Schroders outlines nearly $200 million in cost cuts in revamp

By Iain Withers

LONDON (Reuters) - Schroders outlined plans to cut 150 million pounds ($194 million) from its costs over the next three years in a strategy update on Thursday aimed at rebooting flagging performance at the 221-year-old British money manager.

The FTSE 100 company also said clients pulled a net 4.7 billion pounds from its funds in 2024 - underlining the pressure on the business - compared with 1 billion pounds of inflows the prior year.

Analysts at JPMorgan said in a note that the cost cuts - equivalent to 8% of Schroders' operating costs of 1.8 billion pounds - would be welcomed by investors, adding that its operating profit of 640.5 million pounds for the year beat forecasts.

Schroders' shares gained 5% in early trading.

Chief Executive Richard Oldfield stepped up to the role in November and is aiming to revive Schroders' fortunes after a poor run of earnings last year dragged its shares down 25%, a third straight annual decline.

Like rival mid-sized fund houses, Schroders has struggled to fend off competition from huge U.S. rivals such as BlackRock and Vanguard offering cheaper passive products like index-trackers.

Reuters reported last week that representatives of the company's founding Schroder family, which still own a 44% stake and has two family members on the board, had challenged executives to improve its fortunes faster.

The company said the targeted savings would come from simplifying processes and technology improvements.

Finance chief Meagen Burnett told reporters the company, which employs 6,400 people, would have fewer staff after the cuts, but did not give any further detail. Schroders said it would incur restructuring costs of around 200 million pounds, which often stem from layoffs.

RAMPING UP NEW BUSINESS

Former finance chief Oldfield also outlined targets to ramp up new business from its higher-margin wealth and private markets units, including attracting 20 billion pounds into its private assets arm Schroders Capital in three years.

"Schroders is an exceptional company. We have all we need to ensure this business thrives," he said.

Oldfield had already moved quickly to cut costs, shedding around 200 staff and more than halving the size of its executive committee.

Schroders' shares had gained 17% so far this year ahead of the strategy update.

The company's overall assets under management increased 4% to 778.7 billion pounds and it announced an unchanged dividend for the year of 21.5 pence per share including a 15 pence final dividend.

Oldfield said he had spoken to managers at French money manager Tikehau since they had built up a 5% stake in the company last month, adding they had expressed that they saw value in the business.

Tikehau leapt into its top five backers and has said it sees potential for "commercial collaboration" with the British company. Oldfield said he was open to collaboration if it was in the best interests of clients.

($1 = 0.7751 pounds)

(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Emelia Sithole-Matarise)