Annual results 2018 · Presentation. 7 March 2019. Annual results 2018. Peter Harrison . Group...

Presentation7 March 2019

Annual results 2018

Peter Harrison Group Chief Executive

1 Annual Results 2018

Resilient results with strategic progress

Peter HarrisonGroup Chief Executive

Growth in key areas of investment

Year of strategically critical initiatives

Business model evolving to meet changing client demand

Revenue growth while investing back into the business



2018 2017 Change

Net income1 £2,123.9m £2,068.9m 3%

Ratio of total costs to net income 64% 61% –

Profit before tax1 £761.2m £800.3m (5)%AUMA £421.4bn £447.0bn (6)%

Net new business £(9.5)bn £9.6bn –

Basic EPS1 215.8p 226.9p (5)%Total dividend per share 114p 113p –

1 Before exceptional items.







Pre-exceptional profit before tax (£m)

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016 2017 2018





4 Annual results 2018

Net flows by channel

Institutional flows dominated by one

large client

Section 1

1Excludes Friends Life mandate win of £12bn in December 2014.

£bn

Weaker markets impacting client demand

(15)

(10)

(5)

0

5

10

15

2013 2014¹ 2015 2016 2017 2018Institutional Intermediary Wealth Management

Wealth Management continued to see strong demand

‘Risk off’ across Intermediary


Net flows by region

(8)

(6)

(4)

(2)

0

2

4

Americas UK EMEA Asia Pacific

£bn

Section 1Record inflows in North America

Positive UK flows led by Wealth

Good underlying growth in core Asian markets

Challenging markets across channels and countries in Europe

Small outflows in Latin America

UK Institutional led by £5.5bn Multi-asset net flows

Outflows from one large Japanese client and Australian Institutional

Institutional demand for Private Assets


Net flows by asset class Section 1Ongoing demand for Multi-asset solutions

£2.3bn net flows in Private Assets, all regions net positive

Continued turnaround across Wealth Management

Fixed income outflows dominated by one client

Demand from UK and Asia Pacific Institutional clients

Diversified across strategies, led by Private Equity and Securitised Credit

Positive flows from Benchmark Capital and Schroder Wealth

Redemptions primarily from US strategies

(10)

(8)

(6)

(4)

(2)

0

2

4

6

Multi-asset Private Assets& Alternatives

WealthManagement

Fixed Income Equities

£bn

‘Risk off’ led to lack of demand for developed markets equities

Partly offset by flows into Asian and EM strategies

Richard KeersChief Financial Officer


Group segment4.1

Group segment(3.0)

AssetManagement

705.9

AssetManagement

670.8

Net income Compensation costs Non-compensationcosts

Exceptional items

201820182017

Profit before tax and exceptional items

Profit before tax and exceptional items -5% £761.2m

Profit before tax 649.9


800.3


761.2

£m

to

90.3

55.0(22.0) (72.1)

93.4Wealth Management (111.3)Wealth

Management


2017 2018

Group segment38

AssetManagement

1,758

AssetManagement

1,801

WealthManagement

WealthManagement

Group segment33

Net operating revenue+£61m

Net income

Net income2,124Net income

2,069

Otherincome

(6)

Performance fees (52)

Carried interest

28FX(28)

Markets28

Net new business

41

Other operating revenue

44

290

Net income +3% £2,123.9mto

£m

273

Markets and FX+£0m

Performance fees and carried interest

-£24m

Acquisitions+£72m


(90)

(60)

(30)

0

30

60

90

(10)(8)(6)(4)(2)

02468

10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Net new business Annualised net new revenue 2017 - 2018

2017

Net operating revenueNet new business and annualised net new revenue

(NNB and ANNR)£m

Annualised revenue impact of flows over two years

+£30mAverage AUM

+£22.6bnNet operating revenue margin1

47bps1Excluding performance fees and carried interest

1,671.6 1,931.8 2,015.7

41.2

78.4 26.628.4

0

500

1,000

1,500

2,000

Performance fees Net carried interest

2016 2017 2018

1,712.8

2,010.2 2,070.7

2018

NNB£bn

ANNR£m


Wealth Management net operating revenue

161.5203.8 216.2

38.8

40.838.5

20.6

21.426.8

2.4

0.90.4

223.3

266.9281.9

0

50

100

150

200

250

300

2016 2017 2018

Management fees Transaction feesNet banking interest income Performance fees

Net operating revenue

+6%Closing AUM of

£43.7bn

£m

61bpsNet operating revenue margin1

1Excluding performance fees

2017

(2)

0

2

4

6

8

10

12

14

16

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2018

NNB£bn

ANNR£m

Net new business and annualised net new revenue(NNB and ANNR)


