Interim Results

SCHRODERS PLC 10 September 1999 SCHRODERS PLC Half Year Results to 30th June 1999 Profit before tax up 4% to £147 million against H1 1998 (£141.4 million) Profit before tax up 63% against H2 1998 (£90.3 million) No further Asian debt provisions (1998 H1 £25.0 million net; 1998 H2 £18.2 million net) Funds under management up £13 billion to £132 billion Earnings per share up 10% to 37.5p (1998 H1 34.1p) Interim dividend up 10% to 5.5p Six months Six months Six months ended 30th ended 31st ended 30th June 1999 December June 1998 (unaudited) 1998 (unaudited) (unaudited) £'mn £'mn £'mn Profit before tax Investment banking 68.9 24.8 60.3 Asset management 78.1 65.5 81.1 ======= ======= ======= 147.0 90.3 141.4 Tax (36.5) (24.2) (38.3) ======= ======= ======= Profit after tax 110.5 66.1 103.1 Minority interests 0.2 1.5 (2.9) ======= ======= ======= Profit attributable to shareholders 110.7 67.6 100.2 ======= ======= ======= An interim dividend of 5.5p per share (compared with 5.0p per share) will be paid on 28th October 1999 to shareholders on the register on 24th September 1999. Commentary At £147.0 million, the profit before tax for the half year to 30th June 1999 was a substantial improvement on that for the previous half year ended 31st December 1998 (£90.3 million after Asian debt provisions) and somewhat better than the results for the first six months of 1998 (£141.4 million after Asian debt provisions). The pre-tax return on average equity was 24 per cent. (1998 full year - 21 per cent.) and the cost income ratio was 77.4 per cent. (1998 full year - 79.2 per cent.). Profit after tax and minority interests was £110.7 million, as against £100.2 million in the corresponding period of 1998 (second half 1998 - £67.6 million). The tax rate for the period was 25 per cent. (first and second half 1998 - both 27 per cent.). Earnings per share rose to 37.5p, an increase of 10 per cent. over the comparable period in 1998. Average staff numbers for the first half of 1999 rose to 6,291 from 6,035 for the first half of 1998. However, headcount across the Group fell by over 100 from the year end to stand at 6,235 at 30th June 1999. In April the Group raised US$250 million of ten year debt capital through a private placement with US institutional investors. Investment banking Investment banking profits for the first half of 1999 showed an increase over the first half of 1998; the latter included exceptional UK corporate finance revenues. The profit before tax of £68.9 million (first half 1998 - £60.3 million) was helped by the absence of Asian provisions and significant profits from private equity investments. European corporate finance continued to benefit from an active mergers and acquisitions market. The Group's UK business was ranked second by value of deals and fourth by number of transactions, whilst in continental Europe our German and Eastern European advisory businesses in particular showed satisfactory growth. In the US our corporate finance revenue levels were lower than in the same period last year. In Asia, activity increased throughout the region. Revenues were higher throughout our securities business, with Japan showing particularly strong growth, whilst within financial markets the increase in revenues from our European client business was encouraging. This growth in activity was reflected in a corresponding increase in our balance sheet footings. As a result of the improvement in economic conditions in a number of the Asian countries in which we operate, there was no further deterioration in our exposures to counterparties domiciled in that region; consequently additional net provisions against our Asian debt exposures were unnecessary. Asian exposures fell from the £318 million reported at 31st December 1998 to £292 million. Asset management Asset management profits before tax of £78.1 million were £12.6 million higher than in the second half of 1998 but slightly lower than the first half of 1998. Our business benefited from the sustained growth in most stock markets in the first half of the year, although results were held back somewhat by lower unit trusts sales in the UK. Funds under management reached £132.0 billion compared with £118.8 billion at the end of 1998, the bulk of the increase coming from market movements. New funds under management showed a small net increase with overseas gains offsetting some losses in the UK. Our investment approach has begun to yield stronger results with the recovery of previously undervalued market sectors and the performance of our retail and institutional funds has generally improved over the last six months. In August, we announced the sale of our Australian property asset management business, realising A$84 million for our 75 per cent. interest. This transaction will be reflected in the results of the second half year. We are committed to