Schroders delivers profits bonanza

Michael Dobson, the chief executive of Schroders, declared his four-year strategy for reviving the fortunes of the historic investment house was paying off yesterday, as annual pre-tax profits more than tripled to £66m.

Profits on the asset management business doubled to £60m in the 12 months to 31 December, boosted by the intense cost-cutting regime Mr Dobson has implemented since being hired in October 2001. Schroders' shares rose 14.5p to 704.5p.

However, the company - which celebrates its 200th birthday this year - is still suffering from investors withdrawing funds. Institutions pulled a net £4.3bn from Schroders during the year, and retail investors £500,000.

Mr Dobson warnedSchroders was suffering from the "time lag" of its poor performance in the past, and that funds would continue to depart in the first few months of this year. But he predicted2004 would be the first year since 1998 when the company would have a net positive position at the end of the year.

Schroders has been sacking underperforming fund managers, and it said 74 per cent of its funds were performing above their benchmarks last year, compared with just over 20 per cent three years ago.

Mr Dobson said 2004 would be a year of expansion. "We will spend much more on portfolio management and research than in 2002 and 2003 and I expect there to be positive fund flows this year," he said. He also said Schroders, which has a cash pile of more than £700m, might use the money to buy businesses to extend its product range. Analysts believe Schroders might look at hedge funds.

The bank said it had held discussions with the Financial Services Authority about possible market timing trading. But Schroders said it did not think its business practices in the UK or US would cause any problems.