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RNS
Schroders PLC  -  SDR   

Final Results

Released 07:00 07-Mar-2013

RNS Number : 4338Z
Schroders PLC
06 March 2013
 



Schroders plc

Annual Results to 31 December 2012 (audited)

7 March 2013

 

 

 

 

·      Profit before tax £360.0 million (2011: £407.3 million)

·      Earnings per share 104.7 pence (2011: 115.9 pence)

·      Full-year dividend 43.0 pence per share (2011: 39.0 pence)

·      Net inflows £9.4 billion (2011: £3.2 billion)

·      Assets under management £212.0 billion (2011: £187.3 billion)

 


2012
£m

2011
£m

Profit



                Asset Management

348.5

389.4

                Private Banking

11.8

23.8


360.3

413.2

                Group segment

(0.3)

(5.9)

Total profit before tax

360.0

407.3




Earnings per share (pence)

104.7

115.9




Total dividend (pence per share)

43.0

39.0

 

Contacts:

Schroders

Emma Holden

Head of Corporate Communications

+44 (0) 207 658 2329

emma.holden@schroders.com

Maitland

William Clutterbuck


 +44 (0) 207 379 5151

wclutterbuck@maitland.co.uk

 

Management Statement

Financial markets and investor sentiment fluctuated sharply in the first half of 2012, with early gains in equity markets given back in the second quarter as concerns grew over the Eurozone and faltering economic growth. In the second half confidence recovered as central banks continued to provide liquidity, convincing actions were taken in Europe to address the challenges facing the single currency and the likelihood of a hard landing for the Chinese economy receded. Sentiment improved markedly and, with equity valuations looking historically attractive against bonds and investors seeking to reduce their underweight positions, equity markets moved higher.

Against this volatile background Schroders had a solid year, with four quarters of positive net new business flows in Institutional and Intermediary, £9.4 billion of net new business for the year as a whole and assets under management reaching their highest ever level of £212.0 billion (2011: £187.3 billion). Profit before tax was down 12 per cent. at £360.0 million (2011: £407.3 million), with a small reduction in net revenue attributable to lower net revenue margins, and a 4 per cent. increase in costs as we continued to invest in the business.

Asset Management

Asset Management net revenue declined 3 per cent. to £1,014.8 million (2011: £1,041.5 million) including performance fees of £28.4 million (2011: £36.6 million). Net revenue margins, excluding performance fees, were 54 basis points (2011: 56 basis points) reflecting the significant growth of Institutional in recent years. Asset Management profit before tax was £348.5 million (2011: £389.4 million).

Last year we continued our programme of selective investment in support of future growth. Notable areas were Multi-asset and Fixed Income; control functions in the context of the significant expansion in our business and the increased regulatory agenda; and information technology upgrades in order to give us greater scale benefits and provide our fund managers with a leading support capability.

Investment performance for clients has been strong across the board with 71 per cent. of funds outperforming benchmark or peer group over the three years to the end of 2012 and 78 per cent. outperforming over one year.  Net new business in Institutional was £6.4 billion (2011: £6.8 billion) with positive flows in most asset classes and a particularly strong performance in Equities. Assets under management in Institutional ended the year at £123.7 billion (2011: £108.4 billion).

Despite weak retail investor demand early in the year, we achieved four quarters of positive net inflows  in Intermediary in 2012 and net inflows for the year as a whole were £3.3 billion (2011: net outflows £3.8 billion), predominantly in Multi-asset. Assets under management in Intermediary ended the year at £72.0 billion (2011: £62.9 billion).

During the year we announced two acquisitions which are complementary to our organic growth strategy. In India we acquired a 25 per cent. shareholding in Axis Asset Management, the asset management subsidiary of the third largest private sector bank in the country. India's demographics and economic growth prospects will lead over time to a major asset management opportunity and Axis shares our long-term approach to building businesses as well as bringing a strong distribution capability.

Towards the end of the year we announced the acquisition of STW, a US fixed income business with US$11.6 billion of assets under management at 31 December 2012. STW has an excellent investment track record, adds 100 new institutional client relationships and meets our strategic objectives of building scale in Fixed Income and growing our presence in the US. We expect the transaction to complete in the first half of 2013.

Private Banking

Our Private Banking business faced a number of challenges in 2012. Net revenue declined 17 per cent. to £94.4 million (2011: £114.3 million), with lower management fee and commission income as a result of subdued client activity and business outflows. Net revenue was also impacted by a further £7.9 million of loan losses on previously impaired loans, principally as a result of the continued weakness in the commercial property market.

Costs were reduced by 9 per cent. to £82.6 million (2011: £90.5 million) and profit before tax was £11.8 million (2011: £23.8 million).

