Schroders profit beats forecasts, seeks deeper cost cuts this year

By Iain Withers

LONDON (Reuters) -Schroders reported lower than expected outflows of client cash and forecast-beating operating profit in its first-half results, as the asset manager tries to win back investor confidence after tough trading last year.

The group said it was ahead of schedule on cost-cutting plans and would trim 50 million pounds this year, up from 40 million pounds targeted previously.

Like many money managers, Schroders' largest business of actively picking stocks and bonds has been squeezed by competition from low-cost index-trackers that have taken market share.

Analysts have speculated that Schroders may have to explore M&A opportunities to compete with larger global rivals like BlackRock.

Reuters reported in February that members of the founding Schroder family, who remain the 221-year-old company's biggest shareholders, had challenged managers to improve its fortunes faster.

When asked about the M&A speculation, Schroders CEO Richard Oldfield told Reuters on Thursday the company had the backing of its founding family and was open to doing deals as long as they were right for clients, staff and shareholders.

"I have a very committed shareholder base, a very committed family. But in terms of (M&A) and what we might do, nothing is off the table," Oldfield told Reuters. He said the company was not promoting itself for sale.

Oldfield said that the cuts this year had meant some redundancies, but declined to give numbers.

Schroders shares were last up 0.9% at 0847 GMT, after gaining as much as 5% in early trading. The stock is up 22% this year, but remains down about 40% from a peak four years ago.

Oldfield, Schroders' former finance chief, revamped the company's strategy in March, targeting 150 million pounds of cost savings over three years and doubling down on its better-performing wealth business.

The company reported 1 billion pounds ($1.3 billion) of net outflows in the first half, compared with 3.9 billion pounds of inflows a year earlier, reflecting hefty withdrawals from its joint venture in China in the first quarter.

But excluding joint ventures, it reported 4.5 billion pounds of net inflows for the first half, helped by strong flows into its wealth business.

"Across the key measures... Schroders has reported results at least as good as market expectations and in many areas better," analysts at Panmure Liberum said in a note.

Adjusted operating profit was 316 million pounds, beating forecasts and up 7% year on year.

The fund manager said its assets under management stood at 776.6 billion pounds at the end of June, up marginally from 758.4 billion at the end of March. It also announced an unchanged interim dividend of 6.5 pence per share.

($1 = 0.7539 pounds)

(Reporting by Iain WithersEditing by David Goodman and Jane Merriman)