Interim Results
Schroders PLC
02 September 2003
2nd September 2003
Schroders plc
Interim Results to 30th June 2003
• Underlying asset management profit £32.6 million (H1 2002: £46.8 million)
• Profit before tax and goodwill amortisation £32.4 million (H1 2002: £25.9
million)
• Profit before tax £27.2 million (H1 2002: £20.5 million)
• Funds under management £90.4 billion (31st December 2002: £86.2 billion*,
30th June 2002: £100.2 billion*)
• Net new business £0.2 billion (H1 2002: net outflow £2.3 billion)
• Unchanged interim dividend of 5.5 pence per share
* Adjusted to exclude £2.1 billion and £2.5 billion from funds under management
at 31st December 2002 and 30th June 2002 respectively on the completion of the
sales of Schroder Hermes and Schroder Pensions in January and February 2003.
Six months ended Six months ended Year ended
30th June 2003 30th June 2002 31st December 2002
(unaudited) (unaudited) (audited)
£mn £mn £mn
Underlying asset management profit 32.6 46.8 77.0
Project expenditure (10.0) (15.0) (33.2)
Redundancy costs (1.2) (7.0) (13.7)
Asset management profit before exceptional items 21.4 24.8 30.1
Exceptional items - net gain/(loss) on sale of 2.4 - (5.4)
subsidiary undertakings
Asset management profit 23.8 24.8 24.7
Private equity 12.0 3.7 12.9
Group net income/(costs) (3.4) (2.6) (8.1)
Profit before goodwill 32.4 25.9 29.5
Goodwill amortisation (5.2) (5.4) (10.6)
Profit before tax 27.2 20.5 18.9
----------------------------------------------
Contacts:
Schroders
Michael Dobson Chief Executive +44 (0) 20 7658 6962
Jonathan Asquith Chief Financial Officer +44 (0) 20 7658 6565
Julian Samways Head of Corporate Communications +44 (0) 20 7658 6166
The Maitland Consultancy
William Clutterbuck +44 (0) 20 7379 5151
Management Statement
Equity markets were sharply lower in the first half of 2003 against the
comparable period in 2002 and this had a direct impact on net revenues which
were £202.4 million, down 19 per cent. from £250.1 million in the first half of
2002. Against this, good progress has been made in reducing our cost base: total
costs were down £40.6 million or 17 per cent. on the first half of 2002. The
position on net new business flows was much improved reflecting a reduction in
institutional outflows and another very strong performance in our retail
business. Our listed and unlisted private equity investments made an important
contribution to Group profit before tax, with a sharp rise in the share price of
Schroder Ventures International Investment Trust plc over the period
supplemented by carried interest payments and realisations from the old Schroder
Ventures funds.
Underlying asset management profit was £32.6 million compared to £46.8 million
in the first half of 2002, a decrease of 30 per cent. Profit before goodwill
amortisation amounted to £32.4 million (H1 2002: £25.9 million), up 25 per cent.
Profit before tax was £27.2 million (H1 2002: £20.5 million), up 33 per cent.
From an opening position of £86.2 billion at the end of December 2002, adjusted
to exclude £2.1 billion on the completion of the sales of Schroder Hermes and
Schroder Pensions in January and February 2003 respectively, funds under
management rose 5 per cent. to £90.4 billion during the period. The increase
predominantly reflects rising stock markets. Net new business inflows were £0.2
billion compared to a net outflow of £2.3 billion in the first half of 2002.
Funds under management**
30th June 2003 31st December 2002
£bn £bn
Institutional 66.4 66.0
Retail 19.1 15.3
Private Banking 4.9 4.9
90.4 86.2
** See Note after the Outlook paragraph below.
Institutional Fund Management
Overall net outflows of institutional funds were £2.5 billion, down from £4.4
billion in the first half of 2002.**
In the UK, our £1.2 billion multi-asset pooled fund has performed in line with
or above benchmark in thirteen out of the last fourteen quarters and UK equity
performance has been strong across the board this year. The bulk of the net
outflow of £1.8 billion in the UK in the first half was the result of the
continued restructuring from balanced to specialist mandates. Balanced mandates
now represent less than 7 per cent. of Group funds under management.
As expected, there was an outflow of £1.4 billion from our Americas business.
Net business gains in continental Europe were £0.8 billion. In Australia we have
closed to new segregated accounts while we absorb the growth in domestic
equities under management from £0.7 billion to £2.0 billion over the eighteen
months to June 2003.