We continued to generate inflows in the UK private client and charities business but we saw outflows from our cash management service, and in our Swiss business reflecting changes in our client base. Net outflows were £0.3 billion (2011: net inflows: £0.2 billion) and assets under management ended the year at £16.3 billion (2011: £16.0 billion).

In the short term we may see further net outflows, but longer term we remain positive about opportunities in Private Banking. We are streamlining the management structure, adding to our talent pool and strengthening our business development activities.

Group

The Group segment comprises returns on investment capital, which increased during 2012, and central costs including management, governance and the Group's insurance arrangements. The loss before tax for the year was £0.3 million (2011: loss £5.9 million).

Shareholders' equity at the end of 2012 was £2.1 billion (2011: £1.9 billion).

Dividend

Recognising our financial strength and confidence in the Company's long-term growth prospects, the Board has decided to increase the final dividend to 30.0 pence (2011: 26.0 pence). This will bring the total dividend for the year to 43.0 pence (2011: 39.0 pence), an increase of 10 per cent. The final dividend will be paid on 9 May 2013 to shareholders on the register at 2 April 2013.

It remains our policy in the long term to increase dividends progressively, in line with the trend in profitability.

The Board

In September, we welcomed Nichola Pease as a non-executive Director. Her experience of the asset management industry brings additional insights to our discussions.

After nine years on the Board, Merlyn Lowther will stand down at the 2013 Annual General Meeting. We thank her for her contribution over many years, most recently as Chairman of the Audit and Risk Committee. Ashley Almanza will succeed Merlyn as Chairman of the Audit and Risk Committee and Nichola Pease will join the Committee.

In November, we announced that, after ten years' service, Kevin Parry had decided to step down from the Board in May 2013. We also thank Kevin for his contribution to Schroders, initially as a non-executive Director and then as Chief Financial Officer. We intend to appoint Richard Keers to the Board as Chief Financial Officer on 5 May 2013. Richard's previous experience in PricewaterhouseCoopers' financial services practice since 1988, and as the Global Relationship Partner for Schroders from 2006 to 2010, positions him well for his new role.

Outlook

 

With economic activity likely to be subdued for some time, and with austerity programmes being increasingly challenged, the outlook for markets is still uncertain. However, corporate balance sheets are healthy and, while earnings may only grow modestly in 2013, dividends remain well supported. In the first two months of the year equity markets have extended their strong showing as investors have continued to switch funds from low-yielding cash and bonds. Good investment performance and a broad product range have enabled us to benefit from this pick up in investor demand for Equities.

We are confident that the strategy that has served the Company well over the past decade, of building a diversified business across different client types, asset classes and regions, and of focusing on the long term rather than on short-term trends or market cycles, will continue to deliver value for shareholders.

 

 

 

 

 

Copies of this announcement are available on the Schroders website: www.schroders.com.  Michael Dobson, Chief Executive, and Kevin Parry, Chief Financial Officer, will host a presentation and webcast for the investment community, to discuss the Group's results at 9 a.m. GMT on Thursday, 7 March 2013 at 31 Gresham Street, London, EC2V 7QA.  The webcast can be viewed live at www.schroders.com/ir and www.cantos.com.  For individuals unable to attend the presentation or participate in the live webcast, a replay will be available from midday on Thursday, 7 March 2013 at www.schroders.com/ir.

The Annual Report and Accounts will be available on the Schroders website: www.schroders.com on 22 March 2013.

 

 

Forward-looking statements

This announcement, the Annual Report and Accounts for 2012 from which it is extracted and the Schroders website may contain forward-looking statements with respect to the financial condition, results of operations and businesses of the Group.  Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and circumstances in the future. Without limitation, any statements preceded or followed by or that include the words 'targets', 'plans', 'believes', 'expects', 'aims' 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 announcement.  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 this announcement or in the Annual Report and Accounts or on the Schroders website should be construed as a profit forecast.  

Consolidated income statement

for the year ended 31 December 2012


Notes

2012
£m

2011
£m





Revenue

2

1,425.4

1,501.9

Cost of sales


(329.7)

(363.3)

Net gains on financial instruments and other income


39.2

14.0

Net revenue1


1,134.9

1,152.6

Operating expenses

3

(791.2)

(761.8)

Operating profit


343.7

390.8

Net finance income


11.8

14.5

Share of profit of associates and joint ventures


4.5

2.0

Profit before tax


360.0

407.3

Tax

4

(76.8)

(91.5)

Profit after tax


283.2

315.8

Earnings per share




Basic

5

104.7p

115.9p

Diluted

5

101.3p

111.9p

Dividends per share2

6

39.0p

39.0p

 

1Non-GAAP measure of performance.

2Interim and final dividends declared during the year.

