profit before tax and exceptional items was up 8 per cent. to £540.5 million (2014: £499.3 million).  Exceptional items of £12.1 million (2014: £17.6 million) related principally to the amortisation of the value of client relationships arising from acquisitions. Profit before tax increased 10 per cent. to £528.4 million (2014: £481.7 million).

We generated £13.1 billion of net new business in 2015, as a result of competitive investment performance for clients with 72 per cent. of assets under management outperforming benchmark or peer group over the three years to the end of 2015, a broad product range and a global distribution capability.

Institutional had a very strong year with £8.8 billion of net new business, concentrated in Fixed Income and Multi-asset and, by region, Asia Pacific and the UK. Assets under management in Institutional at the end of the year were £181.0 billion (2014: £171.1 billion).

Intermediary generated £4.3 billion of net new business, diversified across Fixed Income, Multi-asset and Equities, with a strong performance in continental Europe and Asia Pacific, continuing the trend of 2014. After a very strong first half, we saw small net outflows in the second half as weak markets affected retail investor demand. Assets under management in Intermediary at the end of the year were £100.9 billion (2014: £97.8 billion).

Our associates and joint ventures made good progress in 2015. In China, Bank of Communications Schroders, where we have a 30 per cent shareholding, serves Chinese investors and saw assets under management increase to £45.4 billion* and our share of after tax profit increased to £11.1 million (2014: £4.5 million). Our partnership with Nippon Life in Japan continues to develop through demand from Japanese clients as well as through our two joint ventures in London and Singapore. Our more recent partnership in India with Axis Bank, serving Indian investors, is developing well. Investment performance is strong, the business is profitable and its growing market share now places Axis Asset Management, where we have a 25 per cent. shareholding, just outside the top ten with assets under management of £3.6 billion*. Our joint venture with Secquaero in Switzerland in insurance linked securities has also performed well. Assets under management have reached £1.3 billion and we recently increased our shareholding to 50.1 per cent.

Wealth Management

Wealth Management net revenue was £207.2 million (2014: £213.5 million). Underlying revenues increased in 2015, as revenue in 2014 included £9.0 million from performance fees and the release of a loan loss provision. Profit before tax and exceptional items was £61.3 million (2014: £61.7 million). Profit before tax increased 46 per cent. to £60.5 million (2014: £41.3 million).

New business was slower in 2015, particularly in the second half, reflecting weaker market conditions. We generated £0.2 billion of net inflows in the UK, comprising significant levels of new client wins offset by outflows from private clients and charities drawing down income returns to fund their outgoings. We had net outflows of £0.3 billion in Switzerland, as we continue to reshape our business. We generated small net inflows in Asia Pacific. Total net outflows were £0.1 billion (2014: net inflows £0.5 billion) and assets under management ended the year at £31.6 billion (2014: £31.1 billion).

We see long-term opportunities in Wealth Management based on our leading client offering and market position in the UK and growth potential in continental Europe and Asia Pacific.

Group

The Group segment comprises returns on investment capital, including seed capital deployed in building a track record in new investment strategies, and central costs. Investment returns also include our share of the after tax profit arising from our 45 per cent. shareholding in RWC which increased to £5.9 million (2014: £3.8 million) as assets under management reached £7.9 billion* (2014: £5.8 billion*). Profit before tax and exceptional items was £7.9 million (2014: £4.2 million) and exceptional items were £7.8 million (2014: £10.1 million), comprising costs relating to acquisitions completed in 2013. Shareholders' equity at the end of December was £2.8 billion (2014: £2.5 billion).

Dividend

Our policy is to increase dividends progressively in line with the trend in profitability. Consistent with this, the Board will recommend to shareholders at the Annual General Meeting an increase in the final dividend of 7 per cent., taking the final dividend to 58.0 pence (2014: 54.0 pence). This will bring the total dividend for the year to 87.0 pence (2014: 78.0 pence), an increase of 12 per cent. The final dividend will be paid on 5 May 2016 to shareholders on the register at 29 March 2016.

Outlook

A combination of an interest rate rise in the US, deteriorating economic indicators in China, a weak oil price and fears of slowing economic growth or even recession in the US and Europe, has led to sharp falls in equities and some fixed income markets. Markets will remain volatile in the face of these uncertainties with an inevitable impact on retail investor demand in the short term. To date in 2016 we have seen continuing good inflows in Institutional, partially offset by outflows in Intermediary.

Schroders is well placed for this more challenging environment with a highly diversified business and a strong financial position. We see many interesting long-term growth opportunities and we will again be taking advantage of a period of dislocation to invest behind them.