785.4909.4 936.8

11.6

19.9 0.7797.0

929.3 937.5

0

200

400

600

800

1,000

Performance fees

2016 2017 2018

Intermediary net operating revenue

£m

Closing AUM of

£121.2bnAverage AUM

+£4.7bnNet operating revenue margin1

72bps1Excluding performance fees

(60)

(40)

(20)

0

20

40

60

(8)

(6)

(4)

(2)

0

2

4

6

8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2017 2018

NNB£bn

ANNR£m



Average AUM

Institutional net operating revenue

665.3756.4 797.4

27.2

57.6 25.528.4372.8

0

200

400

600

800

1,000

Performance fees Net carried interest

2016 2017 2018

+£15.5bnClosing AUM of

£242.3bn

692.5

814.0 851.3

Net operating revenue margin1

31bps1Excluding performance fees and carried interest

(20)

(15)

(10)

(5)

0

5

10

15

20

(8)

(6)

(4)

(2)

0

2

4

6

8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2017 2018

NNB£bn

ANNR£m


£m


Carried interest

74Investment vehicles with carried interest arrangements

9Investment vehicles have recognised carried interest income

Net carried interest £28.4mRepresents 1% of net operating revenue

10 yearsApproximate weighted average age of investment vehicles where carriedinterest has been recognised

15 yearsTypical age at which an investment vehicle would be liquidated

34Investment vehicles contributing to the cost of financial obligations in relation to carried interest

Investor return Catch-up phase Shared return

Year

Preferred return(‘hurdle’)

Total returnReturn


Operating expenses

881.3 903.3

387.3459.4

0

200

400

600

800

1,000

1,200

1,400

1,600

2017 2018

1,362.7

1,303.4

[X]

Total compensation ratio

43%£m

1,268.6

34.8

97.5

Compensation costs Non-compensation costs Exceptional items

2017: 43%

Ratio of total cost to net income

64%2017: 61%

1,460.2


1,146 1,115

944 1,126

216 216

1,1651,164

0

1,000

2,000

3,000

4,000

31 December2017

31 December2018

Capital base

Capital surplus

Dividend¹

Overall regulatorycapital requirement

Other items²

Group Capital

1Final dividend proposed for respective year2Comprises regulatory deductions, principally goodwill, intangible assets and pension scheme surplus

1,146 1,115

147 165

696 465

392 535

1,090 1,341

0

1,000

2,000

3,000

4,000

31 December2017

31 December2018

Capital allocation

3,621 3,4713,471 3,621

Working capital – Other

Working capital – Seed and co-investment

Investment capital – Liquid

Investment capital – Illiquid

Other items2

£m


SummaryNet income1

+3% to £2,123.9m

Ratio of total costs to net income

64%


-5% to £761.2m

+1p to 114pTotal dividend

-5% to 215.8pBasic EPS before exceptional items

2,068.9 2,123.9

800.3 761.2


Net income1

2017 20182017 2018

£m

1Before exceptional items.

Peter Harrison Group Chief Executive


Product innovation and Solutions

– Increase seed capital

– GAIA Helix – Sustainability

Fixed Income andMulti-asset

NorthAmerica

AsiaPacific

Technology

– Alpha generation– Client experience– Operational efficiency

Private Assets & Alternatives

– Alternative Sales Unit– Algonquin real estate– Securitised credit & A10– Adveq private equity– Infrastructure

– Benchmark Capital– Lloyds joint venture– Thirdrock– C.Hoare & Co

WealthManagement

Investing for growth – seven key areas

– Scottish Widows mandate– Solutions– Strategic capabilities

– Hartford partnership

– US & Canada Instl.

– Maybank & WeInvest

– China– Growth in core markets



Expand core business

Target client longevity



NorthAmerica

AsiaPacific

Technology Private Assets & Alternatives


WealthManagement








– C.Hoare & Co– Thirdrock– Lloyds joint venture– Benchmark Capital– Alpha generation

– Client experience– Operational efficiency



Grow Wealth offering

Closer proximity to consumer





NorthAmerica

AsiaPacific



WealthManagement












Grow Private Assets and Alternatives

Rebalance business towards private markets







NorthAmerica

AsiaPacific



WealthManagement












Grow Private Assets and Alternatives

Rebalance business towards private markets





Technology



NorthAmerica

AsiaPacific



WealthManagement











OutlookGlobal footprint and diversified business model to drive future growth


Annual results 2018

Challenging market conditions but strong pipeline of new business

We remain focused on strategy to reposition business for changing client demand


Thank you


Forward looking statementsThese presentation slides 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’, ‘likely’, ‘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 these presentation slides should be construed as a forecast, estimate or projection of future financial performance.

Annual results 2018 · Presentation. 7 March 2019. Annual results 2018. Peter Harrison . Group...

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