 

Consolidated statement of comprehensive income

for the year ended 31 December 2012



2012

£m

2011

£m

Profit for the year


283.2

315.8





Net exchange differences on translation of foreign operations after hedging


(21.8)

2.1

Actuarial gains/(losses) on defined benefit pension schemes


10.4

(0.5)

Net fair value movement arising from available-for-sale financial assets


(9.5)

(16.3)

Net fair value movement arising from available-for-sale financial assets held by joint ventures


1.5

(3.5)

Tax on items taken directly to other comprehensive income


(4.1)

(1.7)





Other comprehensive losses for the year net of tax


(23.5)

(19.9)





Total comprehensive income for the year net of tax


259.7

295.9





 

Consolidated statement of financial position


31 December 2012


Notes

2012

£m

2011

£m

Assets




Cash and cash equivalents


2,542.8

2,338.7

Trade and other receivables


414.7

411.2

Financial assets


2,019.8

2,165.2

Associates and joint ventures


79.4

58.4

Property, plant and equipment


15.0

16.2

Goodwill and intangible assets


142.1

144.1

Deferred tax


47.8

50.1

Retirement benefit scheme surplus

10

67.2

55.7



5,328.8

5,239.6





Assets backing unit-linked liabilities




Cash and cash equivalents


820.5

673.6

Financial assets


8,525.8

7,971.6



9,346.3

8,645.2





Total assets


14,675.1

13,884.8





Liabilities




Trade and other payables


559.3

580.9

Financial liabilities


2,585.1

2,642.1

Current tax


40.8

51.8

Provisions

11

64.0

52.7

Deferred tax


1.9

2.6

Retirement benefit scheme deficits

 10

7.8

7.9



3,258.9

3,338.0





Unit-linked liabilities


9,346.3

8,645.2





Total liabilities


12,605.2

11,983.2

Net assets


2,069.9

1,901.6





Equity 


2,069.9

1,901.6

 

 


Consolidated statement of changes in equity

for the year ended 31 December 2012


Share capital
£m

Share premium
£m

Own

Shares

£m

Net exchange differences

£m

Associates and joint ventures reserve

£m

Fair value reserve

£m

Profit and loss reserve

£m

Total
£m

At 1 January 2012

282.5

87.8

(172.5)

123.8

25.8

34.9

1,519.3

1,901.6










Profit for the year

-

-

-

-

4.5

-

278.7

283.2










Net exchange differences on translation of foreign operations

-

-

-

(28.3)

-

-

-

(28.3)

Net exchange differences on hedging of foreign operations

-

-

-

6.5

-

-

-

6.5

Actuarial gains on defined benefit pension schemes

-

-

-

-

-

-

10.4

10.4

Net fair value movements on available-for-sale financial assets taken to other comprehensive income

-

-

-

-

1.5

16.3

-

17.8

Transfer to income statement on derecognition or impairment of available-for-sale financial assets

-

-

-

-

-

(25.5)

-

(25.5)

Net exchange differences on available-for-sale financial assets

-

-

-

(0.2)

-

(0.1)

-

(0.3)

Tax on items taken directly to other comprehensive income

-

-

-

-

-

-

(4.1)

(4.1)

Other comprehensive (losses)/income

-

-

-

(22.0)

1.5

(9.3)

6.3

(23.5)










Shares issued

0.5

2.3

-

-

-

-

-

2.8

Shares cancelled

(0.5)

-

-

-

-

-

0.5

-

Share-based payments

-

-

-

-

-

-

45.3

45.3

Tax in respect of share schemes

-

-

-

-

-

-

6.3

6.3

Dividends attributable to owners of the parent

-

-

-

-

-

-

(104.1)

(104.1)

Own shares purchased

-

-

(41.7)

-

-

-

-

(41.7)

Transactions with owners

-

2.3

(41.7)

-

-

-

(52.0)

(91.4)










Transfers

-

-

49.1

-

(6.3)

-

(42.8)

-










At 31 December 2012

282.5

90.1

(165.1)

101.8

25.5

25.6

1,709.5

2,069.9

Notes

7

7

8






 



 

 

 

for the year ended 31 December 2011

 

 


Share capital
£m

Share premium
£m

Own

shares

£m

Net exchange differences

£m

Associates

and joint ventures

reserve

£m

Fair value reserve

£m

Profit and loss reserve

£m

Total
£m

At 1 January 2011

290.4

84.7

(199.1)

122.1

35.5

50.8

1,415.3

1,799.7










Profit for the year

-

-

-

-

2.0

-

313.8

315.8










Net exchange differences on translation of foreign operations

-

-

-

1.1

-

-

0.1

1.2

Net exchange differences on hedging of foreign operations

-

-

-

1.0

-

-

-

1.0

Transfer to the income statement of cumulative foreign exchange on derecognition of foreign operations

-

-

-

(0.1)