We have continued to pursue operational efficiencies which enhance the services
we provide to our clients. A single dealing platform will be rolled out across
the Group by the end of the year which allows the simultaneous implementation of
dealing decisions globally, reducing transaction costs. It also enables
portfolio modelling and automatic pre-trade mandate checking to be conducted
across portfolios in all major locations. Portfolio accounting, administration
and client reporting for North America and Hong Kong have been consolidated into
London and Singapore respectively.
Retail Fund Management
Gross sales were £5.5 billion during the period. Net sales were £2.9 billion, up
36 per cent. on the same period in 2002.**
Net new business flows were derived equally from Europe, including the UK, and
Asia Pacific. Over 80 per cent. of inflows have been into fixed income products.
We announced the launch of three new equity Alpha funds with aggressive
performance targets following the success of the UK Alpha Plus fund which now
has £150 million in assets under management, just over one year after its
launch.
We continued to consolidate our distribution networks with key local and global
partners and concluded several strategic partnership agreements with leading
financial institutions. In the UK we are well placed to benefit from
depolarisation.
The outsourcing of UK unit trust administration was successfully completed and
will result in significant cost savings. We closed or merged ten small funds and
we concluded the integration of the Hong Kong fund range into the Luxembourg
range, enabling us to deliver a more comprehensive reporting service to our
clients.
Private Banking
In Private Banking we strengthened our client relationship and marketing teams,
enhanced our services and products for high net worth individuals, and
streamlined our operations.
We saw increased demand for our cash management and asset allocation services
and added approximately £250 million to the balance sheet in short term client
deposits. We also launched two new alternative investment products: a second
private equity fund of funds vehicle to be listed on the Dublin Stock Exchange,
and a specialist fund of hedge funds.
A new portfolio accounting system was introduced in London and Zurich,
specifically tailored to the needs of private clients, automating and upgrading
client reporting and performance measurement. We outsourced custody and
transferred out a small book of business which did not fit with our strategy of
focusing on clients with complex financing and investment needs.
Interim Dividend
An unchanged interim dividend of 5.5 pence per share has been declared and will
be paid on 15th October 2003 to shareholders on the register at 19th September
2003.
Outlook
We have seen net new business gains in the first half of the year, although we
remain cautious about fund flows for the year as a whole. As we look forward to
Schroders' 200th anniversary in 2004, the major actions to reduce our cost base
have been implemented and the emphasis is now on growing revenues.
--------------------------------------------------------------------------------
Note
During the period £3.6 billion of sub-advisory assets were transferred from
Institutional to Retail to reflect more closely the underlying source of this
business. In Asia, £0.3 billion was transferred from Private Banking to
Institutional. Of the £2.1 billion adjustment to reflect the sales of Schroder
Hermes and Schroder Pensions, £1.5 billion was classified as institutional
assets and £0.6 billion as retail assets. These changes have been reflected as
appropriate throughout this announcement.
Consolidated Profit and Loss Account
Six months ended Six months ended Six months ended Year ended
30th June 2003 30th June 2002 31st December 31st December 2002
2002
(unaudited) (unaudited) (audited)
(unaudited)
£mn £mn £mn £mn
Net revenues - continuing operations 202.3 249.6 221.6 471.2
- discontinued operations 0.1 0.5 0.9 1.4
