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 initiatives the business Business model evolving Growth in key areas to meet changing of investment client demand 1 Annual Results 2018
2018 2017 Change £2,123.9m £2,068.9m 3% Net income 1 64% 61% – Ratio of total costs to net income £761.2m £800.3m (5)% Profit before tax 1 £421.4bn £447.0bn (6)% AUMA £(9.5)bn £9.6bn – Net new business 215.8p 226.9p (5)% Basic EPS 1 114p 113p – Total dividend per share Peter Harrison Revenue growth while Group Chief Executive Year of strategically investing back into critical initiatives the business Business model evolving Growth in key areas to meet changing of investment client demand 1 Before exceptional items. 2 Annual Results 2018
Pre-exceptional profit before tax (£m) 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 2018 Peter Harrison Revenue growth while Group Chief Executive Year of strategically investing back into critical initiatives the business Business model evolving Growth in key areas to meet changing of investment client demand 3 Annual Results 2018
Net et flows ws by by c channel nel Section 1 £bn £b 15 10 5 0 (5) (10) (15) 2013 2014¹ 2015 2016 2017 2018 Institutional Intermediary Wealth Management 1 Excludes Friends Life mandate win of £12bn in December 2014. Weaker markets impacting client demand ‘Risk off’ across Institutional flows Wealth Management Intermediary dominated by one continued to see large client strong demand 4 Annual results 2018
Net et flows ws by by r reg egion Section 1 Record inflows in Small outflows in North America Latin America £bn £b 4 2 Positive UK flows UK Institutional led led by Wealth by £5.5bn Multi-asset 0 net flows (2) (4) Challenging markets Institutional demand across channels and for Private Assets (6) countries in Europe (8) Americas UK EMEA Asia Pacific Outflows from one Good underlying large Japanese client growth in core and Australian Asian markets Institutional 5 Annual results 2018
Net et flows ws by by asse set c class ass Section 1 Demand from UK and Ongoing demand for Asia Pacific Institutional Multi-asset solutions clients £b £bn Diversified across £2.3bn net flows in 6 strategies, led by Private Private Assets, all Equity and Securitised 4 regions net positive Credit 2 Positive flows from Continued turnaround 0 Benchmark Capital and across Wealth (2) Schroder Wealth Management (4) (6) Fixed income Redemptions primarily (8) outflows dominated from US strategies by one client (10) Multi-asset Private Assets Wealth Fixed Income Equities & Alternatives Management ‘Risk off’ led to lack of Partly offset by flows into demand for developed Asian and EM strategies markets equities 6 Annual results 2018
Richard Keers Chief Financial Officer
Profit before tax and exceptional items £m £m Compensation costs Profit before tax and Net income Non-compensation Profit before tax and exceptional items exceptional items costs 55.0 800.3 Exceptional items (72.1) 761.2 (22.0) 90.3 Wealth 93.4 Wealth (111.3) Management Management Asset Asset Profit before tax Management Management 649.9 705.9 670.8 Group segment Group segment 4.1 (3.0) 2017 2018 2018 £761.2m -5% Profit before tax to and exceptional items 8 Annual Results 2018
Net income Net operating revenue +£61m £m £m Performance fees and Markets and FX carried interest +£0m -£24m Other Carried Performance Other operating Net new interest fees income Net income revenue FX business Markets Net income 28 (52) (6) 2,124 44 (28) 28 41 2,069 Acquisitions Wealth 290 273 +£72m Management Wealth Management Asset Asset Management Management 1,801 1,758 Group segment Group segment 33 38 2017 2018 Net income + 3% £2,123.9m to 9 Annual Results 2018
Net operating revenue Net new business and annualised net new revenue (NNB and ANNR) £m £m ANNR NNR NNB NNB £m £m £bn bn Net new business Annualised net new revenue 2017 - 2018 2,070.7 2,010.2 28.4 10 90 2,000 78.4 26.6 8 1,712.8 60 41.2 6 1,500 4 30 2 0 0 1,000 2,015.7 1,931.8 (2) 1,671.6 (30) (4) (6) 500 (60) (8) (10) (90) 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 Performance fees Net carried interest 2017 2018 Average AUM Net operating revenue margin 1 Annualised revenue impact of flows over two years +£22.6bn 47bps +£30m 1 Excluding performance fees and carried interest 10 Annual Results 2018
