Schroders (SDR) H2 2011 earnings summary

Executive summary

• Profit before tax was £407.3m, broadly flat YoY; net revenue was £1,152.6m and net inflows were £3.2bn, down from £27.1bn in 2010.

• Year-end AUM fell to £187.3bn from £196.7bn as negative market returns reduced assets by £12.6bn, partly offset by positive net flows.

• Basic EPS rose to 115.9p from 111.8p; the proposed total dividend was 39.0p per share, up 5% YoY.

Financial highlights

• Revenue was £1,501.9m versus £1,439.3m; net revenue was £1,152.6m versus £1,155.8m, and operating profit was £390.8m versus £381.8m.

• Profit after tax increased to £315.8m from £311.2m; profit before tax was £407.3m versus £406.9m.

• Operating expenses declined to £761.8m from £774.0m; compensation costs were £499.8m versus £505.5m.

• Performance fees were £37.8m versus £73.4m; 2010 included a one-off £22.3m European property fund fee, while 2011 had no one-off gains or material changes in fund-award values.

• Total comprehensive income was £295.9m versus £334.5m, reflecting £19.9m of other comprehensive losses after tax.

Outlook and guidance

• 2012 net inflows were expected to improve if markets maintained their positive start to the year.

• Cost and compensation ratios could rise in the short term as investment continued in talent, products, markets and infrastructure.

• Investment capital was expected to increase in 2012; planned technology-platform upgrades were expected to add costs over the next few years.

• The long-term targets remained at least 60% of AUM outperforming benchmarks or peers over rolling three-year periods, a 70% cost-to-net-revenue ratio and a 45% compensation-to-operating-revenue ratio.