growing our remaining property asset management operations; our successful UK and continental European businesses have recently been supplemented by a new Asian fund. Year 2000 The Group continues to devote substantial resources to the resolution of the Year 2000 problem. Whilst no assurance can be given, we are confident that our own systems will be compliant and our contingency plans are well advanced to guard against the potential impact of Year 2000 failures. We estimate that the total specific costs of the Group's Year 2000 programme will be £26 million, of which approximately £4 million was incurred in the first half of 1999. Outlook The Asian economy is showing signs of improvement, Europe remains an attractive market place and the US economy continues to be strong. Against this background, we look forward to a satisfactory outcome for the second half. Press enquiries to: W.F.W. Bischoff I.P. Sedgwick Chairman Deputy Chairman 120 Cheapside, London EC2V 6DS Tel: (44) 171 658 6000 CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months Six months Six months ended 30th ended 31st ended 30th June 1999 December June 1998 (unaudited) 1998 (unaudited) (unaudited) £'mn £'mn £'mn Net interest income 67.1 74.5 67.9 Dividend income - 0.4 0.1 Net fees and commissions 526.5 433.3 510.3 Net dealing income 37.4 (16.6) 25.2 Other operating income 14.3 10.5 5.7 ===== ===== ===== Operating income 645.3 502.1 609.2 Administrative expenses (493.4) (401.3) (460.7) Depreciation (10.4) (11.8) (9.3) Specific provisions for bad debts (0.7) (9.1) (9.2) General provision for contingencies - 10.0 10.0 Associated undertakings 6.2 0.4 1.4 ===== ===== ===== Profit on ordinary activities before tax 147.0 90.3* 141.4* Tax (36.5) (24.2) (38.3) ===== ===== ===== Profit on ordinary activities after tax 110.5 66.1 103.1 Minority interests 0.2 1.5 (2.9) ===== ===== ===== Profit attributable to shareholders 110.7 67.6 100.2 Dividend (15.9) (33.6) (14.7) ===== ===== ===== Profit retained 94.8 34.0 85.5 Basic earnings per share 37.5p 22.9p 34.1p Diluted earnings per share 37.4p 22.8p 33.8p Dividend per share 5.5p 11.5p 5.0p ===== ===== ===== * After charges against Asian debt exposures (1st half 1998 - £25.0mn net; 2nd half 1998 - £18.2mn net) CONSOLIDATED BALANCE SHEET 30th June 31st December 1999 1998 (unaudited) (audited) £'mn £'mn Assets Cash and balances at central banks 10 10 Treasury bills and other eligible bills 108 205 Secured loans arising from purchase and resale agreements 4,868 4,264 Loans and advances to banks 1,686 2,125 Loans and advances to customers (less provisions) 780 652 Leasing receivables (less provisions) 490 459 Settlement accounts 3,784 2,400 Debt securities and other fixed income securities 2,444 2,151 Equity shares 209 134 Interests in associated undertakings 14 7 Tangible fixed assets 66 67 Financial instrument contracts 549 688 Other assets 228 228 Prepayments and accrued income 166 199 ====== ====== Total assets 15,402 13,589 ====== ====== Liabilities Deposits by banks 1,180 1,342 Customer accounts 1,589 1,432 Secured loans arising from sale and repurchase agreements 4,679 4,460 Settlement accounts 3,485 2,311 Corporate debt securities in issue 159 - Other debt securities in issue 488 466 Financial instrument contracts 711 846 Short securities positions 1,184 817 Other liabilities 157 180 Accruals and deferred income 440 520 Provisions for liabilities and charges 35 30 ====== ====== 14,107 12,404 Equity shareholders' funds Called up share capital 295 295 Share premium account 3 - Reserves 94 86 Profit and loss account 889 790 ====== ====== 1,281 1,171 Minority interests 14 14 ====== ====== Total liabilities and shareholders' funds 15,402 13,589 ====== ====== Commitments 546 672 ====== ====== Contingent liabilities 1,111 520 ====== ====== Statement of total consolidated recognised gains and losses £'mn Profit for the period 111 Exchange translation adjustments to foreign currency net investments 14 ===== Total recognised gains and losses 125 ===== Reconciliation of movement in consolidated shareholders' funds £'mn Profit for the period 111 Dividend (16) ===== 95 Exchange translation adjustments 14 New share capital subscribed 3 Other movements (2) ===== Net increase in shareholders' funds 110 At 1st January 1999 1,171 ===== At 30th June 1999 1,281 ===== * * * * * * * The accounting policies adopted are consistent with those described in the 1998 Annual Report and Accounts. The half year figures are non-statutory and have not been audited. The statutory accounts for the year ended 31st December 1998 received an unqualified audit report and have been delivered to the Registrar of Companies. The Interim Report will be posted to shareholders within the next week. Further copies are available from the Company Secretary at 120 Cheapside, London EC2V 6DS.

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