Presentation 7 March 2019 Annual results 2018 Peter Harrison Group Chief Executive
Presentation7 March 2019
Annual results 2018
Peter Harrison Group Chief Executive
1 Annual Results 2018
Resilient results with strategic progress
Peter HarrisonGroup Chief Executive
Growth in key areas of investment
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 HarrisonGroup 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 of investment
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 HarrisonGroup Chief Executive
Pre-exceptional profit before tax (£m)
0
100
200
300
400
500
600
700
800
2012 2013 2014 2015 2016 2017 2018
Growth in key areas of investment
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 flows by channel
Institutional flows dominated by one
large client
Section 1
1Excludes Friends Life mandate win of £12bn in December 2014.
£bn
Weaker markets impacting client demand
(15)
(10)
(5)
0
5
10
15
2013 2014¹ 2015 2016 2017 2018Institutional Intermediary Wealth Management
Wealth Management continued to see strong demand
‘Risk off’ across Intermediary
5 Annual results 2018
Net flows by region
(8)
(6)
(4)
(2)
0
2
4
Americas UK EMEA Asia Pacific
£bn
Section 1Record 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 flows by asset class Section 1Ongoing demand for Multi-asset solutions
£2.3bn net flows in Private Assets, all regions net positive
Continued turnaround across Wealth Management
Fixed income outflows dominated 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)
0
2
4
6
Multi-asset Private Assets& Alternatives
WealthManagement
Fixed Income Equities
£bn
‘Risk off’ led to lack of demand for developed markets equities
Partly offset by flows into Asian and EM strategies
Richard KeersChief Financial Officer
8 Annual Results 2018
Group segment4.1
Group segment(3.0)
AssetManagement
705.9
AssetManagement
670.8
Net income Compensation costs Non-compensationcosts
Exceptional items
201820182017
Profit before tax and exceptional items
Profit before tax and exceptional items -5% £761.2m
Profit before tax 649.9
Profit before tax and exceptional items
800.3
Profit before tax and exceptional items
761.2
£m
to
90.3
55.0(22.0) (72.1)
93.4Wealth Management (111.3)Wealth
Management
9 Annual Results 2018
2017 2018
Group segment38
AssetManagement
1,758
AssetManagement
1,801
WealthManagement
WealthManagement
Group segment33
Net operating revenue+£61m
Net income
Net income2,124Net income
2,069
Otherincome
(6)
Performance fees (52)
Carried interest
28FX(28)
Markets28
Net new business
41
Other operating revenue
44
290
Net income +3% £2,123.9mto
£m
273
Markets and FX+£0m
Performance fees and carried interest
-£24m
Acquisitions+£72m
10 Annual Results 2018
(90)
(60)
(30)
0
30
60
90
(10)(8)(6)(4)(2)
02468
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017
Net operating revenueNet new business and annualised net new revenue
(NNB and ANNR)£m
Annualised revenue impact of flows over two years
+£30mAverage AUM
+£22.6bnNet operating revenue margin1
47bps1Excluding performance fees and carried interest
1,671.6 1,931.8 2,015.7
41.2
78.4 26.628.4
0
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£bn
ANNR£m
11 Annual Results 2018
Wealth Management net operating revenue
161.5203.8 216.2
38.8
40.838.5
20.6
21.426.8
2.4
0.90.4
223.3
266.9281.9
0
50
100
150
200
250
300
2016 2017 2018
Management fees Transaction feesNet banking interest income Performance fees
Net operating revenue
+6%Closing AUM of
£43.7bn
£m
61bpsNet operating revenue margin1
1Excluding performance fees
2017
(2)
0
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£bn
ANNR£m
Net new business and annualised net new revenue(NNB and ANNR)
12 Annual Results 2018
785.4909.4 936.8
11.6
19.9 0.7797.0
929.3 937.5
0
200
400
600
800
1,000
Performance fees
2016 2017 2018
Intermediary net operating revenue
£m
Closing AUM of
£121.2bnAverage AUM
+£4.7bnNet operating revenue margin1
72bps1Excluding performance fees
(60)
(40)
(20)
0
20
40
60
(8)
(6)
(4)
(2)
0
2
4
6
8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017 2018