* not included in total reported assets under management

Additional information

Assets under management

Twelve months to 31 December 2015	Institutional £bn	Intermediary £bn	Asset Management £bn	Wealth Management £bn	Total AUM £bn
1 January 2015	171.1	97.8	268.9	31.1	300.0
Gross inflows	32.0	46.6	78.6	5.5	84.1
Gross outflows	(23.2)	(42.3)	(65.5)	(5.6)	(71.1)
Net flows	8.8	4.3	13.1	(0.1)	13.0
Investment returns	1.1	(1.2)	(0.1)	0.6	0.5
31 December 2015	181.0	100.9	281.9	31.6	313.5

Three months to 31 December 2015	Institutional £bn	Intermediary £bn	Asset Management £bn	Wealth Management £bn	Total AUM £bn
1 October 2015	167.3	96.6	263.9	30.9	294.8
Net flows	5.3	(0.3)	5.0	(0.3)	4.7
Investment returns	8.4	4.6	13.0	1.0	14.0
31 December 2015	181.0	100.9	281.9	31.6	313.5

Income and cost metrics for the Group

	2015	2014
Cost:net revenue ratio	63%	64%
Compensation cost:net revenue ratio	44%	44%
Bonus: pre-bonus profit before tax and exceptional items	37%	37%
Return on average capital before exceptional items (pre-tax)	23%	24%
Return on average capital before exceptional items (post-tax)	18%	19%

Copies of this announcement are available on the Schroders website: www.schroders.com.  Michael Dobson, Chief Executive, and Richard Keers, Chief Financial Officer, will host a presentation and webcast for the investment community, to discuss the Group's results at 09.00 a.m. GMT on Thursday, 3 March 2016 at 31 Gresham Street, London, EC2V 7QA.  The webcast can be viewed live at www.schroders.com/ir and www.cantos.com.  For individuals unable to attend the presentation or participate in the live webcast, a replay will be available from midday on Thursday, 3 March 2016 at www.schroders.com/ir. The Annual Report and Accounts will be available on the Schroders website: www.schroders.com on 18 March 2016.

Michael Dobson, Chief Executive, and Richard Keers, Chief Financial Officer, will host a conference call for the media to discuss the 2015 Annual Results at 7.30am GMT on Thursday 3 March 2016. The conference call telephone number is 0800 694 1515 (International: [phone]), conference ID 63973635.

Forward-looking statements

This announcement, the Annual Report and Accounts for 2015 from which it is extracted and the Schroders website may contain forward-looking statements with respect to the financial condition, performance and position, strategy, results of operations and businesses of the Schroders Group. Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and depend upon circumstances in the future and you should not place reliance on them. Without limitation, any statements preceded or followed by or that include the words 'targets', 'plans', 'sees', 'believes', 'expects', 'aims', 'confident', 'will have', 'will be', 'will ensure,' 'estimates' or 'anticipates' or the negative of these terms or other similar terms are intended to identify such forward-looking statements. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in this announcement or in the Annual Report and Accounts or on the Schroders website should be construed as a forecast, estimate or projection of future financial performance.

Investment performance

Investment performance is calculated by Schroders, using published benchmarks for products, where available, for Asset Management only. It excludes private equity, LDI and externally managed GAIA funds, and funds which do not have the required track record. If no benchmark is published or agreed with the client but the fund is listed in competitor rankings, the relative position of the fund to its peer group is used to calculate any outperformance. Funds with no benchmark but an absolute return target over the one or three-year period are measured against that absolute target. Funds with no benchmark and no target may be measured against a cash return, if applicable. As at 31 December 2015, such comparator data existed for 74 per cent. of Asset Management AUM over three years and 83 per cent. over one year. Certain Schroders Group companies claim compliance with the Global Investment Performance Standards (GIPS). Further information is available upon request.

Consolidated income statement

for the year ended 31 December 2015

		2015			20144
	Notes	Before exceptional items £m	Exceptional Items3 £m	Total £m	Before exceptional items £m	Exceptional Items3 £m	Total £m
Revenue	3	2,043.2	-	2,043.2	1,924.3	-	1,924.3
Cost of sales		(442.5)	-	(442.5)	(429.1)	-	(429.1)
Net operating revenue1		1,600.7	-	1,600.7	1,495.2	-	1,495.2
Net gains on financial instruments and other income		36.3	-	36.3	43.7	2.8	46.5
Share of profit of associates and joint ventures		21.5	(2.2)	19.3	10.6	(2.1)	8.5
Net revenue1		1,658.5	(2.2)	1,656.3	1,549.5	0.7	1,550.2
Operating expenses	4	(1,048.8)	(18.5)	(1,067.3)	(984.3)	(48.8)	(1,033.1)
Profit before tax		609.7	(20.7)	589.0	565.2	(48.1)	517.1
Tax	5	(126.3)	4.7	(121.6)	(113.9)	10.0	(103.9)
Profit after tax		483.4	(16.0)	467.4	451.3	(38.1)	413.2
Earnings per share
Basic	6	176.9p	(5.8p)	171.1p	166.8p	(14.1p)	152.7p
Diluted	6	172.2p	(5.7p)	166.5p	161.5p	(13.7p)	147.8p
Dividends per share2	7			83.0p			66.0p

¹ Non-GAAP measure of performance.

