annual results 2019 - schroders...annual results 2019 1 peter harrison group chief executive...

Peter Harrison Group Chief Executive

Presentation

5 March 2020

Annual results 2019

1

Peter HarrisonGroup Chief Executive

Delivering strategic progress

Targeted acquisitions to further reposition business

Progress across strategic initiatives

Greater granularity in reporting

Record inflows across both Asset and Wealth Management

2

Peter HarrisonGroup Chief Executive

1 Before exceptional items.

Targeted acquisitions to further reposition business

Progress across strategic initiatives

Greater granularity in reporting

Record inflows across both Asset and Wealth Management

2019 2018 Change

Net income1 £2,124.8m £2,123.9m 0%

Ratio of total costs to net income 67% 64% –

Profit before tax1 £701.2m £761.2m (8)%

AUM £500.2bn £407.2bn 23%

Net new business £43.4bn £(9.5)bn –Basic EPS1 201.6p 215.8p (7)%Total dividend per share 114p 114p –

3

1 Before exceptional items.

Grow Asset Management

Closer relationships with end clients

Expand Private Assets & Alternatives

4

Wealth Management

Private Assets & Alternatives

Solutions Mutual Funds Institutional

Wealth management and financial planning for ultra high net worth, high net worth, affluent and charity clients

Investment opportunities available in private markets, such as real estate, private equity and infrastructure, as well as alternative investments

Provision of complete solutions and partnerships, including liability offsets and risk mitigation

Branded mutual funds provided through intermediary network for retail clients

Index-relative investment components for institutions and sub-advisory mandates

Strategically-aligned view of the business


Wealth Management



66.7

44.2

142.8

102.4

144.1

0

50

100

150

Asse

ts u

nder

man

agem

ent (

£bn)

Changing composition of our assets

0

100

200

300

400

500

600

2015 2016 2017 2018 2019

Institutional Mutual Funds

Wealth Management Private Assets & Alternatives

Solutions

Now over

50%of AUM

Asse

ts u

nder

man

agem

ent (

£bn)


Wealth Management



302.1 300.2

226.1

734.8

502.0

0

200

400

600

800

Net

ope

ratin

g re

venu

e (£

m)


Wealth Management



Net

new

bus

ines

s (£

bn)

14.7

2.8

34.5

(1.5)

(7.1)-10

0

10

20

30

40

Closer relationships with end clients through Wealth Management

Positive flows into Cazenove and Benchmark Capital

Launch of Schroders Personal Wealth, £13.7bn AUM at year end

Acquisition of ThirdRock in Singapore

114% increase in assets and 46% increase in revenues since 2015

£bn£bn

-5

0

5

10

15

20

01020304050607080

2015 2016 2017 2018 2019

AUM Cumulative net flows (rhs)

£bn5 year revenue CAGR of 8%

Expand Private Assets & Alternatives

£2.8bn net inflows, diversified across investment desks

Ongoing demand for alternative sources of returns

Strategic acquisitions in impact investing & real estate

Five year asset growth of 128%, revenue growth of 112%

5 year revenue CAGR of 16%

34%

19%18%

7%

7%

6%4%4% 1%

Real Estate Private EquitySec. credit GAIAImpact investing EMD ARILS Infra. FinanceCommodities

-20246810

0

10

20

30

40

50

2015 2016 2017 2018 2019AUM Cumulative net flows (rhs)

£bn£bn

Grow asset management through Solutions

Over £45bn of cumulative net flows in the last five years

Ongoing client demand for high longevity strategies

2019 saw £34.5bn of net new business, led by Scottish Widows

0

10

20

30

40

50

020406080

100120140160

2015 2016 2017 2018 2019

AUM Cumulative net flows (rhs)

£bn£bn 5 year revenue CAGR of 14%

Assets increased 114% and revenues by 90% in five years

“Risk off” environment in Mutual Funds

Redemptions from equity funds, rotated into fixed income

Risk off backdrop at start of 2019Resilient performance in 2019 with only £1.5bn of net outflows

Assets up 38%, revenues up 25% over last five years


0

5

10

15

20

0

20

40

60

80

100

120

2015 2016 2017 2018 2019AUM Cumulative net flows (rhs)