Wealth Management net operating revenue Net new business and annualised net new revenue (NNB and ANNR) £m £m NNB NNB ANNR NNR 300 281.9 0.4 £bn bn £m £m 266.9 Net new business Annualised net new revenue 2017 - 2018 0.9 26.8 1.6 21.4 16 250 223.3 38.5 1.4 14 40.8 2.4 20.6 1.2 12 200 38.8 1.0 10 150 0.8 8 0.6 6 216.2 203.8 100 0.4 4 161.5 0.2 2 50 0.0 0 (0.2) (2) 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 Management fees Transaction fees 2017 2018 Net banking interest income Performance fees Net operating revenue margin 1 Closing AUM of Net operating revenue 61bps +6% £43.7bn 1 Excluding performance fees 11 Annual Results 2018
Intermediary net operating revenue Net new business and annualised net new revenue (NNB and ANNR) ANNR NNR NNB NNB £m £m £m £m £bn bn Net new business Annualised net new revenue 2017 - 2018 937.5 1,000 929.3 8 60 0.7 19.9 797.0 6 40 800 11.6 4 20 2 600 0 0 936.8 909.4 400 (2) 785.4 (20) (4) (40) 200 (6) (8) (60) 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 Performance fees 2017 2018 Average AUM Net operating revenue margin 1 Closing AUM of +£4.7bn 72bps £121.2bn 1 Excluding performance fees 12 Annual Results 2018
Institutional net operating revenue Net new business and annualised net new revenue (NNB and ANNR) ANNR NNR NNB NNB £m £m £m £m £bn bn 1,000 Net new business Annualised net new revenue 2017 - 2018 8 20 851.3 372.8 814.0 28.4 6 15 800 57.6 25.5 692.5 4 10 27.2 600 2 5 0 0 400 797.4 756.4 (2) (5) 665.3 (4) (10) 200 (6) (15) (8) (20) 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 Performance fees Net carried interest 2017 2018 Average AUM Net operating revenue margin 1 Closing AUM of +£15.5bn 31bps £242.3bn 1 Excluding performance fees and carried interest 13 Annual Results 2018
Carried interest Net carried interest £28.4m Return Represents 1% of net operating revenue Total return 74 Investment vehicles with carried interest arrangements 34 9 Preferred return Investment vehicles Investment vehicles (‘hurdle’) have recognised contributing to the cost of carried interest financial obligations in income relation to carried interest 10 years Year Approximate weighted average age Investor return Catch-up phase Shared return of investment vehicles where carried interest has been recognised 15 years Typical age at which an investment vehicle would be liquidated 14 Annual Results 2018
Operating expenses £m £m 43% Total 1,600 compensation 1,460.2 2017: 43% 97.5 ratio 1,400 1,303.4 34.8 1,200 459.4 387.3 1,000 800 [X] 1,362.7 600 1,268.6 903.3 881.3 64% 400 Ratio of total cost to net 200 income 2017: 61% 0 2017 2018 Non-compensation costs Exceptional items Compensation costs 15 Annual Results 2018
Group Capital £m £m 4,000 4,000 3,621 3,621 3,471 3,471 1,164 3,000 3,000 1,341 1,090 1,165 216 Working capital – Other Capital surplus 392 216 2,000 2,000 535 Working capital – Seed 1,126 696 944 and co-investment 465 Dividend¹ 147 165 Investment capital – Liquid 1,000 1,000 Overall regulatory Investment capital – Illiquid 1,146 1,146 1,115 1,115 capital requirement Other items 2 Other items² 0 0 31 December 31 December 31 December 31 December 2017 2018 2017 2018 Capital base Capital allocation 1 Final dividend proposed for respective year 2 Comprises regulatory deductions, principally goodwill, intangible assets and pension scheme surplus 16 Annual Results 2018
Summary Net income 1 +3% to £2,123.9m £m £m Ratio of total costs to net income 2,123.9 64% 2,068.9 Profit before tax and exceptional items -5% to £761.2m 800.3 761.2 Basic EPS before exceptional items -5% to 215.8p Total dividend 2017 2018 2017 2018 +1p to 114p Profit before tax and Net income 1 exceptional items 1 Before exceptional items. 17 Annual Results 2018
Peter Harrison Group Chief Executive
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