NNB£bn
ANNR£m
Net new business and annualised net new revenue(NNB and ANNR)
13 Annual Results 2018
Average AUM
Institutional net operating revenue
665.3756.4 797.4
27.2
57.6 25.528.4372.8
0
200
400
600
800
1,000
Performance fees Net carried interest
2016 2017 2018
+£15.5bnClosing AUM of
£242.3bn
692.5
814.0 851.3
Net operating revenue margin1
31bps1Excluding performance fees and carried interest
(20)
(15)
(10)
(5)
0
5
10
15
20
(8)
(6)
(4)
(2)
0
2
4
6
8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net new business Annualised net new revenue 2017 - 2018
2017 2018
NNB£bn
ANNR£m
Net new business and annualised net new revenue(NNB and ANNR)
£m
14 Annual Results 2018
Carried interest
74Investment vehicles with carried interest arrangements
9Investment vehicles have recognised carried interest income
Net carried interest £28.4mRepresents 1% of net operating revenue
10 yearsApproximate weighted average age of investment vehicles where carriedinterest has been recognised
15 yearsTypical age at which an investment vehicle would be liquidated
34Investment 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 returnReturn
15 Annual Results 2018
Operating expenses
881.3 903.3
387.3459.4
0
200
400
600
800
1,000
1,200
1,400
1,600
2017 2018
1,362.7
1,303.4
[X]
Total compensation ratio
43%£m
1,268.6
34.8
97.5
Compensation costs Non-compensation costs Exceptional items
2017: 43%
Ratio of total cost to net income
64%2017: 61%
1,460.2
16 Annual Results 2018
1,146 1,115
944 1,126
216 216
1,1651,164
0
1,000
2,000
3,000
4,000
31 December2017
31 December2018
Capital base
Capital surplus
Dividend¹
Overall regulatorycapital requirement
Other items²
Group Capital
1Final dividend proposed for respective year2Comprises regulatory deductions, principally goodwill, intangible assets and pension scheme surplus
1,146 1,115
147 165
696 465
392 535
1,090 1,341
0
1,000
2,000
3,000
4,000
31 December2017
31 December2018
Capital allocation
3,621 3,4713,471 3,621
Working capital – Other
Working capital – Seed and co-investment
Investment capital – Liquid
Investment capital – Illiquid
Other items2
£m
17 Annual Results 2018
SummaryNet income1
+3% to £2,123.9m
Ratio of total costs to net income
64%
Profit before tax and exceptional items
-5% to £761.2m
+1p to 114pTotal dividend
-5% to 215.8pBasic EPS before exceptional items
2,068.9 2,123.9
800.3 761.2
Profit before tax and exceptional items
Net income1
2017 20182017 2018
£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 andMulti-asset
NorthAmerica
AsiaPacific
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
WealthManagement
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 andMulti-asset
NorthAmerica
AsiaPacific
Technology Private Assets & Alternatives
– Alternative Sales Unit– Algonquin real estate– Securitised credit & A10– Adveq private equity– Infrastructure
WealthManagement
– 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 andMulti-asset
NorthAmerica
AsiaPacific
Technology Private Assets & Alternatives
– Alternative Sales Unit– Algonquin real estate– Securitised credit & A10– Adveq private equity– Infrastructure
WealthManagement
– 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 andMulti-asset
NorthAmerica
AsiaPacific
Technology Private Assets & Alternatives
– Alternative Sales Unit– Algonquin real estate– Securitised credit & A10– Adveq private equity– Infrastructure
WealthManagement
– 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 andMulti-asset
NorthAmerica
AsiaPacific
Technology Private Assets & Alternatives
– Alternative Sales Unit– Algonquin real estate– Securitised credit & A10– Adveq private equity– Infrastructure
WealthManagement
– 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
OutlookGlobal footprint and diversified business model to drive future growth
Peter HarrisonGroup 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
Thank you
27 Annual Results 2018
Forward looking statementsThese 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.