202.4 250.1 222.5 472.6
Gains/(losses) on current asset investments 11.0 0.2 (5.3) (5.1)
Administrative expenses (189.8) (219.2) (208.2) (427.4)
Depreciation (5.0) (16.0) (16.1) (32.1)
Amortisation of goodwill (5.2) (5.4) (5.2) (10.6)
Group operating profit/(loss)
- continuing operations 13.8 13.3 (9.5) 3.8
- discontinued operations (0.4) (3.6) (2.8) (6.4)
13.4 9.7 (12.3) (2.6)
Share of operating profit of associated 0.1 1.5 6.2 7.7
undertakings
Total operating profit/(loss) 13.5 11.2 (6.1) 5.1
Provision for loss on sale of subsidiary
undertakings
- discontinued operations - - (6.3) (6.3)
Profit on disposal of subsidiary undertakings
- continuing operations - - 0.9 0.9
- discontinued operations 2.4 - - -
Interest receivable and similar income 12.1 10.9 11.9 22.8
Amounts written off fixed asset investments (0.5) (1.3) (2.0) (3.3)
Interest payable and similar charges (0.3) (0.3) - (0.3)
Profit/(loss) on ordinary activities before tax 27.2 20.5 (1.6) 18.9
Tax on profit/(loss) on ordinary activities (4.7) (6.8) 14.5 7.7
Profit on ordinary activities after tax 22.5 13.7 12.9 26.6
Minority interests - (0.4) (0.1) (0.5)
Profit attributable to shareholders 22.5 13.3 12.8 26.1
Dividends (16.1) (16.0) (37.3) (53.3)
Retained profit/(loss) for the period 6.4 (2.7) (24.5) (27.2)
Basic earnings per share 7.6p 4.4p 4.4p 8.8p
Diluted earnings per share 7.6p 4.4p 4.4p 8.8p
Statement of Total Consolidated Recognised Gains and Losses
Six months ended 30th June Six months ended 30th Year ended
2003 June 2002 31st December
2002
(unaudited) (unaudited)
(audited)
£mn £mn
£mn
Profit attributable to shareholders for the period 22.5 13.3 26.1
Exchange translation adjustments to foreign currency 0.5 (0.3) (14.0)
net investments
Total recognised gains and losses 23.0 13.0 12.1
Reconciliation of Movements in Consolidated Shareholders' Funds
Six months ended 30th Six months ended Year ended
June 2003 30th June 2002 31st December 2002
(unaudited) (unaudited) (audited)
£mn £mn £mn
Profit attributable to shareholders for the period 22.5 13.3 26.1
Dividends (16.1) (16.0) (53.3)
6.4 (2.7) (27.2)
New share capital subscribed - - 3.0
Shares to be issued - - (3.0)
Cancellation of non-voting ordinary shares - (8.1) (19.4)
Exchange translation adjustments 0.5 (0.3) (14.0)
Net movement in shareholders' funds 6.9 (11.1) (60.6)
Opening shareholders' funds 1,051.9 1,112.5 1,112.5
Closing shareholders' funds 1,058.8 1,101.4 1,051.9
Consolidated Balance Sheet
30th June 2003 30th June 2002 31st December 2002
(unaudited) (unaudited) (audited)
£mn £mn £mn
Fixed assets
Intangible assets - goodwill 29.7 40.5 35.0
Tangible assets 12.8 106.6 17.8
Investments 106.2 101.0 100.5
148.7 248.1 153.3
Insurance assets attributable to unit linked - 2,482.2 2,134.6
policyholders+
148.7 2,730.3 2,287.9
Current assets
Debtors due within one year 584.8 646.2 409.0
Debtors due after more than one year 241.2 260.9 262.1
Investments 1,189.7 778.9 897.1
Cash and balances with banks 651.2 686.3 736.4
2,666.9 2,372.3 2,304.6
Creditors - amounts falling due within one year (1,490.0) (1,202.3) (1,098.5)
Net current assets 1,176.9 1,170.0 1,206.1
Total assets less current liabilities 1,325.6 3,900.3 3,494.0
Creditors - amounts falling due after more than one (223.0) (242.2) (256.6)
year
Insurance liabilities attributable to unit linked - (2,482.2) (2,134.6)
policyholders+
Provisions for liabilities and charges (43.8) (74.2) (50.9)
Net assets 1,058.8 1,101.7 1,051.9
Capital and reserves
Called up share capital 295.7 297.6 295.7
Share premium account 17.8 15.2 17.8
Shares to be issued 9.9 12.9 9.9
Capital reserves 138.9 131.4 129.4
Profit and loss account 596.5 644.3 599.1
Equity shareholders' funds 1,058.8 1,101.4 1,051.9
Minority interests - 0.3 -
Total shareholders' funds including minority 1,058.8 1,101.7 1,051.9
interests
+Since the sale of Schroder Hermes and Schroder Pensions during the first
quarter of 2003, the Group no longer has insurance assets/liabilities
attributable to unit linked policyholders.
Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
30th June 2003 30th June 2002 31st December 2002
(unaudited) (unaudited) (audited)
£mn £mn £mn
Net cash inflow/(outflow) from operating 231.0 (82.7) 78.7
activities
Distributions received from associates 0.3 - 0.5
Returns on investments and servicing of 12.5 10.4 20.8
finance
Taxation (5.3) 3.1 (4.6)
Capital expenditure and financial investments (6.0) (26.3) 13.8
Acquisitions and disposals 4.4 (0.3) (0.6)
Dividends paid (37.5) (37.6) (53.5)
Management of liquid resources (368.5) (105.5) (97.7)
Financing - (8.1) (19.4)
(Decrease) in cash (169.1) (247.0) (62.0)
Reconciliation of operating profit to net cash inflow/(outflow) from operating
activities
Six months ended 30th Six months ended Year ended 31st
June 2003 (unaudited) 30th June 2002 December 2002
(unaudited) (audited)
£mn
£mn £mn
Operating profit 13.5 11.2 5.1
Depreciation of tangible fixed assets 5.0 16.0 32.1
Amortisation and impairment of goodwill 5.2 5.4 10.6
Other non-cash movements (6.5) 2.6 (4.6)
Changes in working capital 213.8 (117.9) 35.5
Net cash inflow/(outflow) from operating 231.0 (82.7) 78.7
activities
Reconciliation of movement in cash
At 30th June 2003 Cash flow At 31st December 2002
(unaudited) (audited)
(unaudited)
£mn £mn
£mn
Cash and balances with banks - repayable on 117.3 (166.9) 284.2
demand
Cash and balances with banks - other 533.9 452.2
Cash and balances with banks 651.2 736.4
Exchange adjustments (2.2)
(Decrease) in cash (169.1)
Financial information for the year ended 31st December 2002 is presented in
Format 1 of Schedule 4 to the Companies Act 1985, adapted to include an
additional item, 'Gains/(losses) on current asset investments'.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2002 Annual Report & Accounts.
This announcement was approved by the Board of Directors on 1st September 2003.
The financial information for the six month periods ended 30th June 2002 and
30th June 2003 and the year ended 31st December 2002 set out above does not
constitute full accounts within the meaning of section 240 of the Companies Act
1985. The full statutory accounts for 2002 received an unqualified audit report
and have been delivered to the Registrar of Companies.
The Interim Report for the six months to 30th June 2003 will be published in the
Financial Times on 3rd September 2003. The Interim Report, which is extracted
from this announcement and which includes the independent review report by the
auditors, has been prepared in accordance with the Listing Rules of the
Financial Services Authority. Set out below, in the version of this announcement
released to the London Stock Exchange, is the full text of the Interim Report.
Further copies of this announcement and the Interim Report are available from
the Company Secretary at 31 Gresham Street, London, EC2V 7QA (email:
company.secretary@schroders.com telephone 020 7658 6742) and will be available
on the Group's website at www.schroders.com together with further information
about the results.
Schroders plc Interim Report 2003
To be published in the Financial Times on 3rd September 2003
'Equity markets were sharply lower in the first half of 2003 against the
comparable period in 2002 and this had a direct impact on net revenues which
were £202.4 million, down 19 per cent. from £250.1 million in the first half of
2002. Against this, good progress has been made in reducing our cost base: total
costs were down £40.6 million or 17 per cent. on the first half of 2002. The
position on net new business flows was much improved reflecting a reduction in
institutional outflows and another very strong performance in our retail
business. Our listed and unlisted private equity investments made an important
contribution to Group profit before tax, with a sharp rise in the share price of
Schroder Ventures International Investment Trust plc over the period
supplemented by carried interest payments and realisations from the old Schroder
Ventures funds.
We have seen net new business gains in the first half of the year, although we
remain cautious about fund flows for the year as a whole. As we look forward to
Schroders' 200th anniversary in 2004, the major actions to reduce our cost base
have been implemented and the emphasis is now on growing revenues.
Financial highlights:
• Profit before tax £27.2 million (H1 2002: £20.5 million)
• Funds under management £90.4 billion (31st December 2002: £86.2 billion*,
30th June 2002: £100.2 billion*)
• Net new business £0.2 billion (H1 2002: net outflow £2.3 billion)
• Unchanged interim dividend of 5.5 pence per share
* Adjusted to exclude £2.1 billion and £2.5 billion from funds under management
at 31st December 2002 and 30thJune 2002 respectively on the completion of the
sales of Schroder Hermes and Schroder Pensions in January and February 2003.
Independent Review Report to the Board of Directors of Schroders plc
Introduction
We have been instructed by Schroders plc to review the summary consolidated
profit and loss account, the summary consolidated balance sheet and the summary
consolidated cash flow statement. We have read the other information contained
in the Interim Report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
The maintenance and integrity of the Schroders website is the responsibility of
the directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the Interim Report
since it was initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information may differ from the legislation in other jurisdictions.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30th June 2003.