-

-

-

(0.1)

Actuarial losses on defined benefit pension schemes

-

-

-

-

-

-

(0.5)

(0.5)

Net fair value movements on available-for-sale financial assets taken to other comprehensive income

-

-

-

-

(3.5)

(10.6)

-

(14.1)

Transfer to income statement on derecognition or impairment of available for-sale financial assets

-

-

-

-

-

(5.4)

-

(5.4)

Net exchange differences on available-for-sale financial assets

-

-

-

(0.3)

-

-

-

(0.3)

Tax on items taken directly to other comprehensive income

-

-

-

-

-

0.1

(1.8)

Other comprehensive income/(losses)

-

-

-

1.7

(3.5)

(15.9)

(2.2)

(19.9)










Shares issued

0.5

3.1

-

-

-

-

-

3.6

Shares cancelled

(8.4)

-

-

-

-

-

(16.0)

(24.4)

Share-based payments

-

-

-

-

-

-

42.7

42.7

Tax in respect of share schemes

-

-

-

-

-

-

(6.1)

(6.1)

Dividends attributable to owners of the parent

-

-

-

-

-

-

(104.8)

(104.8)

Dividends attributable to non-controlling interests

-

-

-

-

-

-

(3.3)

(3.3)

Own shares purchased

-

-

(101.4)

-

-

-

(0.3)

(101.7)

Transactions with owners

(7.9)

3.1

(101.4)

-

-

-

(87.8)

(194.0)










Transfers










-

-

128.0

-

(8.2)

-

(119.8)

-

At 31 December 2011

282.5

87.8

(172.5)

123.8

25.8

34.9

1,519.3

1,901.6

Notes

7

7

8







Consolidated cash flow statement

for the year ended 31 December 2012


Note

2012

£m

2011

£m

Net cash from operating activities

9

489.2

426.8





Cash flows from investing activities




Acquisition of associates


(23.3)

-

Net acquisition of property, plant and equipment and intangible assets


(12.8)

(12.7)

Net disposal of financial assets


54.1

114.6

Non-banking interest received


12.0

15.0

Distributions received from associates and joint ventures


6.5

9.0

Net cash from investing activities


36.5

125.9





Cash flows from financing activities




Proceeds from issue of non-voting ordinary shares


2.8

3.6

Purchase of non-voting ordinary shares for cancellation


-

(24.4)

Acquisition of own shares


(41.7)

(101.7)

Repayments of borrowings


-

(18.6)

Dividends paid


(104.1)

(104.8)

Other flows


(1.9)

(4.8)

Net cash used in financing activities


(144.9)

(250.7)





Net increase in cash and cash equivalents


380.8

302.0





Opening cash and cash equivalents


3,012.3

2,711.7

Net increase in cash and cash equivalents


380.8

302.0

Effect of exchange rate changes


(29.8)

(1.4)

Closing cash and cash equivalents


3,363.3

3,012.3





Closing cash and cash equivalents consists of:




Cash backing unit-linked liabilities


820.5

673.6

Other cash and cash equivalents held by the Group:




Cash


1,718.7

1,396.9

Cash equivalents


824.1

941.8



2,542.8

2,338.7



3,363.3

3,012.3

 

The cash backing unit-linked liabilities cannot be used by the Group as it is not legally entitled to draw on the assets of the Life Company for its own corporate purposes.

Basis of preparation

The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The statutory accounts for 2011 have been delivered to the Registrar of Companies and the auditors' opinion on those accounts was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Companies Act 2006.  An unqualified auditors' opinion has also been issued on the statutory accounts for the year ended 31 December 2012 which will be delivered to the Registrar of Companies in due course.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), which comprise Standards and Interpretations approved by either the International Accounting Standards Board or the IFRS Interpretations Committee or their predecessors, as adopted by the European Union (EU), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

1. Segmental reporting

Operating segments

The Group has three business segments: Asset Management, Private Banking and Group.  Asset Management principally comprises investment management including advisory services, equity products, fixed income securities, multi-asset, property and alternative asset classes such as commodities, private equity and funds of hedge funds.  Private Banking principally comprises investment management and banking services provided to high net worth individuals and charities. Group principally comprises the Group's investment capital and treasury management activities, insurance arrangements and the management of costs associated with governance and corporate management. Insurance activities comprise acting as insurer to the Group, including the results of the captive insurer which provides reinsurance for certain activities of the Group. Provisions for actual and potential claims that are within the insurance cover are consequently recorded in the Group segment, net of any recognisable external insurance asset. The expected insurance recovery may be in excess of the amount that is allowed to be recorded under accounting rules.

Segment information is presented on the same basis as that provided for internal reporting purposes to the Group's chief operating decision-maker.  The chief operating decision-maker is the Chief Executive.  One of the key measures used in respect of performance measurement is net revenue.

