Schroders sees 27% rise in AuM, hikes dividend 7%

Schroders reported a sharp rise in full-year assets under management, in part due to the weakness in the pound, and hiked its dividend payout, but net inflows fell short of analysts' forecasts.

AuM jumped 27% to £397.1bn, in part due to weakness in Sterling, which added £42.0bn to the full-year tally, with
acquisitions contributing a further £6.7bn.

That drove a 6% rise in profit before tax and exceptionals to £644.7m (consensus: £626.0m), with the equivalent figure for 2015 at £609.7m.

Before exceptionals, earnings per share were higher to 186.3p from 176.5 one year ago.

Schroder's boss, Peter Harrison, highlighted the firm's strong investment performance, adding that he saw a number of opportunities for growth.

"We have made good progress against our strategic objectives and see a number of future growth opportunities. Our diversified business model, a strong financial position and willingness to invest behind the business means we are well placed to take advantage of these opportunities, despite the challenges faced by the industry," Harrison added.

Improvement on the bottom line was exclusive to its asset management arm, which saw PBT rise 4.9% to £553.9m, whereas in Wealth Management PBT dropped from £60.5m to £56.3m.

In a separate announcement, Schroders said that Philip Mallinckrodt, Group Head of Private Assets and Wealth Management, had relinquished his executive responsibilities on 1 March but would remain as a non-executive Director on the Board of Schroders.

Total net inflows increased by £1.1bn, amid continued demand from institutional clients offset by outflows from Intermediary and Wealth Management clients, the company said in a statement.

On this point, analysts at Numis said: "The only minor negative we can see is that net flows of £1.1bn were behind our £3.7bn forecast and consensus £3.2bn, mainly reflecting an unexpected institutional outflow in Q4. There is no comment on this from management, but institutional flows are by their nature lumpy."

"We continue to regard Schroders as a core sector holding for the long term," they added, while calling attention to management's assertion that 2017 had "started well".

Over the past three years, 74.0% of its assets outperformed their benchmarks, Schroders said.

"The asset management industry is facing significant regulatory and structural challenges and this is likely to continue to weigh on Schroders, as with others in the industry. Potential upside resides in expansion plans in the US but for now we maintain our Hold recommendation," analysts at Liberum chimed in.

Numis had the shares at a 'Buy' with a target price of 3,771p.

For 2016, the fund manager declared a 7.0% rise in its full-year dividend per share payout to 93.0p (consensus: 92.0p).