PricewaterhouseCoopers LLP
Chartered Accountants, London
2nd September 2003
Summary Consolidated Profit and Loss Account
Six months ended Six months ended 30th Year ended
30th June 2003 June 2002 (unaudited) 31st December 2002
(unaudited) (audited)
£mn
£mn £mn
Net revenues - continuing operations 202.3 249.6 471.2
- discontinued operations 0.1 0.5 1.4
202.4 250.1 472.6
Operating profit /(loss) - continuing 13.9 14.8 11.5
operations
- discontinued operations (0.4) (3.6) (6.4)
13.5 11.2 5.1
Provision for loss on sale of subsidiary
undertakings
- discontinued operations - - (6.3)
Profit on disposal of subsidiary undertakings
- continuing operations - - 0.9
- discontinued operations 2.4 - -
Amounts written off fixed asset investments (0.5) (1.3) (3.3)
Net interest income 11.8 10.6 22.5
Profit on ordinary activities before tax 27.2 20.5 18.9
Tax on profit on ordinary activities (4.7) (6.8) 7.7
Profit on ordinary activities after tax 22.5 13.7 26.6
Minority interests - (0.4) (0.5)
Profit attributable to shareholders 22.5 13.3 26.1
Dividends (interim 2003 and 2002 5.5p/total 2002 (16.1) (16.0) (53.3)
18.5p)
Retained profit/(loss) for the period 6.4 (2.7) (27.2)
Basic earnings per share 7.6p 4.4p 8.8p
Diluted earnings per share 7.6p 4.4p 8.8p
Summary Consolidated Balance Sheet
30th June 2003 30th June 2002 31st December 2002
(unaudited) (unaudited) (audited)
£mn £mn £mn
Fixed assets 148.7 248.1 153.3
Insurance assets attributable to unit linked - 2,482.2 2,134.6
policyholders+
Debtors 826.0 907.1 671.1
Investments 1,189.7 778.9 897.1
Cash and balances with banks 651.2 686.3 736.4
2,666.9 2,372.3 2,304.6
Creditors - amounts falling due within one (1,490.0) (1,202.3) (1,098.5)
year
Net current assets 1,176.9 1,170.0 1,206.1
Total assets less current liabilities 1,325.6 3,900.3 3,494.0
Creditors - amounts falling due after more (223.0) (242.2) (256.6)
than one year
Insurance liabilities attributable to unit - (2,482.2) (2,134.6)
linked policyholders+
Provisions for liabilities and charges (43.8) (74.2) (50.9)
Net assets 1,058.8 1,101.7 1,051.9
Equity shareholders' funds 1,058.8 1,101.4 1,051.9
Minority interests - 0.3 -
Total shareholders' funds including minority 1,058.8 1,101.7 1,051.9
interests
+Since the sale of Schroder Hermes and Schroder Pensions during the first
quarter of 2003, the Group no longer has insurance assets/liabilities
attributable to unit linked policyholders.
Summary Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
30th June 2003 30th June 2002
(unaudited) (unaudited) 31st December 2002
(audited)
£mn £mn
£mn
Net cash inflow/(outflow) from operating 231.0 (82.7) 78.7
activities
Distributions received from associates 0.3 - 0.5
Returns on investments and servicing of 12.5 10.4 20.8
finance
Taxation (5.3) 3.1 (4.6)
Capital expenditure and financial investments (6.0) (26.3) 13.8
Acquisitions and disposals 4.4 (0.3) (0.6)
Dividends paid (37.5) (37.6) (53.5)
Management of liquid resources (368.5) (105.5) (97.7)
Financing - (8.1) (19.4)
(Decrease) in cash (169.1) (247.0) (62.0)
The Interim Results announcement 2003 as released to the London Stock Exchange
on 2nd September 2003, which contains additional details, is available on the
Schroders website www.schroders.com together with further information about the
results. Copies of the Interim Results announcement 2003 and this Interim Report
can also be obtained by emailing company.secretary@schroders.com or by
telephoning 020 7658 6742. This Interim Report was approved by the Board of
Directors on 1st September 2003.
Schroders plc
Registered No. 3909886
Registered office 31 Gresham Street, London, EC2V 7QA.'
Forward-looking statements
This announcement contains certain forward-looking statements and forecasts with respect to the financial condition,
results of operations and businesses of Schroders plc and its subsidiaries. These statements and forecasts involve risk
and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a
number of factors that could cause actual results or developments to differ materially from those expressed or implied
by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit
forecast.
This information is provided by RNS
The company news service from the London Stock Exchange
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