Annual results 2018 Presentation 7 March 2019 Peter Harrison - - PowerPoint PPT Presentation
Annual results 2018 Presentation 7 March 2019 Peter Harrison Group Chief Executive Resilient results with strategic progress Peter Harrison Revenue growth while Group Chief Executive Year of strategically investing back into critical
Presentation 7 March 2019
Annual results 2018
Peter Harrison Group Chief Executive
1 Annual Results 2018
Peter Harrison
Group Chief Executive
Growth in key areas
Year of strategically critical initiatives Business model evolving to meet changing client demand Revenue growth while investing back into the business
2 Annual Results 2018
Peter Harrison
Group Chief Executive
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.Growth in key areas
Year of strategically critical initiatives Business model evolving to meet changing client demand Revenue growth while investing back into the business
3 Annual Results 2018
Peter Harrison
Group Chief Executive Pre-exceptional profit before tax (£m)
100 200 300 400 500 600 700 800 2012 2013 2014 2015 2016 2017 2018
Growth in key areas
Year of strategically critical initiatives Business model evolving to meet changing client demand Revenue growth while investing back into the business
4 Annual results 2018
Net et flows ws by by c channel nel
Institutional flows dominated by one large client
Section 1
1Excludes Friends Life mandate win of £12bn in December 2014.£b £bn
Weaker markets impacting client demand
(15) (10) (5) 5 10 15 2013 2014¹ 2015 2016 2017 2018
Institutional Intermediary Wealth Management
Wealth Management continued to see strong demand ‘Risk off’ across Intermediary
5 Annual results 2018
Net et flows ws by by r reg egion
(8) (6) (4) (2) 2 4
Americas UK EMEA Asia Pacific £b £bn
Section 1
Record 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
6 Annual results 2018
Net et flows ws by by asse set c class ass
Section 1
Ongoing demand for Multi-asset solutions £2.3bn net flows in Private Assets, all regions net positive Continued turnaround across Wealth Management Fixed income
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) 2 4 6
Multi-asset Private Assets & Alternatives Wealth Management Fixed Income Equities
£b £bn
‘Risk off’ led to lack of demand for developed markets equities Partly offset by flows into Asian and EM strategies
Richard Keers Chief Financial Officer
8 Annual Results 2018
Group segment 4.1 Group segment (3.0) Asset Management 705.9 Asset Management 670.8 Net income Compensation costs Non-compensation costs Exceptional items 2018 2018 2017
Profit before tax and exceptional items
Profit before tax and exceptional items
Profit before tax 649.9 Profit before tax and exceptional items 800.3 Profit before tax and exceptional items 761.2
£m £m
to
90.3 55.0 (22.0) (72.1) 93.4 Wealth Management (111.3) Wealth Management
9 Annual Results 2018
2017 2018
Group segment 38 Asset Management 1,758 Asset Management 1,801 Wealth Management Wealth Management Group segment 33
Net operating revenue +£61m
Net income
Net income 2,124 Net income 2,069 Other income (6) Performance fees (52) Carried interest 28 FX (28) Markets 28 Net new business 41 Other
revenue 44 290
Net income +3%
to
£m £m
273 Markets and FX +£0m Performance fees and carried interest
Acquisitions +£72m
10 Annual Results 2018
(90) (60) (30) 30 60 90 (10) (8) (6) (4) (2) 2 4 6 8 10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017
Net operating revenue
Net new business and annualised net new revenue
(NNB and ANNR)
£m £m Annualised revenue impact of flows over two years
Average AUM
Net operating revenue margin1
1,671.6 1,931.8 2,015.7 41.2 78.4 26.6 28.4 500 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 NNB £bn bn ANNR NNR £m £m
11 Annual Results 2018
Wealth Management net operating revenue
161.5 203.8 216.2 38.8 40.8 38.5 20.6 21.4 26.8 2.4 0.9 0.4 223.3 266.9 281.9 50 100 150 200 250 300 2016 2017 2018 Management fees Transaction fees Net banking interest income Performance fees
Net operating revenue
Closing AUM of
£m £m
Net operating revenue margin1
1Excluding performance fees2017
(2) 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
Net new business Annualised net new revenue 2017 - 2018
2018
NNB NNB £bn bn ANNR NNR £m £m
Net new business and annualised net new revenue
(NNB and ANNR)
12 Annual Results 2018
785.4 909.4 936.8 11.6 19.9 0.7 797.0 929.3 937.5 200 400 600 800 1,000 Performance fees 2016 2017 2018
Intermediary net operating revenue
£m £m Closing AUM of
Average AUM
Net operating revenue margin1
(60) (40) (20) 20 40 60 (8) (6) (4) (2) 2 4 6 8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017 2018
NNB NNB £bn bn ANNR NNR £m £m
Net new business and annualised net new revenue
(NNB and ANNR)
13 Annual Results 2018
Average AUM
Institutional net operating revenue
665.3 756.4 797.4 27.2 57.6 25.5 28.4 372.8 200 400 600 800 1,000 Performance fees Net carried interest 2016 2017 2018
Closing AUM of
692.5 814.0 851.3
Net operating revenue margin1
(20) (15) (10) (5) 5 10 15 20 (8) (6) (4) (2) 2 4 6 8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017 2018
NNB NNB £bn bn ANNR NNR £m £m
Net new business and annualised net new revenue
(NNB and ANNR)
£m £m
14 Annual Results 2018
Carried interest
74
Investment vehicles with carried interest arrangements
9
Investment vehicles have recognised carried interest income
Net carried interest £28.4m
Represents 1% of net operating revenue
10 years
Approximate weighted average age
interest has been recognised
15 years
Typical age at which an investment vehicle would be liquidated
