By Ben Simmons
Schroders plc (LSE: SDR) posted full year profits of £407m- largely unchanged since their 2010 earnings.
Revenue from private banking more than doubled- to £23m- though this remains a minor source of income for the asset management specialists.
Asset Management net revenue increased to £1,041.5 million (2010: £996.2 million) despite a decline in performance fees to £36.6 million (2010: £72.6 million). As expected, net revenue margins excluding performance fees were lower at 56 basis points (2010: 59 basis points) reflecting the high levels of new business won in Institutional in the past two years. Asset Management profit before tax was a record £389.4 million (2010: £381.0 million).
While market volatility has impacted short-term investment performance in some asset classes, our long-term performance remains strong with 70 per cent. of funds outperforming benchmark or peer group over the three years to the end of 2011. Together with our broad product range and distribution capability, this resulted in another successful year in Institutional with £6.8 billion of net inflows (2010: £16.8 billion). We saw high levels of net new business in multi- asset strategies, and in equities despite the market environment. Assets under management in Institutional ended the year at £108.4 billion (2010: £106.4 billion).
Retail investor demand was affected by growing concerns over the macro-economic environment and equity market volatility. As a result, gross sales in our Intermediary business declined as the environment deteriorated and for the year as a whole we had net outflows of £3.8 billion (2010: net inflows £7.9 billion). Assets under management in Intermediary ended the year at £62.9 billion (2010: £74.1 billion).
Private Banking profit rebounded sharply on the back of record levels of new business in the previous year and the absence of doubtful debt charges. Net revenue increased to £114.3 million (2010: £103.3 million) and profit before tax more than doubled to £23.8 million (2010: £10.1 million). Net new business was £0.2 billion (2010: £2.4 billion) and assets under management ended the year at £16.0 billion (2010: £16.2 billion).
The Group segment incurred a loss before tax of £5.9 million (2010: profit £15.8 million) as mark to market losses on seed capital investments, principally in the fourth quarter, outweighed the modest returns we achieved on our investment capital portfolio during the year in what was a very low return environment. After the purchase of 3.4 million ordinary shares and 5.2 million non-voting ordinary shares at a cost of £126.1 million, shareholders’ equity at the end of 2011 was £1.9 billion (2010: £1.8 billion).
The Board is recommending an unchanged final dividend of 26.0 pence per share payable on 11 May 2012 to shareholders on the Register at 30 March 2012. This brings the total dividend for the year to 39.0 pence per share (2010: 37.0 pence).
After more than nine years as Chairman, Michael Miles will retire from the Board at the Annual General Meeting on 3 May 2012 and will be succeeded by Andrew Beeson, the Senior Independent Director. Alan Brown will also step down from the Board at the Annual General Meeting. Alan has served as Chief Investment Officer since 2005 and has made an important contribution to our success during that time. He will continue to work with some of our largest clients as a Senior Adviser to the firm. During the year we welcomed Ashley Almanza as a member of the Board.
Since the year end, the tone in markets has improved as investors have seen signs of progress in the resolution of some of the problems of the Eurozone. Retail investor demand has recovered somewhat and we have generated positive net flows in both Institutional and Intermediary. However, financial markets are likely to remain volatile as the process of reducing government debt will be a long one and economic growth will remain subdued.
We will continue to invest in talent, developing new products and markets and strengthening our infrastructure. We believe that the higher short-term costs of this organic investment are fully justified by the long-term growth opportunities for our business in the UK and internationally.
Join us on