² Prior year final dividend and current year interim dividend paid during the year.

³ Please refer to notes 1 and 2 for a definition and further details of exceptional items.

⁴ 2014 has been reformatted for consistency with the 2015 presentation, see basis of preparation.

Consolidated statement of comprehensive income

for the year ended 31 December 2015

	2015 £m	2014 £m
Profit for the year	467.4	413.2
Items that may be reclassified to the income statement on fulfilment of specific conditions:
Net exchange differences on translation of foreign operations after hedging	5.4	(1.8)
Net fair value movement arising from available-for-sale financial assets	(5.9)	10.4
Net fair value movement arising from available-for-sale financial assets held by associates	5.2	3.9
Tax on items taken directly to other comprehensive income	3.8	0.6
	8.5	13.1
Items reclassified to the income statement:
Net realised gains on disposal of available-for-sale financial assets	(16.8)	(8.3)
	(16.8)	(8.3)
Items that will not be reclassified to the income statement:
Actuarial gains on defined benefit pension schemes	7.3	36.9
Tax on items taken directly to other comprehensive income	(2.3)	(7.4)
	5.0	29.5
Other comprehensive (losses)/income for the year net of tax	(3.3)	34.3
Total comprehensive income for the year net of tax	464.1	447.5

Consolidated statement of financial position

31 December 2015

		2015 £m	2014 £m
Assets
Cash and cash equivalents		3,019.0	3,535.3
Trade and other receivables		526.8	541.0
Financial assets		2,446.7	1,763.4
Associates and joint ventures		109.2	92.6
Property, plant and equipment		41.8	29.9
Goodwill and intangible assets		467.4	474.5
Deferred tax		53.7	47.8
Retirement benefit scheme surplus		115.4	103.7
		6,780.0	6,588.2
Assets backing unit-linked liabilities
Cash and cash equivalents		603.1	696.3
Financial assets		10,716.8	12,962.1
		11,319.9	13,658.4
Total assets		18,099.9	20,246.6
Liabilities
Trade and other payables		761.2	752.1
Financial liabilities		3,126.5	3,193.5
Current tax		61.8	44.1
Provisions		26.3	54.0
Deferred tax		0.4	0.4
Retirement benefit scheme deficits		8.2	6.3
		3,984.4	4,050.4
Unit-linked liabilities		11,319.9	13,658.4
Total liabilities		15,304.3	17,708.8
Net assets		2,795.6	2,537.8
Equity		2,795.6	2,537.8

Consolidated statement of changes in equity

for the year ended 31 December 2015

	Note	Share capital £m	Share premium £m	Own shares £m	Net exchange differences reserve £m	Associates and joint ventures reserve £m	Fair value reserve £m	Profit and loss reserve £m	Total £m
At 1 January 2015		282.5	119.4	(200.1)	81.4	29.6	27.0	2,198.0	2,537.8
Profit for the year		-	-	-	-	19.3	-	448.1	467.4
Other comprehensive income/(losses)1		-	-	-	5.4	5.2	(18.9)	5.0	(3.3)
Total comprehensive income/(losses) for the year		-	-	-	5.4	24.5	(18.9)	453.1	464.1
Own shares purchased	10	-	-	(51.1)	-	-	-	-	(51.1)
Share-based payments		-	-	-	-	-	-	63.3	63.3
Tax in respect of share schemes		-	-	-	-	-	-	7.4	7.4
Other movements in associates and joint ventures reserve		-	-	-	-	0.5	-	-	0.5
Dividends attributable to shareholders		-	-	-	-	-	-	(226.3)	(226.3)
Dividends attributable to non-controlling interests		-	-	-	-	-	-	(0.1)	(0.1)
Transactions with shareholders		-	-	(51.1)	-	0.5	-	(155.7)	(206.3)
Transfers		-	-	75.7	-	(8.9)	-	(66.8)	-
At 31 December 2015		282.5	119.4	(175.5)	86.8	45.7	8.1	2,428.6	2,795.6

¹ Other comprehensive income reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive income/(losses) reported in the associates and joint ventures reserve and the fair value reserve represent post-tax fair value movements on available-for-sale assets held. Other comprehensive income reported in the profit and loss reserve represent post-tax actuarial gains.