The allocation of costs to individual business segments is undertaken in order to provide management information on the business performance and to provide managers with a tool to manage and control expenditure. Costs are allocated on a basis that aligns the charge with the resources employed by the Group in a particular area of the business.

 

 

Year ended 31 December 2012

Asset

Management
£m

Private

Banking
£m

 Group
£m

 Total
 £m






Fee income

1,295.5

96.3

0.5

1,392.3

Banking interest receivable

-

33.1

-

33.1

Revenue

1,295.5

129.4

0.5

1,425.4






Fee expense

(303.1)

(7.2)

(0.1)

(310.4)

Banking interest payable

-

(19.3)

-

(19.3)

Cost of sales

(303.1)

(26.5)

(0.1)

(329.7)






Net gains/(losses) on financial instruments and other income*

22.4

(8.5)

25.3

39.2

Net revenue

1,014.8

94.4

25.7

1,134.9






Operating expenses

(671.4)

(82.6)

(37.2)

(791.2)

Operating profit/(loss)

343.4

11.8

(11.5)

343.7






Net finance income

0.1

-

11.7

11.8

Share of profit/(loss) of associates and joint ventures

5.0

-

(0.5)

4.5

Profit/(loss) before tax

348.5

11.8

(0.3)

360.0

*For Private Banking, includes fair value movements on loans held at fair value and other loan losses.


 

 

Year ended 31 December 2011

Asset

Management
£m

Private

Banking
£m

 Group
£m

 Total
 £m






Fee income

1,359.3

106.3

0.4

1,466.0

Banking interest receivable

-

35.9

-

35.9

Revenue

1,359.3

142.2

0.4

1,501.9






Fee expense

(335.4)

(6.4)

-

(341.8)

Banking interest payable

-

(21.5)

-

(21.5)

Cost of sales

(335.4)

(27.9)

-

(363.3)






Net gains/(losses) on financial instruments and other income

17.6

-

(3.6)

14.0

Net revenue

1,041.5

114.3

(3.2)

1,152.6






Operating expenses

(658.5)

(90.5)

(12.8)

(761.8)

Operating profit/(loss)

383.0

23.8

(16.0)

390.8






Net finance (charge)/income

(0.3)

-

14.8

14.5

Share of profit/(loss) of associates and joint ventures

6.7

-

(4.7)

2.0

Profit/(loss) before tax

389.4

23.8

(5.9)

407.3

 

2. Revenue


2012

£m

 2011
£m

Management fees

1,223.9

1,267.0

Performance fees

28.5

37.8

Other fees

139.9

161.2

Interest income receivable by Private Banking subsidiaries

33.1

35.9


1,425.4

1,501.9


3. Operating expenses

Operating expenses include:

 

2012

£m

 

 2011
£m

Salaries and other remuneration

472.4

455.3

Social security costs

45.7

39.4

Pension costs

27.6

5.1

Employee benefits expense

545.7

499.8






 

4. Tax expense

Analysis of charge in the year:


2012

£m

2011

 £m

UK corporation tax on profits for the year

29.6

31.6

Adjustments in respect of prior years

1.7

-

Foreign tax - current

54.6

67.1

Foreign tax - adjustments in respect of prior years

(8.6)

0.8

Current tax

77.3

99.5




Origination and reversal of temporary differences

(6.5)

(7.9)

Adjustments in respect of prior years

4.6

(1.7)

Effect of changes in corporation tax rates

1.4

1.6

Deferred tax

(0.5)

(8.0)




Tax charge reported in the income statement

76.8

91.5

 

The UK standard rate of corporation tax reduced from 26 per cent. to 24 per cent. on 1 April 2012 resulting in a UK effective tax rate for the year of 24.5 per cent. (2011: effective rate of 26.5 per cent.). The tax charge for the year is lower (2011: lower) than a charge based on the UK effective rate. The reconciliation of the income statement tax charge to the UK rate on profits before tax including the impact of taxes incurred in overseas operations and differences in accounting versus tax profit is set out below:


2012

£m

2011

 £m

Profit before tax

360.0

407.3

Less post-tax profits of associates and joint ventures

(4.5)

(2.0)

Profit before tax of consolidated Group entities

355.5

405.3




Profit before tax of consolidated Group entities multiplied by corporation tax at the UK
rate of 24.5 per cent. (2011: 26.5 per cent.)

