Schroders confirmed today that it continues to sink. Funds under management declined by 15 per cent during the third quarter from 102.7 billion to 87.2 billion, thanks largely to a 20 per cent fall in major equity markets – three out of four pounds under management are invested in equities – which was only partially corrected on October. Since fees on half the assets under management are calculated on an ad valorem basis, revenues for the quarter fell sharply too: they were 99.2 million compared to 238.5 million in the first six months. Group losses before goodwill amortisation and tax stood at 9.4 million, compared with a profit of 25.9 million in the first six months of the year.
Costs are being cut, and assets sold. Underlying asset management costs, before project expenditure and redundancy costs, were 87.8 million in the third quarter compared to 191.7 million in the first six months. Current estimates are that project expenditure for the second half will exceed the previous indication of 22.5 million by approximately 2 million. Redundancy costs for the second half are now expected to be approximately 7 million, the same level as the first half, and year-end headcount will be below previous estimates.
Underlying asset management profits were 11.4 million during the quarter compared to 46.8 million in the first six months. Private Equity and Group income/costs accounted for a loss of 8.4 million, against a profit of 1.1 million in the first half, largely due to the effect of marking to market the Group’s 12.8 per cent shareholding in Schroder Ventures International Investment Trust. This led to a Group loss before goodwill amortisation and tax of 9.4 million in the quarter, compared to a profit of 25.9 million in the first six months.
The sales of Schroder Pensions and Schroder Hermes were announced in September, conditional upon the approval of the Financial Services Authority. On approval, the costs relating to these sales will be reflected in the fourth quarter’s results; they have been incorporated in the project expenditure estimates above. The sale of the private banking business in Miami was announced in October. This will not have a material impact on reported results. In September the Group disposed of a significant proportion of its leasing assets for 100 million. The proceeds were retained in liquid assets which now account for 490 million out of the Group’s total surplus capital of 700 million. The disposal will have a negligible impact on pre-tax profits.