Consolidated statement of changes in equity

for the year ended 31 December 2014

	Notes	Share capital £m	Share premium £m	Own shares £m	Net exchange differences reserve £m	Associates and joint ventures reserve £m	Fair value reserve £m	Profit and loss reserve £m	Total £m
At 1 January 2014		282.7	119.4	(229.9)	83.2	23.5	24.3	1,965.4	2,268.6
Profit for the year		-	-	-	-	8.5	-	404.7	413.2
Other comprehensive (losses)/income1		-	-	-	(1.8)	3.9	2.7	29.5	34.3
Total comprehensive (losses)/income for the year		-	-	-	(1.8)	12.4	2.7	434.2	447.5
Shares cancelled	9	(0.2)	-	-	-	-	-	0.2	-
Own shares purchased	10	-	-	(64.9)	-	-	-	-	(64.9)
Share-based payments		-	-	-	-	-	-	60.6	60.6
Tax in respect of share schemes		-	-	-	-	-	-	4.2	4.2
Other movements in associates and joint ventures reserve		-	-	-	-	(0.4)	-	-	(0.4)
Dividends attributable to shareholders		-	-	-	-	-	-	(177.7)	(177.7)
Dividends attributable to non-controlling interests		-	-	-	-	-	-	(0.1)	(0.1)
Transactions with shareholders		(0.2)	-	(64.9)	-	(0.4)	-	(112.8)	(178.3)
Transfers		-	-	94.7	-	(5.9)	-	(88.8)	-
At 31 December 2014		282.5	119.4	(200.1)	81.4	29.6	27.0	2,198.0	2,537.8

¹ Other comprehensive losses reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive income reported in the associates and joint ventures reserve and the fair value reserve represent the post-tax fair value movements on available-for-sale assets held. Other comprehensive income reported in the profit and loss reserve represent post-tax actuarial gains.

Consolidated cash flow statement

for the year ended 31 December 2015

	Note	2015 £m	2014 £m
Net cash from operating activities	11	47.9	1,321.9
Cash flows from investing activities
Net acquisition of associates and joint ventures		-	(1.3)
Net acquisition of property, plant and equipment and intangible assets		(38.8)	(29.5)
Acquisition of financial assets		(1,556.3)	(997.9)
Disposal of financial assets		1,138.5	897.4
Non-banking interest received		16.9	11.1
Distributions and capital redemptions received from associates and joint ventures		9.1	5.9
Net cash used in investing activities		(430.6)	(114.3)
Cash flows from financing activities
Acquisition of own shares		(51.1)	(64.9)
Dividends paid		(226.3)	(177.7)
Other flows		(0.7)	(0.1)
Net cash used in financing activities		(278.1)	(242.7)
Net (decrease)/increase in cash and cash equivalents		(660.8)	964.9
Opening cash and cash equivalents		4,231.6	3,320.4
Net (decrease)/increase in cash and cash equivalents		(660.8)	964.9
Effect of exchange rate changes		51.3	(53.7)
Closing cash and cash equivalents		3,622.1	4,231.6
Closing cash and cash equivalents consists of:
Cash backing unit-linked liabilities		603.1	696.3
Cash held in consolidated funds		46.0	8.3
Cash that the Group cannot use for its own corporate purposes		649.1	704.6
Cash		1,842.1	2,552.5
Cash equivalents		1,130.9	974.5
Cash and cash equivalents available for use by the Group		2,973.0	3,527.0
Cash and cash equivalents		3,622.1	4,231.6

Basis of preparation

The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The statutory accounts for 2014 have been delivered to the Registrar of Companies and the auditors' opinion on those accounts was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Companies Act 2006.  An unqualified auditors' opinion has also been issued on the statutory accounts for the year ended 31 December 2015, which will be delivered to the Registrar of Companies in due course.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), which comprise Standards and Interpretations approved by either the International Accounting Standards Board or the IFRS Interpretations Committee or their predecessors, as adopted by the European Union (EU), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements and related notes have been reformatted to reflect the way in which revenues and costs are managed internally. Net revenue has been reformatted to include the Group's share of profits from associates and joint ventures of £19.3 million (2014: £8.5 million) and now also includes net finance income of £12.7 million (2014: £10.5 million). A new net operating revenue sub-total has been introduced which represents revenues earned through our clients. The new presentation provides a more relevant basis on which to measure performance as it enhances comparability between revenues and related costs.  Comparative information has been reformatted where relevant resulting in a £19.0 million increase in 2014 net revenues.

1.  Segmental reporting

Operating segments

The Group has three business segments: Asset Management, Wealth Management, and the Group segment.  Asset Management principally comprises investment management including advisory services, equity products, fixed income securities, multi-asset investments, real estate and other alternative asset classes such as commodities. Wealth Management principally comprises investment management, wealth planning and banking services provided to high net worth individuals and charities. The Group segment principally comprises the Group's investment capital and treasury management activities and the management costs associated with governance and corporate management.

Segment information is presented on the same basis as that provided for internal reporting purposes to the Group's chief operating decision-maker, the Chief Executive.

Operating expenses include an allocation of costs between the individual business segments on a basis that aligns the charge with the resources employed by the Group in particular business areas. This allocation provides management information on the business performance to manage and control expenditure.