87.1

107.4




Effects of:



Different statutory tax rates of overseas jurisdictions

(1.2)

(1.9)

Permanent differences including non-taxable income and non-deductible expenses

(9.0)

(10.5)

Net creation/(utilisation) of tax losses for which no deferred tax asset was recognised

1.1

(3.8)

Foreign exchange movements on tax balances

-

(0.9)

Deferred tax adjustments in respect of changes in corporation tax rates

1.1

1.6

Adjustments to prior year estimates

(2.3)

(0.4)

Tax charge reported in the income statement

76.8

91.5

  

5. Earnings per share

Reconciliation of the figures used in calculating basic and diluted earnings per share:


2012

Number

Millions

2011

Number
Millions

Weighted average number of shares used in calculation of basic earnings per share

270.3

272.3

Effect of dilutive potential shares - share options

8.4

9.2

Effect of dilutive potential shares - contingently issuable shares

0.5

0.5

Weighted average number of shares used in calculation of diluted earnings per share

279.2

282.0

 

6. Dividends


2013

2012

2011


£m

Pence per share

£m

Pence per share

£m

Pence per share

Declared and paid in year:







Final dividend

80.1

30.0

69.4

26.0

70.1

26.0

Interim dividend



34.7

13.0

34.7

13.0




104.1

39.0

104.8

39.0

 

Dividends of £6.0 million (2011: £6.2 million) on shares held by the employee trusts have been waived; dividends may not be paid on treasury shares. The 2012 final dividend is payable on 9 May 2013 and will be accounted for in 2013.

 

7. Share capital and share premium


Number of shares
Millions

Ordinary
shares

£m

Non-voting ordinary shares

£m

Total
shares

£m

Share premium

£m

At 1 January 2012

282.5

226.0

56.5

282.5

87.8

Shares issued

0.5

-

0.5

0.5

2.3

Shares cancelled

(0.5)

-

(0.5)

(0.5)

-

At 31 December 2012

282.5

226.0

56.5

282.5

90.1

 


Number of shares

Millions

Ordinary
shares

£m

Non-voting ordinary shares

£m

Total
shares

£m

Share premium

£m

At 1 January 2011

290.4

226.0

64.4

290.4

84.7

Shares issued

0.5

-

0.5

0.5

3.1

Shares cancelled

(8.4)

-

(8.4)

(8.4)

-

At 31 December 2011

282.5

226.0

56.5

282.5

87.8

 




2012

Millions

2011

Millions

Issued and fully paid:





   Ordinary shares of £1 each



226.0

226.0

   Non-voting ordinary shares of £1 each



56.5

56.5




282.5

282.5

 

The non-voting ordinary shares carry the same rights as ordinary shares except that they do not confer the right to attend and vote at any general meeting of the Company, and that on a capitalisation issue they carry the right to receive non-voting ordinary shares rather than ordinary shares.

Details of shares held in treasury are included in note 8.

During the year, 0.5 million non-voting ordinary shares were cancelled, all of which had previously been held in treasury.



8. Own shares

Own shares include the Group's shares (both ordinary and non-voting ordinary) that are held by employee trusts or in treasury.

Movements during the year were as follows:


2012

£m

2011

£m

At 1 January

(172.5)

(199.1)

Own shares purchased

(41.7)

(101.4)

Cancellation of own shares held in treasury*

5.6

75.3

Awards vested*

43.5

52.7

At 31 December

(165.1)

(172.5)

*Own shares balances are transferred to the profit and loss reserve insofar as they relate to treasury shares that have been cancelled or share-based payments that have vested.

 


2012

2011


Number of vested shares

Millions

Number of unvested shares Millions

 

Total

Millions

Number of vested shares Millions

Number of unvested shares Millions

 

Total

Millions

Ordinary shares held within trusts

3.0

11.6

14.6

2.4

12.3

14.7

Non-voting ordinary shares held within
 trusts

0.6

0.2

0.8

0.6

0.1

0.7

Non-voting ordinary shares held as treasury
 shares*

-

0.1

0.1

-

0.6

0.6


3.6

11.9

15.5

3.0

13.0

16.0

*Non-voting ordinary shares held as treasury shares do not vest but are included in unvested shares for presentational purposes only.

 

During the year 0.5 million non-voting ordinary shares held within treasury were cancelled.



9. Reconciliation of net cash from operating activities


2012

£m

2011

£m

Operating profit

343.7

390.8




Adjustments for income statement non-cash movements:



Depreciation of property, plant and equipment and amortisation of intangible assets

12.0

14.1

Net (gains)/losses and impairments taken through the income statement on
  financial instruments

(22.0)

3.2

Share-based payments

45.3

42.7

Charge for provisions net of releases

17.2

11.3

Other non-cash movements            

4.0

(7.6)


56.5

63.7

Adjustments for other income statement cash movements:



Payments made to the defined benefit pension schemes

-

(3.1)




Adjustments for statement of financial position movements:



Decrease in trade and other receivables

82.5

61.9

(Decrease)/increase in trade and other payables and provisions

(58.5)

26.3


24.0

88.2

Adjustments for Life Company movements:



Net purchase of assets backing unit-linked liabilities

(554.2)

(405.9)

Net increase in unit-linked liabilities

701.1

371.8


146.9

(34.1)




Tax paid

(81.6)

(78.5)

Interest paid

(0.3)

(0.2)




Net cash from operating activities

489.2

426.8



 

10. Retirement benefit obligations

The disclosures are provided mainly in respect of the principal defined benefit (DB) scheme in the UK which is the DB section of the funded Schroders Retirement Benefits Scheme (the Scheme). Some disclosures are also provided in respect of the DC section of the Schroders Retirement Benefits Scheme (the DC section).

