The underlying picture demonstrated the tough trading environment faced by the group. Net institutional inflows fell sharply from £16.8bn to £6.8bn, which left institutional assets up just £2bn at £108.4bn. More worryingly, retail business, which typically attracts higher margins, suffered net outflows of £3.8bn - reversing £7.9bn of net inflows in 2010. Furthermore, net revenue margins fell from 59 basis points to 56 basis points. And while management fees rose from £1.16bn to £1.27bn, performance fees fell from £73.4m to £37.8m.
On the private banking side, net new business was down sharply on 2010's £2.4bn to just £0.2bn, and assets under management were roughly static at £16bn. However, with no repeat of the previous year's doubtful debt charge, divisional pre-tax profits recovered from £10.1m to £23.8m.
Numis Securities expects 2012 pre-tax profits of £400m, giving EPS of 108.2p.
|ORD PRICE:||1,549p||MARKET VALUE:||£4.19bn*|
|TOUCH:||1,549-1,551p||12-MONTH HIGH:||1,936p||LOW: 1,155p|
|DIVIDEND YIELD:||2.5%||PE RATIO:||13|
|NET ASSET VALUE:||674p*|
|Year to 31 Dec||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 28 Mar
Payment: 11 May
*Includes non-voting shares
Schroders is attracting low-margin institutional inflows and losing higher-margin retail business. Revenue margins look pretty weak, too, when compared with rivals such as Jupiter Fund Management. So, trading on 14 times forecast earnings and paying a relatively modest dividend, the shares look up with events. Hold.
Last IC view: Fairly priced, 1,485p, 12 August 2011