Hits: 14

30 July 2020

Schroders – H1 Results

Share Price 2968p

Mkt Cap £9.56bn

Conflict Disclosure: No Holding

  • Results are described as “resilient” with PBT down 10% to £306.2m. Net inflows were 7.6% in H1 and AUM rose 5% to £525.8bn, but lower revenue margins which fell from 46bps to 39bps led to a 2% decline in revenue to £971.6m. Costs rose modestly resulting in a 10% PBT fall. EPS 85.8p (2019 98.6p). Net assets £3.9bn. Outlook says the diversified business will continue to show resilience.
  • Estimates FY PBT estimated to be £581m, a 7% decline.
  • Valuation PE 17.6X Yield 3.8%
  • Conclusion The strong inflows are encouraging but I can’t help but feel such a strong brand should be able to achieve a higher fee margin than 39bps. The rating reflects the brand, but the pricing doesn’t which is worrying.

5 March 2020

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Schroders  – FY Results 

Share Price 2884p

Mkt Cap £9417m

Conflict Disclosure: No Holding

  • Results are described as “resilient” with AUM up 23% over the year to £500.2bn. Average AUM was only up 2%. Net income was broadly flat at £2.12bn and pre-exceptional PBT declined 8% to £701m. Exceptional costs were £76.6m which include £29m of cost reduction programme and £15m of “other”. . EPS 198p and DPS 114p. The outlook says there are industry challenges but they see growth in Wealth Management, Solutions, Private assets and Alternatives. Net inflows by each of the newly disclosed by divisions grew by : Private Assets 7.3%, Solutions 36%, Mutual funds -1.6%, Institutional -5.3% and Wealth Management 33.6%. It is possible the high wealth management flows were from the launch of Schroders Personal Wealth in Q4.
  • Estimates PBT looks c 3% ahead of consensus. 9% growth is expected in the year ahead.
  • Valuation PE 14.8X Yield 4%
  • Culture Having long ago decided not to provide quarterly updates to the market the company has broken a number of corporate governance rules and in the last report and accounts paid the CEO 34.5X the average staff member (which is a healthy £195k). Hard to see this being held by ESG conscious funds.
  • Conclusion The stock is cheap. The company has had weak disclosure but with industry headwinds has now given us more divisional disclosure, perhaps because the overall numbers don’t look so good. There are far better things to own.

15 October 2019

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Schroders – Q3 Update 

Share Price 2930p

Mkt Cap £9560m

Conflict Disclosure: No Holding

  • News No information on flows. Just a 9 month number confirming that AUM is now £451m, up 10.8% from £407m on 1 January. No commentary provided.  At the half year in June AUM was £444m so they are up 1.6% since then. In H1 the AUM rose 9.1% despite the company suffering net outflows. There would appear to be no reason to suggest this pattern of outflows and market gains has changed.
  • Estimates Pre tax of £548m is expected in the current year, rising 8% next year to £591m. EPS 196p, and 214p in 2020.
  • Valuation PER 15X, Yield 3.9%. Mkt Cap/AUM 2.1%
  • Conclusion There has to be better things for an active manager to own.  

1 August 2019

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Schroders – H1 Results  

Share Price 2973p

Mkt Cap £8,071m

Conflict Disclosure: No Holding

  • Results  Revenue down 5% to £1,032m and PBT down 14% to £340.6m. AUM up 9% to £444.4bn. Net outflows of £1.2bn. Underlying EPS down 13.5% to 98.6p. Dividend unchanged at 35p for H1. It isn’t easy to reconcile the numbers to the narrative.  “We have continued to focus on our core business……in a challenging market” doesn’t seem to fit with net outflows and market gains. The outlook is confident “in a challenging market”.
  • Estimates Pre tax profit of £688m is anticipated for the year which looks in line with £341m being delivered in H1.
  • Valuation PER 15X Yield 3.8%.
  • Conclusion The net operating margin declined by 1bp to 44bps in asset management.  While average AUM over the half was 2% lower and the company is looking forward to onboarding £45bn of Lloyds assets which are coming over from Aberdeen. It feels a bit like Schroders has now got too large – as Aberdeen did – and has to sell its services ever more cheaply. The premium rating perhaps represents the markets view of how safe Schroders is. I suspect the market is wrong.

2 May 2019

Schroders – Trading Update 

Share Price 3165p

Mkt Cap £8.94bn

Disclosure: No holding

  • Update I thought Jupiter was the last to give us quarterly updates but Schroders who usually don’t have given a two line table showing AUM in fund management 4% to £377.9bn and wealth management up 6.4% to £46.5bn.
  • Estimates Look for EPS to decline 7% to 201p this year
  • Valuation PER 15.3 Yield 3.6%
  • Conclusion This is a text book lesson in poor disclosure. Combine it with the multiple transgressions of corporate governance behavious and we may start to understand why the FCA gave the asset managers such harsh treatment in the Asset Manager review. This may be a strong brand but such behaviour can change that.

7 March 2019

Schroders – FY Results

Share Price 2785p

Mkt Cap £7.8bn

  • Results Net income up 3% to £2.1bn and normalised PBT down 5% to £761m while post exceptional PBT is down 15% to £650m. AUMA was down 6% to £421bn which is 2% net outflows and the balance from negative markets exchange rates etc. Dividend up 1% to 114p. Wealth Management net income grew 6% but this accounts for 13% of the business and asset management net income was up 2%. The outlook is “well positioned” and refers to headwinds facing the industry.
  • Estimates Forecasts assume flat revenues going forwards which looks conservative particularly in the lights of investments being made in Schroders Personal Wealth
  • Valuation PER 13.4X and yield 4.1%
  • Conclusion Schroders is investing into difficult markets. I suspect investors should do the same. I don’t recall Schroders trading as low as 13X.