The income statement charge for retirement benefit costs is as follows:


2012

£m

 2011
£m

Pension costs - defined contribution plans

27.2

22.2

Pension charge/(credit) - defined benefit plans

0.3

(17.3)

Other post-employment benefits

0.1

0.2


27.6

5.1




The income statement charge/(credit) in respect of defined benefit plans consists of:






Current service cost

-

2.8

Expected return on scheme assets

(33.3)

(44.7)

Curtailment

-

(10.2)

Interest on scheme liabilities

32.1

33.4

Total income statement credit in respect of the Scheme

(1.2)

(18.7)

Income statement charges in respect of other defined benefit schemes

1.5

1.4

Total defined benefit schemes income statement charge/(credit)

0.3

(17.3)

 

The amounts recognised in the statement of comprehensive income are set out below:

Other comprehensive (income)/loss consists of:

2012

£m

Actual return less expected return on Scheme assets

1.9

(42.6)

Experience gains and losses arising on Scheme liabilities

1.5

4.1

Changes in assumptions underlying the present value of the Scheme liabilities

(13.7)

39.0

Total other comprehensive (income)/loss in respect of the Scheme

(10.3)

0.5

Other comprehensive income in respect of other defined benefit schemes

(0.1)

-

Total other comprehensive (income)/loss in respect of defined benefit schemes

(10.4)

0.5

 

The Scheme is administered by the Trustee. The Scheme was closed to new entrants and future accrual on 30 April 2011. As a result, no contributions were made to the Scheme in the year (2011: contributions of £3.1 million). At 31 December 2011 and 2012, there were no active members in the DB section and 1,182 active members in the DC section (2011: 1,238). The last completed triennial valuation of the Scheme was carried out as at 31 December 2011. It disclosed that the market value of the assets of the Scheme represented 101 per cent. of the liabilities at that date, calculated on the funding basis applicable to the Scheme, for the benefits that had accrued to members at that date.

The income statement credit for the Scheme has been determined by independent qualified actuaries, Aon Hewitt Limited, and is based on an assessment of the Scheme as at 31 December 2012.

The amounts recognised in the statement of financial position in respect of the Scheme are:

 

Fair value of plan assets

2012

£m

At 1 January

763.8

692.9

Expected return

33.3

44.7

Actuarial (losses)/gains

(1.9)

42.6

Contributions by employer

-

3.1

Benefits paid

(18.3)

(19.5)

At 31 December

776.9

763.8




Present value of funded obligations



At 1 January

(708.1)

(658.5)

Current service cost

-

(2.8)

Interest cost

(32.1)

(33.4)

Curtailment

-

10.2

Actuarial gains/(losses)

12.2

(43.1)

Benefits paid

18.3

19.5

At 31 December

(709.7)

(708.1)




Net asset in respect of the Scheme

67.2

55.7

 

The history of the Group's defined benefit schemes, including the Scheme, is as follows:


 

2012

£m

2011

£m

2010

£m

2009

£m

2008

£m

Fair value of Scheme assets

776.9

763.8

692.9

573.0

547.6

Present value of defined benefit obligation of the
 Scheme

(709.7)

(708.1)

(658.5)

(614.1)

(525.2)

Surplus/(deficit) in the Scheme

67.2

55.7

34.4

(41.1)

22.4







Deficit of other defined benefit schemes

(7.8)

(7.9)

(7.2)

(5.4)

(7.4)

Total surplus/(deficit) of defined benefit schemes

59.4

47.8

27.2

(46.5)

15.0







Experience adjustments on Scheme liabilities

(1.5)

(4.1)

(1.4)

16.6

2.0

Experience adjustments on Scheme assets

(1.9)

42.6

37.1

0.1

(40.0)

Net experience adjustments

(3.4)

38.5

35.7

16.7

(38.0)

 

The sensitivity of the Scheme pension liabilities to changes in assumptions is as follows:



2012

2011

Assumption

Assumption change

Estimated
reduction in
pension
liabilities
£m

Estimated
reduction in
pension
liabilities
%

Estimated reduction in pension

liabilities
£m

Estimated
reduction in
pension
liabilities
%

Discount rate

Increase by 0.5%
per annum

66.3

9.4

68.1

9.6

Expected rate of pension
 increases in payment

Reduce by 0.5%
per annum

45.8

6.5

45.4

6.4

Life expectancy

Reduce by one year

19.7

2.8

18.9

2.7

 

11. Provisions

The Group holds provisions in respect of dilapidations and onerous leases, regulatory and potential legal claims which, at 31 December 2012, total £64.0 million (2011: £52.7 million).

