Schroders announced lacklustre half-year results on Thursday after the London-listed asset manager reported a 14 per cent drop in pre-tax profits as difficult market conditions led to large outflows from its equity products.
Profits before tax and exceptional items fell to £340.4m for the six months ending June 30, slightly ahead of the consensus forecast of £336.3m from 11 analysts.
Investors withdrew £7.2bn from Schroders’ equity products in the first six months of 2019, offset by positive inflows of £3.2bn into fixed income strategies.
Total net client withdrawals were £1.2bn net in the first six months of 2019, compared with positive net inflows of £1.2bn in the same period last year.
Peter Harrison, chief executive, said that a “risk off” environment and “relatively weak” markets in the early part of the year, along with changes in Schroders’ business mix, had contributed to the profit decline, but that the company’s pipeline of new business was looking “pretty good”. The first part of a large Lloyds mandate, around £45bn of assets, is due to arrive in the second half of the year.
Schroders’ assets under management reached a new high of £444.4bn at the end of June, up 9 per cent from the end of December.
The interim dividend was held unchanged at 35p per share, as expected.
Schroders has been expanding its wealth management activities which pulled in £900m in new business in the first half across its Cazenove Capital and Benchmark Capital arms. It acquired Thirdrock, a £1.7bn Singapore-based wealth management business earlier this year. Mr Harrison said acquisition of Thirdrock would accelerate the growth of Schroders’ wealth management business in Asia and strengthen the regional investment expertise offered to private clients.
Two other acquisitions are expected to bolster Schroders private assets business. In May, it acquired Blue Asset Management, a £1.7bn Munich-based real estate investment manager which focuses on value-added property strategies in Germany, Austria and Switzerland.
Last month, Schroders agreed to buy a majority stake in BlueOrchard Finance, a microfinance and impact investing boutique.
“BlueOrchard has a 20 year track record with a great connections with development agencies. It would have business that would have been impossible to build organically and it is a hugely exciting acquisition for Schroders. We will see more investors looking beyond just purely financial returns as there is a crying need for capital to be put to work to benefit society,” said Mr Harrison.
He added that Schroders would continue to follow its strategy of investing in key areas to drive the long-term growth of its business.
David McCann, an analyst with Numis, said Schroders was “by far” the most diversified UK-listed asset manager by asset class, geography and client type with one of the strongest balance sheets in its sector.
“Schroders is likely to outperform, possibly significantly, in weaker markets,” said Mr McCann, who has a £31.52 price target and “hold” recommendation on Schroders shares.
Schroders’ share price was up 22p, or 0.7 per cent, to £29.95 by noon on Thursday, and has gained 22.6 per cent so far this year.
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