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Schroders flags uncertainty

Fund manager Schroders delivered a solid enough first-half performance, but management sounded a note of caution about the future
August 1, 2014

Even after an £18m currency hit, adjusted pre-tax profit at fund manager Schroders (SDR) rose by a decent 15 per cent during the first half, to £262m. But the shares slipped over 2 per cent on the day the figures appeared as management flagged up a quieter market backdrop and a slowdown in investor demand.

IC TIP: Hold at 2437p

Buoyed by last year’s acquisition of Cazenove Capital, the group’s total assets under management jumped by 15 per cent year-on-year to nearly £272bn. Some £3.8bn of net fund inflows via intermediaries, mainly into branded multi-asset and equity funds, helped, too. The Cazenove deal also explains the more than doubling of underlying profit at the wealth management arm, to £26.3m.

But institutional net inflows reached just £0.7bn, with a modest net outflow during the second quarter, significantly reflecting a more challenging environment for commodity-based investments. Management doesn’t sound overly confident about the future, either. Peter Harrison, the head of Schroders’ equities business, pointed to the "plain uncertainty" facing investors at present, given that markets are "trading sideways" amid "very low levels of volatility".

Broker Numis Securities expects full-year pre-tax profit of £542m, giving EPS of 156p (from £506m and EPS of 144p in 2013).

SCHRODERS (SDR)

ORD PRICE:2,437pMARKET VALUE:£6.58bn†
TOUCH:2,437-2,439p12-MONTH HIGH:2,765pLOW: 2,265p
DIVIDEND YIELD:2.7%PE RATIO:18
NET ASSET VALUE†:822p* 

Half-year to 30 JunPre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201322264.216
201423469.024
% change+5+7+50

Ex-div: 13 Aug

Payment: 25 Sep

*Includes intangible assets of £476m, or 169p a share

†Including non-voting shares