Schroders Plc Annual Results to 31 December 2014*
Michael Dobson, Chief Executive, commented:
“2014 was a record year for Schroders. Profit before tax and exceptional items was up 11 per cent. to £565.2 million and assets under management were up 14 per cent. to £300.0 billion. We generated net new business of £24.8 billion from clients around the world on the back of competitive investment performance across a broad product range and strong distribution.
The Board is recommending a final dividend of 54.0 pence per share bringing the total dividend for the year to 78.0 pence per share (2013: 58.0 pence), an increase of 34 per cent.
We believe our focus on building a diversified business across a broad range of investment strategies will continue to deliver value for clients and shareholders over the long term.”
- Profit before tax and exceptional items up 11 per cent. to £565.2 million** (2013: £507.8 million)
- Profit before tax up 16 per cent. to £517.1 million (2013: £447.5 million)
- Earnings per share up 17 per cent. to 152.7 pence (2013: 130.6 pence)
- 78 per cent. of assets under management outperforming over three years***
- Net inflows £24.8 billion (2013: £7.9 billion)
- Assets under management up 14 per cent. to £300.0 billion (2013: £262.9 billion)
- Full-year dividend up 34 per cent. to 78.0 pence per share (2013: 58.0 pence)
|Profit before tax and exceptional items
|Total profit before tax and exceptional items||565.2||507.8|
|Total profit before tax||517.1||447.5|
|Earnings per share before exceptional items (pence)
Earnings per share (pence)
|Total dividend (pence per share)||78.0||58.0|
* The Annual IFRS results for the year ended 31 December 2014 have been extracted from the audited 2014 Schroders plc consolidated group financial statements.
** See notes 1 and 2 in the full press release attached for further details and a definition of exceptional items.
*** See below for a definition of investment performance.
2014 was a strong year for Schroders with high levels of net new business and increased profit, as we benefited from the diversity of our business across a broad range of asset classes, client channels and regions. Net revenue increased by 9 per cent. to £1,531.2 million (2013: £1,407.6 million) and profit before tax and exceptional items increased by 11 per cent. to £565.2 million (2013: £507.8 million). We won net new business of £24.8 billion (2013: £7.9 billion) and assets under management were up 14 per cent. to £300.0 billion (2013: £262.9 billion).
Asset Management net revenue increased 5 per cent. to £1,303.5 million (2013: £1,247.2 million) despite lower performance fees of £34.2 million compared to an unusually high level of performance fees in 2013 at £80.2 million. Net revenue margins, excluding performance fees, were marginally down at 52 basis points (2013: 53 basis points) which was caused by business mix changes during the year. Profit before tax and exceptional items was up 7 per cent. at £499.3 million (2013: £468.6 million). Exceptional items of £17.6 million (2013: £13.5 million) related principally to the amortisation of the value of client relationships acquired with Cazenove Capital and STW and integration costs arising from those two acquisitions.
Our depth of investment talent in the UK and internationally across portfolio management and research, disciplined investment processes and a programme of active engagement with the companies in which we invest, led to competitive investment performance with 78 per cent. of assets under management outperforming benchmark or peer group over three years to the end of 2014. We generated £24.3 billion (2013: £9.4 billion) of net new business during the year as a result of good investment performance, a broad product range across asset classes and a proven distribution capability.
In addition to £13.3 billion of net inflows in the UK we saw the strength of our international network with net inflows of £6.0 billion in continental Europe and £5.3 billion in Asia Pacific. By asset class, we had net inflows of £16.9 billion in Multi-asset, £4.7 billion in Fixed Income and £4.5 billion in Equities, with net outflows in Commodities stemming from the challenging environment in this asset class.
In Institutional, we won net new business of £17.6 billion (2013: £4.6 billion), including a £12.0 billion mandate in Multi-asset and Equities from Friends Life. Assets under management in Institutional ended the year at £171.1 billion (2013: £144.3 billion).
We also had a strong year in Intermediary with net inflows of £6.7 billion (2013: £4.8 billion) and high levels of demand in continental Europe and Asia Pacific. Income products continued to be an important theme behind investor demand. Assets under management in Intermediary ended the year at £97.8 billion (2013: £88.5 billion).
Our Wealth Management business generated significantly higher revenues and profit in 2014, benefiting from a full year of contribution from Cazenove Capital. Net revenue increased 42 per cent. to £213.5 million (2013: £150.0 million), including performance fees of £2.9 million (2013: £0.4 million) and a release of £6.1 million of loan loss provisions. Profit before tax and exceptional items was up 80 per cent. to £61.7 million (2013: £34.3 million). Exceptional items of £20.4 million (2013: £30.9 million) related principally to integration costs and the amortisation of the value of client relationships acquired with Cazenove Capital.
Our focus in 2014 was on ensuring a successful integration of Cazenove Capital with minimal disruption to clients, but we nevertheless generated net inflows of £0.5 billion (2013: net outflows £1.5 billion) as the strength of our wealth management proposition was widely recognised. Assets under management ended the year at £31.1 billion (2013: £30.1 billion).
The Group segment comprises returns on investment capital and seed capital deployed in building a track record in new investment strategies, and central costs. Profit before tax and exceptional items was £4.2 million (2013: £4.9 million). Exceptional items of £10.1 million (2013: £15.9 million) comprised costs relating to the acquisitions of Cazenove Capital and STW.
Shareholders’ equity at the end of 2014 was £2.5 billion (2013: £2.3 billion).
Our policy is to increase dividends progressively, in line with the trend in profitability, and to target a dividend payout ratio of 45 to 50 per cent. In light of the results achieved in 2014, the Board will recommend to shareholders at the Annual General Meeting an increase in the final dividend of 29 per cent., taking the final dividend to 54.0 pence (2013: 42.0 pence). This will bring the total dividend for the year to 78.0 pence (2013: 58.0 pence), an increase of 34 per cent. The final dividend will be paid on 6 May 2015 to shareholders on the register at 27 March 2015.
In an extraordinarily low interest rate environment financial markets have been resilient despite numerous macro-economic uncertainties. This may continue for some time although we expect to see greater volatility in markets and therefore in investor demand in 2015.
Our focus remains on the long term where we see a wide range of growth opportunities in the UK and internationally. We believe that our strategy of building a business which is highly diversified across different clients, asset classes and regions will continue to deliver value for clients and shareholders.
This announcement, the Annual Report and Accounts for 2014 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 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’, ‘believes’, ‘expects’, ‘aims’, ‘will have’, ‘will be’, ‘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 announcement. 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 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. Funds with no benchmark but an absolute return target over the one or threeyear 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 2014, such comparator data existed for 74 per cent. of Asset Management AUM over three years and 84 per cent. over one year.
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