 

During the year the Group made net provisions of £28.9 million in respect of actual or potential claims against the Group. The provisions mainly represent losses arising from the application of legal terms in respect of client mandates and other potential obligations. These are subject to ongoing discussions. The Group has also recorded an external insurance asset of £19.6 million which is an estimate of the recognisable recovery and is recorded in trade and other receivables. The insurance recovery is considered to be virtually certain.

 

Key risks and mitigations

Our Key risks and mitigations can be read by accessing the link at the end of this release.


 

Directors' responsibility statement

To the best of their knowledge and belief, each of the Directors listed below confirms that:

-    The consolidated financial statements of Schroders plc, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of Schroders plc and the undertakings included in the consolidation taken as a whole;

-    The announcement includes a fair summary of the development and performance of the business and the position of Schroders plc and the undertakings included in the consolidation taken as a whole and a description of the principal risks and uncertainties that they face;

-    So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

-    They have each taken all the steps that ought to have been taken by them as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Directors:

Andrew Beeson

Chairman

Michael Dobson

Chief Executive

Philip Mallinckrodt

Group Head of Private Banking

Kevin Parry

Chief Financial Officer

Massimo Tosato

Executive Vice Chairman and Global Head of Distribution

Luc Bertrand

Senior Independent Director

Ashley Almanza

Independent non-executive Director

Robin Buchanan

Independent non-executive Director

Lord Howard of Penrith

Independent non-executive Director

Merlyn Lowther

Independent non-executive Director

Nichola Pease

Independent non-executive Director

Bruno Schroder

Non-executive Director

 

6 March 2013

 

Five-year consolidated financial summary




2012

£m

2011

£m

2010

£m

2009

£m

2008

£m

Profit before tax

360.0

407.3

406.9

137.5

123.1

Tax

(76.8)

(91.5)

(95.7)

(41.8)

(51.8)

Profit after tax

283.2

315.8

311.2

95.7

71.3







Earnings per share:

2012

Pence

2011

Pence

2010

Pence

2009

Pence

2008

Pence

Basic earnings per share

104.7

115.9

111.8

34.3

27.5

Diluted earnings per share

101.3

111.9

108.3

34.2

27.3







Dividends

2012

2011

2010

2009

2008

Cost (£m)

104.1

104.8

87.6

84.9

86.7

Pence per share*

39.0

39.0

32.0

31.0

31.0







Total equity (£m)

2,069.9

1,901.6

1,799.7

1,649.0

1,632.2







Net assets per share (pence)**

733

673

620

571

569

*Dividends per share are those amounts approved by the shareholders to be paid within the year on a per share basis to the shareholders on the
register at the specified dates.

**Net assets per share are calculated by using the actual number of shares at the year-end date.

 

Assets under management - 2012 flows



 

 

Total

£bn

 

 

Institutional

£bn

 

 

Intermediary

£bn


Private Banking

£bn

1 January 2012

187.3

108.4

62.9

16.0

Gross inflows

57.6

21.8

31.8

4.0

Gross outflows

(48.2)

(15.4)

(28.5)

(4.3)

Net flows

9.4

6.4

3.3

(0.3)

Investment returns

15.3

8.9

5.8

0.6

31 December 2012

212.0

123.7

72.0

16.3

  

Income and cost metrics for the Group


2012

2011

Cost: net revenue ratio

70%

66%

Compensation cost: operating revenue ratio

49%

44%

Bonus: pre-bonus operating profit

42%

39%

Return on average capital (pre-tax)

18%

22%

Return on average capital (post-tax)

14%

17%

 

Exchange rates - closing

31 December

2012

2011

2010

2009

2008

Sterling:






Euro

1.23

1.20

1.17

1.13

1.03

US dollar

1.63

1.55

1.57

1.61

1.44

Swiss franc

1.49

1.45

1.46

1.67

1.53

Australian dollar

1.57

1.52

1.53

1.80

2.06

Hong Kong dollar

12.60

12.07

12.17

12.52

11.14

Japanese yen

140.55

119.57

126.98

150.33

130.33

Singaporean dollar

1.99

2.02

2.01

2.27

2.07

 

 

Click on, or paste the following link into your web browser, to view the associated PDF document:

http://www.rns-pdf.londonstockexchange.com/rns/4338Z_-2013-3-6.pdf


 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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