March 7, 2019 / 7:18 AM / 8 months ago

Schroders profit falls on outflows, restructuring

LONDON (Reuters) - Schroders posted a 15 percent fall in full-year pretax profit after restructuring costs and a fall in assets under management and fee income, sending shares in the British asset manager lower on Thursday.

FILE PHOTO: A man walks past the logo of investment management company Schroders at a branch in Zurich, Swtzerland November 5, 2018. REUTERS/Arnd Wiegmann

Pretax profit for the year ended December 31 fell to 649.9 million pounds from 760.2 million, said Schroders, which traces its roots back more than 200 years and is still majority owned by the Schroder family.

Assets under management fell 6 percent to 421.4 billion pounds hit by weaker markets and net outflows of 9.5 billion pounds. It said the bulk of the outflows had come from one client in Japan and were low margin.

Despite the net outflows, Schroders managed to increase assets under management in its Private Assets and Alternatives business, helping net income rise 3 percent to 2.1 billion pounds.

“With fees typically linked directly to the value of assets managed, it’s pretty hard for a fund management business to do anything other than position themselves for the long run and manage the impact of market movements as best they can,” said Steve Clayton, manager of the HL Select UK Growth Shares fund.

The company said it had taken a 56 million pound cost hit linked to restructuring as it looks to focus on growth areas, including China.

Peter Harrison, group chief executive, said he was pleased with the underlying strength of the business and “the resilience of our diversified business model”.

At 0857 GMT, shares in Schroders were down 2.8 percent, among the biggest fallers on Britain’s FTSE 100 index.

Looking ahead, Schroders said it expected to take in at least 85 billion pounds in new assets in the near future, the bulk of which would come from a previously announced strategic wealth management partnership with Lloyds Bank.

Phil Dobbin, analyst at Jefferies, called the shares a ‘buy’ in a note to clients, and said while the market may focus on the near-term outflows, Schroders’ broad range of products and scale meant it was well positioned for future growth.

Reporting by Simon Jessop; editing by Sinead Cruise and Jason Neely

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