Annual Results 2017 - Press Release
- Profit before tax and exceptional items* up 24% to £800.3 million (2016: 644.7 million)
- Profit before tax up 23% to £760.2 million (2016: 618.1 million)
- Net income before exceptional items up 15% to £2,068.9 million (2016: £1,793.1 million)
- Assets under management and administration up 13% to £447.0 billion (31 December 2016: £395.3 billion**)
- Net inflows of £9.6 billion (2016: £1.1 billion)
- Full-year dividend up 22% to 113.0 pence per share (2016: 93.0 pence)
|2017 - £m||2016 - £m|
Profit before tax
Basic earnings per share before exceptional items (pence)*
Ratio of total costs to net income (%)*
Total dividend (pence per share)†
*Defined and explained in the glossary.
**Assets under administration has been restated to exclude assets from which we only derive transactional non-recurring revenues.
†Current year interim dividend paid and final dividend proposed.
Peter Harrison, Group Chief Executive, commented: “Schroders has again delivered strong results in 2017, with our diversified business model and client-centric approach generating growth across the Group. Underlying organic growth and selective acquisitions combined with rigorous cost discipline led to a 24% increase in pre-exceptional profit. Assets under management and administration rose to a new high of £447.0 billion.
Focusing on the longer term, we have continued to see good progress in a number of key strategic areas, with the expansion of our investment capabilities in private assets, an improvement in Wealth Management and strong underlying momentum in North America.
There are headwinds facing the industry but we continue to believe that there remain opportunities for growth. Our diversified business model, ongoing focus on costs, strong financial position and willingness to invest mean that we continue to be well placed.”
Schroders has again delivered strong results in 2017, with our diversified business model and client-centric approach generating growth across the Group. Underlying organic growth and selective acquisitions combined with rigorous cost discipline led to a 24% increase in pre-exceptional profit to £800.3 million (2016: £644.7 million) and a 23% increase in profit before tax to £760.2 million (2016: £618.1 million).
Net operating revenue increased by 17% to £2,010.2 million (2016: £1,712.8 million) and net income before exceptional items rose by 15% to £2,068.9 million (2016: £1,793.1 million), driven by higher assets under management and administration (AUMA) and performance fees.
This was achieved whilst maintaining cost discipline, with the ratio of total costs to net income reducing by three percentage points to 61% (2016: 64%).
At 31 December 2017 AUMA was £447.0 billion, a 13% increase from the prior year end (31 December 2016: £395.3 billion). This was driven by strong investment performance, acquisitions aligned with our strategic priorities and net new business from clients of £9.6 billion, which generates around £63 million of annualised net new revenue*, around £24 million of which is in these results.
Weakness in sterling in the first half of the year, compared to 2016, contributed positively to profit before tax and exceptional items by around £27 million. However, as sterling strengthened in the second half, the impact at 31 December 2017 was to reduce assets under management (AUM) by around £12 billion.
We have seen good underlying growth in key strategic areas and have continued to invest in the future growth of the business. In Asia Pacific we have continued to generate positive net new business from clients in Japan and we are expanding our distribution reach in mainland China. There has also been good underlying momentum in North America, with strong demand from Institutional clients and an encouraging first year in our relationship with Hartford.
We have expanded our capabilities in Private Assets and Alternatives with the acquisition of Adveq, a Swiss-based private equity firm. This acquisition, along with organic growth, brought total AUM in Private Assets and Alternatives to £33.3 billion (2016: £24.4 billion). Within Wealth Management, we acquired the discretionary client assets of C. Hoare & Co. and benefited from a full year’s contribution from Benchmark Capital, which we acquired in December 2016.
Asset Management profit before tax and exceptional items rose 23% to £705.9 million (2016: £572.4 million) and profit before tax was up 24% to £688.7 million (2016: £553.9 million). Assets under management at the end of December were £389.8 billion (31 December 2016: £346.4 billion). We generated net inflows from clients of £7.6 billion (2016: £1.4 billion).
Net operating revenue increased by 17% to £1,743.3 million (2016: £1,489.5 million). We generated performance fees of £77.5 million (2016: £38.8 million), £57.6 million (2016: £27.2 million) of which came from Institutional clients and £19.9 million (2016: £11.6 million) through the Intermediary sales channel. The net operating revenue margin before performance fees for Asset Management was 45 basis points (FY 2016: 46 basis points).
Our Institutional client business generated a net operating revenue margin before performance fees of 32 basis points, which was unchanged from 2016. Growth in higher margin Private Assets and Alternatives through the acquisition of Adveq offset the impact of margin declines, particularly through the outflows from Equity strategies.
Institutional clients invested net new money of £4.2 billion, driven by demand for Multi-asset and Private Assets and Alternatives strategies and from clients in North America and the UK. AUM for Institutional clients at the end of December were £255.8 billion (31 December 2016: £226.3 billion).
The net operating revenue margin in Intermediary (before performance fees) declined by one basis point to 72 basis points (2016: 73 basis points). The combined impact of the loss of a low margin sub-advised mandate and inflows into Equity funds partially offset structural changes to fee rates in the UK and Luxembourg which were reported last year.
In the Intermediary sales channel, we generated net new business of £3.4 billion. Branded funds saw particularly high demand with net inflows of £7.6 billion, more than offsetting £4.2 billion of net outflows from sub-advisory mandates. There was positive net new business within branded funds across all asset classes, with demand led by Fixed Income and Equity products. AUM in the Intermediary sales channel at the end of December were £134.0 billion (31 December 2016: £120.1 billion).
Wealth Management profit before tax and exceptional items was up 36% to £90.3 million (2016: £66.4 million) and profit before tax rose 20% to £67.4 million (2016: £56.3 million). Net operating revenue increased by 20% to £266.9 million (2016: £223.3 million), including performance fees of £0.9 million (2016: £2.4 million). AUM in Wealth Management at 31 December 2017 was £45.9 billion (2016: £39.6 billion) and AUA increased by 22% to £11.3 billion (2016: £9.3 billion).
Wealth Management clients introduced £2.0 billion of net new money in 2017 (2016: net outflows of £0.3 billion). There was client demand from each division within Wealth Management, with £1.1 billion through the Cazenove Capital business and £0.9 billion through Benchmark Capital.
The net operating revenue margin before performance fees was 61 basis points (2016: 65 basis points), with the reduction primarily due to the full year impact of Benchmark Capital.
The Group segment comprises central costs and returns on investment capital. Profit before tax and exceptional items in 2017 was £4.1 million (2016: £5.9 million). Total equity at 31 December 2017 was £3.5 billion (31 December 2016: £3.2 billion).
The Board will recommend to shareholders at the Annual General Meeting a final dividend of 79.0 pence (2016 64.0 pence), which represents an increase of 23%. This will bring the total dividend for the year to 113.0 pence (2016: 93.0 pence), an increase of 22%. The final dividend will be paid on 3 May 2018 to shareholders on the register at 23 March 2018.
Looking ahead, our core focus will remain on helping our clients to achieve their financial goals and build their future prosperity.
We will continue to invest for long-term future growth, whether in allocating more resources to further diversifying our product offering, expanding our geographical footprint or leveraging the opportunities created by the latest technology.
There are challenges facing the industry, although we believe that there remain opportunities for growth and that our diversified business model is well placed to take advantage of these.
*Defined and explained in the glossary.
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