£bn£bn

Institutional business facing headwinds

2019 net outflows of £7.1bn, driven by equity redemptions

33% increase in AUM and 14% in revenues over five years

Opportunities to expand geographical footprint

Commitment to sustainability across 100% of managed assets


-30

-20

-10

0

10

20

30

40

020406080

100120140160180

2015 2016 2017 2018 2019

AUM Cumulative net flows (rhs) Incl. private assets and solutions

£bn£bn

Repositioning towards higher longevity areas

Shift to higher longevity products reducing gross outflows

15%

20%

25%

30%

35%

2013 2014 2015 2016 2017 2018 2019

Outflows as percentage of opening AUM

Net flows by asset class

0 5 10 15 20

Equities

Private Assets &Alternatives

Multi-asset

Fixed Income

Private Assets

Equities

Multi-asset

Fixed Income

– Diversified inflows across channels and desks

– Strong demand for Global, European,US and EMD strategies

– Positive flows into solutions

– Demand for risk-controlled growth and LDI mandates

– Further diversification in product range

– Demand led by securitised credit and private equity

– Positive flows through Scottish Widows mandate

– Structural pressures and ‘risk off’ impacting equities

Net flows by region

-10 0 10 20 30 40

Americas

EMEA

Asia Pacific

UK

– Mutual fund demand led by key markets

– Outflows from Australia and Japan

Asia Pacific

– ‘Risk off’ across region for mutual funds

– Demand for private assetsEMEA

– Strong client demand in solutions

– Uncertainty earlier in the year weighed on retail sentiment

UK

– Institutional outflows across region– Hartford flows of £0.5bn,

AUM now at £6.8bnAmericas


Richard KeersChief Financial Officer

Profit before tax and exceptional items

2018 2019Group Asset Management Wealth Management

Profit before tax and exceptional items

761.2

Profit before tax and exceptional

items 701.2

£m

93.487.5

2019

Profit before tax and after

exceptional items 624.6

Net income0.9

Compensationcosts(24.0)

Non-compensation costs(36.9)

Exceptionalitems(76.6)

670.8606.9

Profit after tax

495.7

1Before exceptional items

Profit after tax

-£9m to £495.7m

Basic EPS1

-7% to 201.6p

Final dividend of 79p taking

total dividend to 114p

Development of average AUM

£bn

400

410

420

430

440

450

460

470

480

490

500

Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19

FY-18 average AUM: £433.1bnFY-19 average AUM: £441.8bn

Average AUM AUM movement

Average AUM

+ 2%Closing AUM of

£500.2bn

Markets impact on average AUM

£bn

400

410

420

430

440

450

460

470

480

490

500

Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19



Market impact

+ 2.2%

400410420430440450460470480490500

Q1-18

Q2-18

Q3-18

Q4-18

Q1-19

Q2-19

Q3-19

Q4-19

FX impact on average AUM

£bn

400

410

420

430

440

450

460

470

480

490

500

Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19



FX impact

+ 0.6%

Net income

Net income

2018 2019 2019Group Asset Management Wealth Management

Mix(50)

Groupnet income

2,125

SPW Adjustment

11Segmentalnet income

2,136Net income

2,124

Associates and joint ventures*

9FX14

Markets43

Net new business

(51)Acquisitions

21

310

£m

290

Markets, FX and mix£7m

Performance fees and net

carried interest18

Other income

8

33 45

1,801 1,781

* Excludes SPW, which is proportionally consolidated

+ £0.9m £2,125mto

Total net operating revenue

+ 2%

1Excluding performance fees and carried interest

Average AUM

45bpsNet operating revenue margin1

+ £6m2020 tailwind from 2019 NNB

FY 2018: 47bps

(100)

(60)

(20)

20

60

100

(60)

(40)

(20)

0

20

40

60

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Net new business Annualised net new revenue 2018 - 2019

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

NNB£bn

ANNR£m

2018 2019

£m

1,931.8 2,015.7 1,992.1

78.4 55.0 73.1

0250500750

1,0001,2501,5001,7502,0002,250

Performance fees and net carried interest

2017 2018 2019

2,070.72,065.2*2,010.2

* Includes £12.8m relating to the proportional consolidation of SPW

FY 2018: £35m headwind

Wealth Management net operating revenue

+ 12%


Average AUM


+7%

Net operating revenue

FY 2018: 61bps

2018

0

20

40

60

80

100

0

2

4

6

8

10

12

14

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2019

NNB£bn

ANNR£m


203.8 216.2 239.6

40.8 38.537.621.4 26.824.0

0.90.4

0.9266.9 281.9

302.1*

0

50

100

150

200

250

300

2017 2018 2019Management fees Transaction fees Net banking interest income Performance fees

£mNet operating revenue

* Includes £12.8m relating to the proportional consolidation of SPW

Asset Management net operating revenue

+ 1%


Average AUM


FY 2018: 45bps

(120)(90)(60)(30)0306090120

(40)(30)(20)(10)

010203040

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2018 2019


ANNR£m

NNB£bn

1,665.8 1,734.2 1,690.9

77.5 54.6 72.21,743.3 1,788.8 1,763.1

0

500

1,000

1,500

2,000

2017 2018 2019Performance fees and net carried interest


Private Assets and Alternatives net operating revenue

1Excluding performance fees, net carried interest and real estate transaction fees.