Year ended 31 December 2015	Asset Management £m	Wealth Management £m	Group £m	Total  £m
Fee income	1,817.7	198.2	-	2,015.9
Wealth Management interest receivable	-	27.3	-	27.3
Revenue	1,817.7	225.5	-	2,043.2
Fee expense	(424.3)	(6.4)	-	(430.7)
Wealth Management interest payable	-	(11.8)	-	(11.8)
Cost of sales	(424.3)	(18.2)	-	(442.5)
Net operating revenue	1,393.4	207.3	-	1,600.7
Net gains/(losses) on financial instruments and other income	6.3	(0.1)	30.1	36.3
Share of profit of associates and joint ventures	12.8	-	8.7	21.5
Net revenue	1,412.5	207.2	38.8	1,658.5
Operating expenses	(872.0)	(145.9)	(30.9)	(1,048.8)
Profit before tax and exceptional items	540.5	61.3	7.9	609.7
Exceptional items within net revenue:
Amortisation of acquired intangible assets relating to associates and joint ventures	(2.2)	-	-	(2.2)
Exceptional items within operating expenses:
Amortisation of acquired intangible assets	(9.9)	(8.0)	-	(17.9)
Deferred compensation arising directly from acquisitions	-	-	(7.8)	(7.8)
Provisions and related costs	-	7.2	-	7.2
	(9.9)	(0.8)	(7.8)	(18.5)
Profit before tax and after exceptional items	528.4	60.5	0.1	589.0

Year ended 31 December 20141	Asset Management £m	Wealth Management £m	Group £m	Total  £m
Fee income	1,698.2	200.1	0.4	1,898.7
Wealth Management interest receivable	-	25.6	-	25.6
Revenue	1,698.2	225.7	0.4	1,924.3
Fee expense	(410.1)	(7.9)	(0.1)	(418.1)
Wealth Management interest payable	-	(11.0)	-	(11.0)
Cost of sales	(410.1)	(18.9)	(0.1)	(429.1)
Net operating revenue	1,288.1	206.8	0.3	1,495.2
Net gains on financial instruments and other income	14.3	6.7	22.7	43.7
Share of profit of associates and joint ventures	5.9	-	4.7	10.6
Net revenue	1,308.3	213.5	27.7	1,549.5
Operating expenses	(809.0)	(151.8)	(23.5)	(984.3)
Profit before tax and exceptional items	499.3	61.7	4.2	565.2
Exceptional items within net revenue:
Reversal of contingent consideration payable	-	-	2.8	2.8
Amortisation of acquired intangible assets relating to associates and joint ventures	(2.1)	-	-	(2.1)
	(2.1)	-	2.8	0.7
Exceptional items within operating expenses:
Restructuring and integration costs	(3.7)	(8.3)	-	(12.0)
Amortisation of acquired intangible assets	(11.8)	(9.2)	-	(21.0)
Deferred compensation arising directly from acquisitions	-	-	(12.9)	(12.9)
Provisions and related costs	-	(2.9)	-	(2.9)
	(15.5)	(20.4)	(12.9)	(48.8)
Profit/(loss) before tax and after exceptional items	481.7	41.3	(5.9)	517.1

¹ 2014 has been reformatted for consistency with the 2015 presentation, see basis of preparation.

2.  Exceptional items

Exceptional items are significant items of income and expenditure that have been presented separately by virtue of their nature to enable a better understanding of the Group's financial performance. Exceptional items relate principally to acquisitions made by the Group in 2013, including costs of acquisition and integration, amortisation of acquired intangible assets and deferred compensation. Exceptional items also include the partial release of a provision within the Swiss bank, recognised in 2013, in connection with the US Department of Justice programme.

3.  Revenue

	2015 £m	20141 £m
Management fees	1,763.0	1,663.8
Performance fees	36.3	37.1
Other income	216.6	197.8
Interest income earned by Wealth Management	27.3	25.6
	2,043.2	1,924.3

¹ 2014 has been reformatted for consistency with the 2015 presentation, see basis of preparation.

4.  Operating expenses

Operating expenses include:	2015 £m	2014 £m
Salaries, wages and other remuneration	645.0	613.6
Social security costs	63.3	59.4
Pension costs	33.5	31.6
Employee benefits expense	741.8	704.6

£7.8 million (2014: £16.8 million) of the total compensation costs of £741.8 million (2014: £704.6 million) are included within exceptional items, being £7.8 million (2014: £12.9 million) of deferred compensation costs arising directly from acquisitions and nil (2014: £3.9 million) integration costs.

