Half-year results 2018 Presentation 26 July 2018 Peter Harrison Group Chief Executive
Delivering growth across the cycle Revenu nue g grow owth a h agai ains nst a a challeng nging ng backd kdrop op Peter Harrison Group Chief Executive Evolution of Growth in key areas business model to of strategic investment meet client demand Delivering strategy through Strong gross flows and diversified business model positive net new business 1 Annual Results 2017
H1 2018 H1 2017 Change £1,086.1m £974.4m 11% Net income 1 63% 63% – Ratio of total costs to net income 1 £397.1m £361.5m 10% Profit before tax 1 £449.4bn £417.5bn 8% AUMA 2 £1.2bn £0.8bn – Net new business 114.0p 103.5p 10% Basic EPS 1 35p 34p 3% Dividend per share 1 Before exceptional items. 2 Assets under administration was restated at the Q3 results announcement to exclude assets from which we only derive transactional non-recurring revenues Peter Harrison Group Chief Executive Evolution of Growth in key areas business model to of strategic investment meet client demand Delivering strategy through Strong gross flows and diversified business model positive net new business 2 Annual Results 2017
Net et flows ws by by c channel nel £bn 15 10 5 0 -5 2013 2014¹ 2015 2016 2017 H1 2018 Institutional Intermediary Wealth Management 1 Excludes Friends Life mandate win of £12bn in December 2014. Industry headwinds impacting client demand £1.2bn Strong client Net inflows in Institutional demand in offset by redemptions in Wealth Intermediary Management net new business 3 Half-year results 2018
Net et flows ws by by a asset c et class £bn Demand for outcome- Continued strong oriented products Multi-asset demand 15 £ 5.0bn and uncorrelated returns 10 net inflows 5 0 -5 Encouraging growth Equity outflows in Private Assets & driven by client -10 Alternatives restructuring 2013 2014¹ 2015 2016 2017 H1 2018 £0.8bn Equities Fixed Income Multi-asset Private Assets & Alternatives Wealth Management net inflows 1 Excludes Friends Life mandate win of £12bn in December 2014. 4 Half-year results 2018
Net et flows ws by by r reg egion £bn 15 £3.9bn 10 Positive net new NNB across North business in most regions and Latin America 5 0 Positive UK net inflows, Asia Pacific flat, -5 despite outflows due to Australian 2013 2014¹ 2015 2016 2017 H1 2018 from large UK redemptions insurance client UK EMEA Asia Pacific Americas 1 Excludes Friends Life mandate win of £12bn in December 2014. 5 Half-year results 2018
Richard Keers Chief Financial Officer
Profit bef t before t e tax a and ex excepti eptiona nal i item ems £m Compensation Profit before tax costs Net income Non-compensation and exceptional Profit before tax items and exceptional costs (43.7) Profit after tax and 397.1 111.7 items Tax (32.4) before exceptional 361.5 items Wealth 48.7 (81.4) 315.7 Management Wealth 45.5 Management (23.1) Exceptional items Asset Asset Profit after tax Management Management and exceptional 347.4 310.6 items 292.6 Group segment Group segment 5.4 1.0 H1 2018 H1 2018 H1 2017 H1 - 17 H1 - 18 H1 - 18 £397.1m 10% Profit before tax to and exceptional items up 7 Half-year results 2018
Net in inco come £m Net operating revenue +£111m Acquisitions Markets and FX +£49m +£20m Other Carried Performance Other operating Net new interest fees income Net income revenue FX business 20 2 1 Markets 1,086 Net income 29 (30) 40 50 974 Wealth 144 Management 134 Wealth Management Asset Asset Management Management 921 820 Group segment Group segment 20 21 H1 2017 H1 2018 H1 - 2017 H1 - 2018 Net income up 11% £1,086.1m to 8 Half-year results 2018
Insti titu tuti tiona nal n net et o oper perating ng r rev evenu enue Annualised revenue on net new business £m £m 15 500 441.2 432.5 11.5 19.6 44.4 400 10 372.8 15.8 13.2 5.0 5.3 300 5 200 0 397.1 396.8 359.6 (0.7) (0.7) (0.6) (1.6) 100 -5 (3.5) 0 -10 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 H1 2017 H2 2017 H1 2018 2016 2016 2017 2017 2017 2017 2018 2018 2016 2017 2018 Performance fees Carried interest Average AUM up Net operating revenue margin 1 Closing AUM of £23bn 31 bps £257.2bn from H1 2017 (FY 2017: 32bps) 1 Excluding performance fees and carried interest 9 Half-year results 2018