34
Investment 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 return Return
15 Annual Results 2018
Operating expenses
881.3 903.3 387.3 459.4 200 400 600 800 1,000 1,200 1,400 1,600 2017 2018 1,362.7 1,303.4 [X]
Total compensation ratio
£m £m
1,268.6 34.8 97.5 Compensation costs Non-compensation costs Exceptional items
2017: 43%
Ratio of total cost to net income
2017: 61%
1,460.2
16 Annual Results 2018
1,146 1,115 944 1,126 216 216 1,165 1,164 1,000 2,000 3,000 4,000 31 December 2017 31 December 2018 Capital base Capital surplus Dividend¹ Overall regulatory capital requirement Other items²
Group Capital
1Final dividend proposed for respective year 2Comprises regulatory deductions, principally goodwill, intangible assets and pension scheme surplus1,146 1,115 147 165 696 465 392 535 1,090 1,341 1,000 2,000 3,000 4,000 31 December 2017 31 December 2018 Capital allocation 3,621 3,471 3,471 3,621 Working capital – Other Working capital – Seed and co-investment Investment capital – Liquid Investment capital – Illiquid Other items2
£m £m
17 Annual Results 2018
Summary
Net income1
+3% to £2,123.9m
Ratio of total costs to net income
64%
Profit before tax and exceptional items
Total dividend
Basic EPS before exceptional items
2,068.9 2,123.9 800.3 761.2 Profit before tax and exceptional items Net income1 2017 2018 2017 2018
£m £m
1Before exceptional items. Peter Harrison Group Chief Executive
19 Annual Results 2018
Product innovation and Solutions – Increase seed capital – GAIA Helix – Sustainability Fixed Income and Multi-asset North America Asia Pacific 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 Wealth Management
Investing for growth – seven key areas
– Scottish Widows mandate – Solutions – Strategic capabilities – Hartford partnership – US & Canada Instl. – Maybank & WeInvest – China – Growth in core markets
20 Annual Results 2018
Investing for growth – seven key areas
Expand core business
Target client longevity Product innovation and Solutions Fixed Income and Multi-asset North America Asia Pacific Technology Private Assets & Alternatives – Alternative Sales Unit – Algonquin real estate – Securitised credit & A10 – Adveq private equity – Infrastructure Wealth Management – Scottish Widows mandate – Solutions – Strategic capabilities – Hartford partnership – US & Canada Instl. – Maybank & WeInvest – China – Growth in core markets – GAIA Helix – Sustainability – Increase seed capital – C.Hoare & Co – Thirdrock – Lloyds joint venture – Benchmark Capital – Alpha generation – Client experience – Operational efficiency
21 Annual Results 2018
Investing for growth – seven key areas
Grow Wealth offering
Closer proximity to consumer Expand core business
Target client longevity Product innovation and Solutions Fixed Income and Multi-asset North America Asia Pacific Technology Private Assets & Alternatives – Alternative Sales Unit – Algonquin real estate – Securitised credit & A10 – Adveq private equity – Infrastructure Wealth Management – Scottish Widows mandate – Solutions – Strategic capabilities – Hartford partnership – US & Canada Instl. – Maybank & WeInvest – China – Growth in core markets – GAIA Helix – Sustainability – Increase seed capital – C.Hoare & Co – Thirdrock – Lloyds joint venture – Benchmark Capital – Alpha generation – Client experience – Operational efficiency
22 Annual Results 2018
Investing for growth – seven key areas
Grow Private Assets and Alternatives
Rebalance business towards private markets
Grow Wealth offering
Closer proximity to consumer Expand core business
Target client longevity Product innovation and Solutions Fixed Income and Multi-asset North America Asia Pacific Technology Private Assets & Alternatives – Alternative Sales Unit – Algonquin real estate – Securitised credit & A10 – Adveq private equity – Infrastructure Wealth Management – Scottish Widows mandate – Solutions – Strategic capabilities – Hartford partnership – US & Canada Instl. – Maybank & WeInvest – China – Growth in core markets – GAIA Helix – Sustainability – Increase seed capital – C.Hoare & Co – Thirdrock – Lloyds joint venture – Benchmark Capital – Alpha generation – Client experience – Operational efficiency
23 Annual Results 2018
Investing for growth – seven key areas
Grow Private Assets and Alternatives
Rebalance business towards private markets
Grow Wealth offering
Closer proximity to consumer Expand core business
Target client longevity
Technology
Product innovation and Solutions Fixed Income and Multi-asset North America Asia Pacific Technology Private Assets & Alternatives – Alternative Sales Unit – Algonquin real estate – Securitised credit & A10 – Adveq private equity – Infrastructure Wealth Management – Scottish Widows mandate – Solutions – Strategic capabilities – Hartford partnership – US & Canada Instl. – Maybank & WeInvest – China – Growth in core markets – GAIA Helix – Sustainability – Increase seed capital – C.Hoare & Co – Thirdrock – Lloyds joint venture – Benchmark Capital – Alpha generation – Client experience – Operational efficiency
24 Annual Results 2018
25 Annual Results 2018
Glob
foot
print nt a and nd diver ersifi fied ed b busines ess m model el to drive fu future gr e growth
Peter Harrison
Group Chief Executive Annual results 2018
Challenging market conditions but strong pipeline of new business We remain focused on strategy to reposition business for changing client demand
26 Annual Results 2018
27 Annual Results 2018
Fo Forward l looking ng s state tements nts
These 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