5.  Tax expense

Analysis of tax charge reported in the income statement:

	2015 £m	2014  £m
UK Corporation Tax on profits for the year	45.7	51.1
Adjustments in respect of prior year estimates	(0.3)	(0.5)
Foreign tax - current	84.0	63.4
Foreign tax - adjustments in respect of prior year estimates	5.2	2.9
Current tax	134.6	116.9
Origination and reversal of temporary differences	(7.5)	(11.2)
Adjustments in respect of prior year estimates	(4.3)	(1.9)
Effect of changes in Corporation Tax rates	(1.2)	0.1
Deferred tax	(13.0)	(13.0)
Tax charge reported in the income statement	121.6	103.9

The UK standard rate of Corporation Tax reduced from 21 per cent. to 20 per cent. on 1 April 2015 resulting in a UK effective tax rate for the year of 20.25 per cent. (2014: effective rate of 21.5 per cent.). The tax charge for the year is higher (2014: lower) than a charge based on the UK effective rate.

	2015 £m	2014  £m
Profit before tax	589.0	517.1
Less post-tax profits of associates and joint ventures	(19.3)	(8.5)
Profit before tax of Group entities	569.7	508.6
Profit before tax of consolidated Group entities multiplied by Corporation Tax at the UK effective rate of 20.25 per cent. (2014: 21.5 per cent.)	115.4	109.3
Effects of:
Different statutory tax rates of overseas jurisdictions	12.8	4.5
Permanent differences including non-taxable income and non-deductible expenses	(4.1)	(6.9)
Net movement in timing differences for which no deferred tax is recognised	(1.9)	(3.6)
Deferred tax adjustments in respect of changes in Corporation Tax rates	(1.2)	0.1
Prior year adjustments	0.6	0.5
Tax charge reported in the income statement	121.6	103.9

6.  Earnings per share

Reconciliation of the figures used in calculating basic and diluted earnings per share:

	2015 Number Millions	2014 Number Millions
Weighted average number of shares used in calculation of basic earnings per share	273.1	270.4
Effect of dilutive potential shares - share options	7.0	8.3
Effect of dilutive potential shares - contingently issuable shares	0.6	0.7
Weighted average number of shares used in calculation of diluted earnings per share	280.7	279.4

7.  Dividends

	2016		2015		2014
	£m	Pence per share	£m	Pence per share	£m	Pence per share
Prior years final dividend paid			147.3	54.0	113.0	42.0
Interim dividend paid			79.0	29.0	64.7	24.0
Total dividends paid			226.3	83.0	177.7	66.0
Current year final dividend recommended	158.0	58.0

Dividends of £8.2 million (2014: £8.8 million) on shares held by employee benefit trusts have been waived; dividends may not be paid on treasury shares. The Board has recommended a 2015 final dividend of 58.0 pence per share (2014 final dividend: 54.0 pence) amounting to £158.0 million (2014: 147.3 million). The dividend will be paid on 5 May 2016 to shareholders on the register at 29 March 2016 and will be accounted for in 2016.

The Company offers a dividend reinvestment plan (DRIP).  The last date for shareholders to elect to participate in the DRIP for the purposes of the 2015 final dividend is 13 April 2016.  Further details are contained on our website.

8.  Fair value measurement disclosures

The Group holds financial instruments that are measured at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

The fair value of financial instruments may require some judgement or may be derived from readily available sources. The degree of judgement involved is reflected below, although this does not necessarily indicate that the fair value is more or less likely to be realised.

For investments that are actively traded in financial markets, fair value is determined by reference to official quoted market prices. For investments that are not actively traded, fair value is determined by using quoted prices from third parties such as brokers, market makers and pricing agencies.

Financial assets that have no quoted price principally consist of investments in private equity, derivatives and certain loans in Wealth Management. The determination of fair value for these instruments requires significant judgement, particularly in determining whether changes in fair value have occurred since the last formal valuation.

The Group's financial instruments have been categorised using a fair value hierarchy that reflects the extent of judgements used in the valuation. These levels are based on the degree to which the fair value is observable and are defined as follows:

·       Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities and principally comprise investments in quoted equities and debt securities, daily-priced funds and exchange-traded derivatives;

·       Level 2 fair value measurements are those derived from prices that are not traded in an active market but are determined using valuation techniques, which make maximum use of observable market data. The Group's level 2 financial instruments principally comprise foreign exchange contracts, certain debt securities and loans held at fair value. Valuation techniques may include using a broker quote in an inactive market or an evaluated price based on a compilation of primarily observable market information utilising information readily available via external sources. For funds not priced on a daily basis, the net asset value which is issued monthly or quarterly is used; and

·       Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data and principally comprise investments in private equity funds. These funds are managed by third parties and are measured at the values provided by the relevant fund managers, unadjusted by the Group except for known events, such as calls or distributions, that have occurred between the valuation and reporting date.  The valuation review is a continual process throughout the year.