Inter termed ediary n net et o oper perating r rev even enue Annualised revenue on net new business £m £m 19.9 492.8 18.6 500 478.6 20 19.9 436.5 12.8 400 10 6.6 300 1.4 0 478.6 472.9 436.5 200 (1.8) -10 100 (8.9) (13.3) 0 -20 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 H1 2017 H2 2017 H1 2018 2016 2016 2017 2017 2017 2017 2018 2018 2016 2017 2018 Performance fees Average AUM up Net operating revenue margin 1 Closing AUM of £10bn 72bps £132.1bn from H1 2017 (FY 2017: 72bps) 1 Excluding performance fees 10 Half-year results 2018
Wea ealth Ma th Managem ement n t net et o oper perati ting ng r rev even enue Annualised revenue on net new business £m £m 5.0 139.9 136.1 140 5.0 0.3 130.8 0.3 12.8 3.7 10.8 0.6 10.6 120 20.6 2.7 19.8 21.0 2.5 1.6 100 1.4 80 0.1 0.0 60 106.2 105.2 (0.5) (1.1) 98.6 40 -2.5 20 -5.0 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 H1 2017 H2 2017 H1 2018 2016 2016 2017 2017 2017 2017 2018 2018 Management fees Transaction fees 2016 2017 2018 Net banking interest income Performance fees Net operating revenue margin 1 Closing AUM of Net operating revenue up 62bps 7% £46.4bn from H1 2017 (FY 2017: 61bps) 1 Excluding performance fees 11 Half-year results 2018
Oper perating ng ex expen penses Annu Annual Re Results 2 2017 63% £m Ratio of total 706.6 700 17.6 costs to net 629.2 16.3 H1 2017: 63% income 600 217.0 184.6 500 400 689.0 300 612.9 472.0 428.3 200 43.5% Total 100 compensation ratio H1 2017: 44.0% 0 H1 2017 H1 2018 Non-compensation costs Exceptional items Compensation costs 12 Half-year results 2018
Group C Capi pita tal £m £m 4,000 4,000 3,522 3,522 3,471 3,471 917 3,000 3,000 1,139 1,090 1,165 96 Working capital – Other 580 216 Capital surplus 392 2,000 2,000 Working capital – Seed 976 565 696 944 and co-investment Dividend¹ 149 147 Investment capital – Liquid 1,000 1,000 Overall regulatory Investment capital – Illiquid 3 1,311 1,311 1,146 1,146 capital requirement Other items 2 Other items² 0 0 31 December 30 June 31 December 30 June 2017 2018 2017 2018 Capital base Capital allocation 1 2017 final dividend/2018 interim dividend proposed 2 Comprises goodwill, intangible assets, pension scheme surplus, other associates and joint ventures, and deferred tax. 3 Includes RWC Partners Limited and Schroder Ventures Investment Limited associates. 13 Half-year results 2018
Summar mary Net income up A growing business delivering on strategy 11% to £1,086.1m £m [ 1,086.1 Ratio of total costs to net income 974.4 63% Profit before tax and exceptional items up 10% to £397.1m 397.1 361.5 Basic EPS up 10% to 114.0p Interim dividend up H1 2017 H1 2018 H1 2017 H1 2018 3% to 35p Profit before tax and Net income exceptional items All figures quoted are before exceptional items 14 Half-year results 2018
Peter Harrison Group Chief Executive
Key ey a area eas o of strateg tegic g growth th Inve vesting i in fut uture gro rowth dri rivers Product Fixed North Asia Technology Private Wealth innovation Income and America Pacific Assets & Management and Solutions Multi-asset Alternatives 16 Half-year results 2018
Conti tinu nued ed m momen entum i in North th Amer erica Strong client demand in key strategic area £bn £2.8 bn £2.4 bn 6.0 4.0 of net new business net inflows from Institutional clients 2.0 0.0 -2.0 Hartford range -4.0 £0.6 bn £5.1 bn -6.0 AUM net inflows from 2012 2013 2014 2015 2016 2017 H1 2018 Canada Institutional Intermediary branded Intermediary sub-advised 17 Half-year results 2018
Gro Growth in in Priv rivate A Assets & & Alt lternativ ives £35.8bn Expanding Client demand in first half of investment £0.8bn expertise assets under management 18 Half-year results 2018
Wea ealth Ma th Managem ement Continued organic growth Strong financial Diversified client Reinforced performance base driving management net inflows team 19 Half-year results 2018
Outl tlook ok Growt wth through i invest stme ment i t in key op y opportuni nitie ies Continued evolution of business towards areas of client demand Driving revenue growth through investment in key strategic areas Delivering strategy through diversified business model
Thank you 21 Half-year results 2018
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