Annual profits at Schroders halved as the fund manager suffered more than £160m of exceptional charges, mostly related to turmoil in the financial markets.
Funds under management at the group fell to £110.2bn in the year to December 31, compared with £139.1bn the previous year.
During 2008, net outflows from retail investors were £6.2bn, and £3.8bn from institutional investors. This compared with a net inflow of £8.8bn for retail in 2007 and a net outflow from institutional investors of £10.66bn. But Michael Dobson, chief executive, ruled out “massive” redundancies as the group cuts costs further.
“We have cut headcount – by 225 in the final quarter alone – and we are not saying we wouldn’t revisit that. We believe the variable pay element [where compensation is linked to revenue] and efficiencies in other non-people items such as IT and marketing will help us to address that,” he said.
Schroders reported full-year pre-tax profits of £123.1m compared with £392.5m last time, as earnings were marred by £167.4m of exceptional charges.
“The extreme dislocation of financial markets, particularly in the third and fourth quarters, led to exceptional charges of £167.4m, compared with nil last year, relating to realised losses and unrealised writedowns on group investment capital,” Schroders said.
Revenues fell from £1.19bn to £935.8m and earnings per share decreased from 104.8p to 27.5p. In its largest division, asset management, profits fell from £266.5m to £231.1m, hit by exceptional charges of £18.7m mostly related to redundancy costs.
Funds under management in Intermediary, or retail, were £38.9bn, compared with £56.2bn at the end of 2007. The board is recommending a final dividend of 21p, bringing the total to 31p. Shares fell 7p to 759½p.
For an apparently safe and reliable company with wads of cash, Schroders has had trouble winning a bride. With cash and cash equivalents of more than £1bn, it should, in theory, be in a strong position as the industry consolidates. But hopes of a marriage with New Star were dashed last month after it was pipped at the post by Henderson. Schroders also has attrition issues. While it is confident this will be offset by lower compensation and other savings, analysts are sceptical. Pressure on margins is set to continue in 2009 and there are concerns about chunky outflows and the potential for investment writedowns. But the underlying message from Schroders is reassuring – there were no nasty surprises in the results. Shares look expensive trading on a prospective price-earnings ratio for 2009 of about 12.5 times. Strip out the cash and the p/e falls to about 9.5 times, which looks reasonable. But those looking for more attractive returns might do better to look elsewhere.
Get alerts on UK companies when a new story is published