The Group holds certain assets and liabilities at fair value.  Their categorisation within the fair value hierarchy is shown below:

	2015
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets:
Equities	534.6	6.5	33.6	574.7
Debt securities1	677.5	21.0	-	698.5
Derivative contracts	15.5	22.7	-	38.2
Other instruments	-	11.0	-	11.0
	1,227.6	61.2	33.6	1,322.4
Trade and other receivables1	20.1	-	-	20.1
Assets backing unit-linked liabilities1	9,007.6	1,605.5	43.4	10,656.5
	10,255.3	1,666.7	77.0	11,999.0
Financial liabilities:
Derivative contracts	30.6	16.7	-	47.3
Other financial liabilities held at fair value through profit or loss	51.0	5.4	-	56.4
	81.6	22.1	-	103.7
Trade and other payables1	99.3	-	-	99.3
Unit-linked liabilities1	11,148.2	129.5	-	11,277.7
	11,329.1	151.6	-	11,480.7

¹ For each of these categories, the Group holds instruments at fair value as well as at amortised cost. Instruments held at amortised cost are not included in the analysis above.

	2014
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets:
Equities	434.3	12.6	40.0	486.9
Debt securities1	450.7	7.6	-	458.3
Derivative contracts	0.6	25.8	-	26.4
Other instruments	-	31.2	-	31.2
	885.6	77.2	40.0	1,002.8
Trade and other receivables1	29.2	-	-	29.2
Assets backing unit-linked liabilities1	10,830.7	1,950.4	49.6	12,830.7
	11,745.5	2,027.6	89.6	13,862.7
Financial liabilities:
Derivative contracts	1.8	13.6	-	15.4
Other financial liabilities held at fair value through profit or loss	43.2	7.6	0.8	51.6
	45.0	21.2	0.8	67.0
Trade and other payables1	102.0	-	-	102.0
Unit-linked liabilities1	13,488.2	5.5	-	13,493.7
	13,635.2	26.7	0.8	13,662.7

¹ For each of these categories, the Group holds instruments at fair value as well as at amortised cost. Instruments held at amortised cost are not included in the analysis above.

Movements in assets and liabilities categorised as level 3 during the year were:

		2015			2014
		Financial assets £m	Assets backing unit-linked liabilities £m	Financial assets £m		Assets backing unit-linked liabilities £m
At 1 January		40.0	49.6	38.8		158.2
Exchange translation adjustments		(0.9)	(3.4)	(1.8)		(6.5)
Total gains recognised in the income statement		-	12.1	-		13.2
Total gains recognised in other comprehensive income		13.5	-	7.7		-
Additions		-	-	8.0		1.8
Disposals		(19.0)	(14.9)	(11.7)		(117.1)
Transfers out of level 3		-	-	(1.0)		-
At 31 December		33.6	43.4	40.0		49.6

No financial assets were transferred from level 2 to level 1 during the period (2014: £36.1 million) or from level 1 to level 2 (2014: none).

9.  Share capital and share premium

	Number of shares Millions	Ordinary shares £m	Non-voting ordinary shares £m	Total shares £m	Share premium £m
At 1 January 2015	282.5	226.0	56.5	282.5	119.4
At 31 December 2015	282.5	226.0	56.5	282.5	119.4

	Number  of shares Millions	Ordinary shares £m	Non-voting ordinary shares £m	Total shares £m	Share premium £m
At 1 January 2014	282.7	226.0	56.7	282.7	119.4
Shares cancelled	(0.2)	-	(0.2)	(0.2)	-
At 31 December 2014	282.5	226.0	56.5	282.5	119.4
			2015 Number of shares Millions	2014 Number of shares Millions
Issued and fully paid:
Ordinary shares of £1 each			226.0	226.0
Non-voting ordinary shares of £1 each			56.5	56.5
			282.5	282.5

10.  Own shares

Own shares include the Group's shares (both ordinary and non-voting ordinary) that are held by employee benefit trusts.

Movements in own shares during the year were as follows:

	2015 £m	2014 £m
At 1 January	(200.1)	(229.9)
Own shares purchased	(51.1)	(64.9)
Cancellation of own shares held in treasury	-	3.8
Awards vested	75.7	90.9
At 31 December	(175.5)	(200.1)

	2015			2014
	Number of vested shares Millions	Number of unvested shares Millions	Total Millions	Number of vested shares Millions	Number of unvested shares Millions	Total Millions
Ordinary shares	2.2	8.1	10.3	2.8	9.9	12.7
Non-voting ordinary shares	0.2	0.6	0.8	0.2	1.1	1.3
	2.4	8.7	11.1	3.0	11.0	14.0

During the year 1.7 million own shares were purchased and held for hedging share-based awards. 4.0 million shares awarded to employees vested in the period and were transferred out of own shares.

