Schroders business model has continued to perform well in the first half of 2018, with strategic investments in new markets and product solutions delivering revenue growth.
Net income before exceptional items increased by 11% to £1,086.1m (H1 2017: £974.4m), including £16.1m of performance fees (H1 2017: £13.8m) and carried interest of £19.6m (H1 2017: nil). Profit before tax and exceptional items grew 10% to £397.1m (H1 2017: £361.5m).
In the first half of the year, we generated net new business of £1.2bn (H1 2017: £0.8bn). Net inflows from Institutional clients were offset by redemptions within the Intermediary sales channel. There was net new business from Wealth Management clients of £1.2bn.
Assets under management and administration at the end of the period were £449.4bn (31 December 2017: £447.0bn).
Asset management net income before exceptional items was up 12% to £921.5m (H1 2017: £820.0m), including carried interest of £19.6m (H1 2017: nil) and performance fees of £15.8m (H1 2017: £13.2m). Profit before tax and exceptional items rose 12% to £347.4m (H1 2017: £310.6m) and profit before tax increased 10% to £332.2m(H1 2017: £301.0m). Assets under management at the end of June 2018 were £389.3bn (31 December 2017: £389.8bn).
The net operating revenue margin before performance fees and carried interest was 45 basis points (FY 2017: 45 basis points).
There was no net new business in the first half of the year (H1 2017: £0.2bn), as inflows from Institutional clients were offset by outflows in the Intermediary sales channel.
The Institutional sales channel saw strong demand from clients in North America and Latin America, offset by outflows in continental Europe and Australia. There were net inflows into Multi-asset and Private Assets and Alternatives strategies, partially offset by redemptions from Equity mandates. Institutional assets under management at the end of June 2018 were £257.2bn.
In the Intermediary sales channel, outflows from sub-advised clients more than offset net positive branded fund sales, particularly in North America and Asia Pacific. Intermediary assets under management at the end of June 2018 were £132.1bn.
Wealth Management net income rose 8% to £143.8m (H1 2017: £133.7m), including performance fees of £0.3m(H1 2017: £0.6m). Profit before tax and exceptional items was up 7% to £48.7m (H1 2017: £45.5m) and profit before tax increased 4% to £37.9m (H1 2017: £36.4m).
There were net inflows of £1.2bn (H1 2017: £0.6bn) in the first half of the year, £0.7bn of which came from clients of Benchmark Capital.
Assets under management and administration at the end of June were £60.1bn (31 December 2017: £57.2bn). The net operating revenue margin before performance fees was 62 basis points (FY 2017: 61 basis points).
Peter Harrison, group chief executive, commented: “We have delivered good results in the first half of 2018 with profit before tax and exceptional items increasing 10% to £397.1 million. Against a challenging backdrop we have delivered robust revenue growth through our strategy of focusing on new markets and by continuing to evolve our products and solutions.
Our diversified business model has again proven its worth. Wealth Management has seen strong client demand and we have continued to expand our capabilities within Private Assets and Alternatives, offsetting industry headwinds in other areas. We remain confident that we can generate growth through the cycle and that we are well placed to continue to create value for our clients and shareholders over the long term.”