Schroders reported a drop in full-year profit after record investor inflows failed to translate into improved earnings for the London-listed asset manager.
Pre-tax profits fell 4 per cent to £624.6m last year from £649.9m in 2018.
Adjusted pre-tax profits (before exceptional items) declined 8 per cent to £701.2m in 2019 from £761.2m the previous year, a better result than the consensus forecast of £684m from a poll of 14 analysts by Bloomberg.
Schroders attracted record net investor inflows of £43.4bn last year, reversing net outflows of £9.5bn in 2018. Profits fell, however, because the bulk of the new business only arrived in the final three months of last year including £32bn in assets from a large Scottish Widows mandate. The remaining £30bn from the mandate will move to Schroders in the first half this year.
Schroders institutional business saw net outflows of £7.1bn in 2019 and retail clients pulled £1.5bn from its mutual fund range last year, reflecting the tough competition that active managers face from low-cost index-tracking funds.
Schroders response to this competition has been to shift into areas such as alternatives and wealth management which are less vulnerable to attack from passively managed strategies.
Schroders Personal Wealth, a joint venture with Lloyds bank which was launched in the fourth quarter of 2019, made a strong start with inflows of £12.6bn.
The private assets and alternatives unit generated net inflows of £2.8bn last year.
Peter Harrison, group chief executive, said that the structural changes Schroders had made in its business had helped to deliver a “resilient performance” in 2019.
“Over the last few years we have been repositioning our business behind a clear vision to move closer to our end clients through wealth management, expand our capabilities in private assets and grow our Solutions business,” said Mr Harrison. “Today, these business areas represent over half of our clients’ assets under management.”
Assets under management ended last year at a record £500.2bn, up 23 per cent.
The dividend per share was unchanged at 114p.
David McCann, an analyst at Numis, said it was unclear if Schroders would succeed in generating significant shareholder value from wealth management given the investment spending that would been needed to achieve its ambitions.
“It is hard to ‘move the needle’ quickly in such a large and diversified asset management group,” said Mr McCann who has a “hold” recommendation on the stock.
Due to the spread of the coronavirus, Schroders has banned non-essential client related travel across the group. Mr Harrison said there had been no signs of coronavirus affecting Schroders operations so far.
“We believe that our business resilience is sufficient to deal with this but the impact [of coronavirus] on economies and markets will be highly correlated with how effective containment measures are,” he said.
Philip Mallinckrodt, 57, will retire as a director at the end of April after the annual shareholder meeting.
A well known figure in the City, Mr Mallinckrodt, who joined Schroders in 1994 and was tipped as a possible leader of the company, will be replaced on the board by his sister Claire Fitzalan Howard.
This maintains the policy of two members of the family on the board. Leonie Schroder Fane, a descendant of the co-founder John Henry Schroder, also sits on the board as a non-executive.
Just under 48 per cent of the company’s voting shares are owned by the Schroders and the Mallinckrodts, the two wings of the family.
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