11.  Reconciliation of net cash from operating activities

	2015 £m	20141 £m
Profit before tax	589.0	517.1
Adjustments for income statement non-cash movements:
Depreciation of property, plant and equipment and amortisation of intangible assets	36.4	37.0
Net gains and impairments taken through the income statement on financial instruments	(12.6)	(18.5)
Share-based payments	63.3	60.6
Net (release)/charge for provisions	(14.8)	7.7
Other non-cash movements	(3.8)	8.3
	68.5	95.1
Adjustments for which the cash effects are investing activities:
Net finance income	(12.7)	(10.5)
Share of profit of associates and joint ventures	(19.3)	(8.5)
	(32.0)	(19.0)
Adjustments for statement of financial position movements:
(Increase)/decrease in trade and other receivables and other financial assets held for operating activities	(231.2)	44.3
(Decrease)/increase in trade and other payables, financial liabilities and provisions	(155.9)	881.2
	(387.1)	925.5
Adjustments for Life Company movements:
Net decrease/(increase) in financial assets backing unit-linked liabilities	2,245.3	(2,062.6)
Net (decrease)/increase in unit-linked liabilities	(2,338.5)	1,972.0
	(93.2)	(90.6)
Tax paid	(97.3)	(106.2)
Net cash from operating activities	47.9	1,321.9

¹ 2014 has been reformatted for consistency with the 2015 presentation, see basis of preparation.

Net cash from operating activities includes cash outflows of £11.2 million (2014: £13.4 million) in respect of exceptional items.

Key risks and mitigations

Our key risks and mitigations can be read by accessing the link below.

Click on or paste the following link into you web browser to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/8733Q_-2016-3-2.pdf

Directors' responsibility statement

To the best of their knowledge and belief, each of the Directors listed below confirms that:

·    The consolidated financial statements of Schroders plc, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of Schroders plc and the undertakings included in the consolidation taken as a whole;

·    The announcement includes a fair summary of the development and performance of the business and the position of Schroders plc and the undertakings included in the consolidation taken as a whole and a description of the principal risks and uncertainties that they face;

·    So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

·    They have each taken all the steps that ought to have been taken by them as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Directors:

Andrew Beeson	Chairman
Michael Dobson	Chief Executive
Richard Keers	Chief Financial Officer
Peter Harrison	Head of Investment
Philip Mallinckrodt	Group Head of Wealth Management
Massimo Tosato	Executive Vice Chairman and Global Head of Distribution
Lord Howard of Penrith	Senior Independent Director
Ashley Almanza	Independent non-executive Director
Robin Buchanan	Independent non-executive Director
Rhian Davies	Independent non-executive Director
Nichola Pease	Independent non-executive Director
Bruno Schroder	Non-executive Director

2 March 2016

Five-year consolidated financial summary

Before exceptional items	2015 £m	2014 £m	2013 £m	2012 £m	2011 £m
Profit before tax	609.7	565.2	507.8	360.0	407.3
Tax	(126.3)	(113.9)	(103.0)	(76.8)	(91.5)
Profit after tax	483.4	451.3	404.8	283.2	315.8
After exceptional items	2015 £m	2014 £m	2013 £m	2012 £m	2011 £m
Profit before tax	589.0	517.1	447.5	360.0	407.3
Tax	(121.6)	(103.9)	(94.8)	(76.8)	(91.5)
Profit after tax	467.4	413.2	352.7	283.2	315.8

Pre-exceptional earnings per share:	2015 Pence	2014 Pence	2013 Pence	2012 Pence	2011 Pence
Basic earnings per share	176.9	166.8	149.9	104.7	115.9
Diluted earnings per share	172.2	161.5	144.6	101.3	111.9
Post-exceptional earnings per share:	2015 Pence	2014 Pence	2013 Pence	2012 Pence	2011 Pence
Basic earnings per share	171.1	152.7	130.6	104.7	115.9
Diluted earnings per share	166.5	147.8	126.0	101.3	111.9
Dividends	2015	2014	2013	2012	2011
Cost (£m)	226.3	177.7	123.5	104.1	104.8
Pence per share1	83.0	66.0	46.0	39.0	39.0
Total equity (£m)	2,795.6	2,537.8	2,268.6	2,069.9	1,901.6
Net assets per share (pence)2	990	898	802	733	673

¹ Dividends per share are those amounts approved by the shareholders to be paid within the year on a per share basis to the shareholders on the register at the specified dates.

² Net assets per share are calculated by using the actual number of shares in issue at the year-end date.

Exchange rates - closing

31 December	2015	2014	2013	2012	2011
Sterling:
Euro	1.36	1.29	1.20	1.23	1.20
US dollar	1.47	1.56	1.66	1.63	1.55
Swiss franc	1.48	1.55	1.47	1.49	1.45
Australian dollar	2.03	1.91	1.85	1.57	1.52
Hong Kong dollar	11.42	12.09	12.84	12.60	12.07
Japanese yen	177.30	186.95	174.08	140.55	119.57
Singaporean dollar	2.09	2.07	2.09	1.99	2.02

 

END

 

 

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