July 30, 2020 / 10:02 AM / 16 days ago

Schroders first-half profit dips as COVID saps mutual funds

LONDON (Reuters) - Money manager Schroders (SDR.L) on Thursday posted a 10% fall in half-year profit after the coronavirus crisis made investors cautious and drove heavy outflows from mutual funds, although assets under management rose to a record high.

FILE PHOTO: The logo of investment management company Schroders is seen at a branch in Zurich, Swtzerland November 5, 2018. REUTERS/Arnd Wiegmann

Britain’s largest-listed fund manager by market capitalisation reported 306.2 million pounds ($396.77 million) in profit before tax and exceptional items for the first half, down from 340.4 million pounds in the same period last year.

Net operating revenue fell 2% to 971.6 million pounds and net income slipped 3% to just over 1 billion pounds.

Assets under management rose by 5% to a record of 525.8 billion pounds, beating a company-compiled analyst consensus of 519.4 billion pounds.

But the company’s mutual funds operations were under pressure, with assets under management down to 94.1 billion pounds after nearly 5 billion pounds of net outflows, up from 1.8 billion last year.

“March and April were incredibly bloody months for the mutual fund industry but considering the entire context these are small numbers,” CEO Peter Harrison told Reuters.

He said the company’s diversified business model mitigated the fallout of the COVID-19 pandemic and demand was strong from clients seeking investment strategies.

Schroders shares were down 0.1% at 2,964 pence at 0842 GMT.

Jefferies analysts said the rise in assets under management coupled with cost control had not made up for margin compression, which had put strain on the balance sheet.

The London-listed company has benefited from an influx of assets from Scottish Widows’ investment mandate, generating an overall 38.1 billion pounds in net new business.

Its wealth management business proved to be a growth area with net new business rising to 1.3 billion pounds in the first half from 900 million last year.

“Schroders has an undeniably strong balance sheet. While we remain constructive on the group, we note recent flow momentum has been relatively subdued,” a JPMorgan analyst note said.

Schroders kept its interim dividend unchanged at 35 pence per share.

Reporting By Pamela Barbaglia; Editing by Timothy Heritage and Barbara Lewis

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