63bps

Net operating revenue margin1

+ £29m

Annualised revenue impact of flows over two years:

FY 2018: 66bps

(12)

(6)

0

6

12

18

24

30

(2)

(1)

0

1

2

3

4

5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2018 2019

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

£m

NNB£bn

6.1 19.431.829.3

273.7 300.2

0

100

200

300

400

2018 2019

Real estate transaction fees Performance fees and net carried interest

251.5

£m Net operating revenue

235.8

Solutions

21bps

Net operating revenue margin

+ £10m

Annualised revenue impact of flows over two years:

FY 2018: 22bps

(10)

0

10

20

30

40

(10)

0

10

20

30

40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2018 2019


ANNR£m

NNB£bn

219.3 226.1

0

50

100

150

200

250

2018 2019


Mutual Funds and Institutional

Mutual Funds


FY 2018: 75bps

Institutional


FY 2018: 33bps

1Excluding performance fees

(80)(60)(40)(20)020406080

(10)

(6)

(2)

2

6

10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


2018 2019

NNB£bn

ANNR£m

InstitutionalNet new business and annualised net new revenue

(NNB and ANNR)

2018 2019

NNB£bn

ANNR£m

(65)

(45)

(25)

(5)

15

35

55

(10)

(6)

(2)

2

6

10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


Mutual FundsNet new business and annualised net new revenue

(NNB and ANNR)

Net income

Net income up


Mix(50)

Groupnet income

2,125

SPW Adjustment


2,136

Net income2,124


9FX14

Markets43

Net new business

(51)Acquisitions

21

310

£m

290



carried interest18

Other income

8

33 45

1,801 1,781


£0.9m £2,125mto

Associates and Joint Ventures

Share of profit of associates and joint ventures2 +53% £30.5mto

2019 2018

SPW1 BoCom Axis Other Total Total

Profit (£m)2 3.8 66.5 11.3 16.3 97.9 61.3

Group's share of profit (£m)2 1.9 20.0 2.8 5.8 30.5 19.9

NNB (£bn) 3.8 5.2 0.4 9.4 (0.5)

AUM (£bn) 54.6 13.6 1.0 69.2 60.3

1SPW’s AUM is managed by the Group and included in the Group’s AUM2Before exceptional items

Net income

Net income up


Mix(50)

Groupnet income

2,125

SPW Adjustment


2,136Net income

2,124


9FX14

Markets43

Net new business

(51)Acquisitions

21

310

£m

290



carried interest18

Other income

8

33 45

1,801 1,781


£0.9m £2,125mto

Operating expenses

67%44%FY 2018: 64%FY 2018: 43%

Ratio of total cost to net incomeTotal compensation ratio

903.3 927.3

459.4 496.3

0

400

800

1,200

1,600

2018 2019

1,498.0

£m

97.5

Compensation costs Non-compensation costs

74.41,460.2

Exceptional items

Non-compensation costs

307.7346.6

410.8433.1 441.8

10.2 10.3

9.4

10.6

11.2

9

10

11

12

2015 2016 2017 2018 20190

100

200

300

400

500

Average AUM Non-compensation costs as bps of average AUM

Average AUM£bn bps

Change in Group Capital

2018 2019

Opening capital 3,621.2

Gain on partial sale of UK WM business

153.6Profit after tax 495.7

Other comprehensive

income (69.3)

Dividends(314.7)

£m

Other (39.0) Closing capital 3,847.5

Group capital up £226.3m £3,847.5mto

Composition of Group Capital

1Final dividend proposed for respective year2Comprises items that are inadmissible for regulatory purposes, principally goodwill, intangible assets and pension scheme surplus

1,1151,498

165 148 465 408 535 578

1,341 1,216

0

1,000

2,000

3,000

4,000

31 December 2018 31 December 2019

Capital allocation

Other items2

3,6213,848

Working capital – regulatory and other Working capital – seed and co-investmentInvestment capital – liquid

Investment capital – illiquidOther items2

1,1151,498

1,1261,127

216 216

1,1641,007

0

1,000

2,000

3,000

4,000

31 December 2018 31 December 2019

Capital base

3,8483,621

£m

Overall regulatory capital requirementDividend1

Capital surplus

Summary

Net income1

+£0.9m to £2,124.8m

Ratio of total costs to net income1 67%

Basic EPS1

-7% to 201.6p

Final dividend of 79p taking

total dividend to 114p

2,123.9 2,124.8

761.2 701.2

Profit before tax1Net income1

2018 20192018 2019

£m

1Before exceptional items.

Outlook for 2020 and beyondStructural changes to group increasing resilience

Increased market volatility likely to continue

Wide range of growth opportunities, particularly in Solutions, Private Assets and Wealth

Focused strategy, global footprint and diversified business model to deliver long-term value for clients and shareholders Retain focus on repositioning business

towards high quality, high longevity areas

Forward looking statements

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 of future financial performance.

annual results 2019 - schroders...annual results 2019 1 peter harrison group chief executive...

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