Schroders half-year profits soar by 50%

Schroders, the UK-listed fund manager, booked in another bumper six months of profit yesterday, announcing pre-tax earnings of £65.8m for the first half of 2004 - up more than 50 per cent on the same period last year.

Schroders, the UK-listed fund manager, booked in another bumper six months of profit yesterday, announcing pre-tax earnings of £65.8m for the first half of 2004 - up more than 50 per cent on the same period last year.

Michael Dobson, the chief executive, said the company's continued improvement had been driven by an influx of specialist, higher margin institutional mandates, which had more than compensated for the continued outflow of larger balanced mandates.

Jonathan Asquith, the chief financial officer, said that as the group passed the halfway period in its four-year turn-around plan, it had now finished its cost-cutting phase and was focusing on bringing in new and more profitable business. "2004 is about raising revenues and keeping costs under control, and indeed with the right opportunities, we would invest," he said.

Mr Asquith pointed out that whilst last year's improvement in profits had been achieved -almost entirely by cost-savings, the improvement over the year to date had been driven by an increase in asset management profits.

The group said it would raise its interim dividend by 18 per cent to 6.5p but warned that a hike of similar proportions was unlikely to be seen in the second half, as it tries to even out the difference between its interim and final dividends.

Earlier this year, the company came under fire from Pirc, the corporate governance consultants, for not having its full year dividend covered by its annual profits. However, Mr Asquith dismissed the criticism as "box ticking", insisting that the group was unlikely to have any difficulty covering its total dividend payout this year.

Mr Dobson said Schroders had benefited from the change in preference amongst institutional investors over the last year, which saw them moving to split up their assets and hand them out to a number of specialist managers, rather than handing them all to the same company. He said this smaller business was more profitable. However, the loss of the larger mandates meant that the group was prone to seeing sharp and substantial movements in its level of total assets.

Schroders' funds continued to perform well over the half, with 72 per cent of its retail and institutional funds beating their benchmark over the past three years. Mr Dobson said the group would not be afraid to close funds to new business if it believed they had reached a reasonable capacity.

He also said Schroders remained interested in making small "bolt-on" acquisitions but was not in the market to take on a big deal which could upset its organic growth strategy.

"We do think we'll probably find an acquisition," Mr Dobson said. "If we find something small and complementary that doesn't throw us off the organic growth path we're on, then we'll look at it."