Schroders plc

Good morning everyone. I know it's a super busy morning for you, so I really appreciate you taking the time and I'm sorry if you're sat waiting for it to join us. Now, it's really hard to follow any video, but following that is quite hard because it's a short excerpt from our new Active Edge campaign. You're going to progressively see this over the next six months. As you know, Schroders were unashamedly active and that's the basis of this campaign. We're now in a world where changing economic and geopolitical events are creating perpetual uncertainty and some people are understandably worried. But within all that lies great opportunity for Schroders and our clients. I believe we're at a turning point with the focus returning to active management. Diversification isn't only back in favour, but it's a real requirement. Portfolio concentration is being challenged in a way we haven't seen for some time. Our 2025 Global Investor Insights survey underscores this. More than half of the respondents want more resilience in their portfolios, and 8% of global investors expect to increase their allocation to active management and further diversify over the next year. In this context, our active stance is a clear competitive advantage. So let's reflect on the half. I'm pleased with what we've got done. There is good early signs of momentum. We're ahead of where I'd hoped we would be when Megan and I spoke to you back in March. And we're presenting some really solid results. Against the backdrop of uncertainty, we have remained focused on what we can control, delivery of our three-year transformation programme. It's been an incredibly busy and challenging few months. We've made some difficult choices about where we invest our time and resources. We're focusing on the areas where we can see real competitive edge. We're focused on right-sizing our business, but with a keen eye on making sure that we'll be more efficient and effective in meeting our clients' needs. So in summary, we've been undaunted by taking difficult decisions, and we've been moving at pace. But before I get into the strategy of progress, Megan, why don't you actually take us through the results?

Yes, thanks, Richard. You will have all seen our results this morning, so I'll just pick up on a few key points. When I spoke to you in March, I said that although our AUM had grown in 2024, our operating profit had fallen. We said that this was not good enough. And I'm pleased to say that for the first half, while our AUM has been stable, our operating profit was up. which I hope gives you a sense of our strong focus on profitability. In terms of our results, our adjusted operating profit was up 7% to £316 million. That was because of good revenue growth, cost discipline, and a strong progress on our transformation. Our net operating revenue increased 2%, driven by good growth in Schroeder's capital and wealth. both up 9%, and our public market was resilient. We contained the increase in our adjusted OPEX to just 1%, with our transformation programme delivering reduction in costs of £21 million in the first half of the year. This is net of a reinvestment. For the full year, we now expect our in-year benefit to the P&L of £50 million, compared to the £40 million annualised savings we communicated in March. We achieved an adjusted cost to income ratio of 74%, which is down from the 75 at the end of last year. Profit before tax was down 29%, reflecting both the costs of our transformation and portfolio restructuring charges, which are non-cash items. These actions have simplified our business and allow us to focus our resources on our core strengths. I'll take you through the underlying drivers of our financial performance after Richard spends some time on how we're progressing on our strategy.

Great. Thanks, Megan. So I thought it was worth reminding us of the three financial targets we set out in March because that's our anchor. In public markets, our focus is on stabilising revenues, insurers' capital, the $20 billion of cumulative net new business, and in wealth management, we'll continue to generate net new business of 5% to 7% of AUM. We'll also achieve £150 million of annualised net cost savings by the end of 2027, while continuing to invest in the business. As a result, we expect our adjusted cost-to-income ratio to fall from 75% last year to below 70% for 2027, subject of course to normal market conditions. Taken together, these actions put us on a clear path to returning Schroders to profitable growth, while creating a more focused and resilient business for the future. Over the last few months, we've achieved a great deal. Firstly, on our cost savings target. As Megan's just pointed out, we've reduced our operating expenses by 21 million on a net basis so far and reinvested about 8 million back into our talent. Now, it's easy to say that quickly. But achieving this involves fundamental changes to how we run our business. We're focused on operating model efficiencies and leveraging our operating partnerships, which Megan will cover a little bit more in a second. But the consequence is that almost 7% of roles have been made redundant in the past three months. This exercise has been precise so that we don't damage our core business, with only a handful of redundant roles affecting our investors. We're committed to remaining the home for exceptional investors so our focus here is on promoting internal talent from an extraordinary bench to ensure that we're developing careers supplemented by selective external hires and we've already hired more than 25 people into our investment team so far this year. This is how we secure continued outperformance for our clients in the future We've always had strong employee retention and that continues. Our current voluntary turnover rate remains at less than 4%. In delivering these cost savings, we've incurred transformation costs that we told you about at £45 million. That's in line with the guidance we gave. On cost, we told you in March we expected to exit 2025 with £40 million of annualised cost savings. And I'm repeating this because I think it's really important, Megan, that we learn this, because now we're expecting to achieve net in-year cost savings close to £50 million during 2025. We also told you in March that we were going to simplify the business and focus on where we can scale and have an edge. So we've started. And as a result, we've closed our alternative risk premium capability. We've sold Schroders RF, a private credit business in Australia, We've closed our real estate business in Munich and we've written off our investment in a US-based credit originator. We've also restructured our Chinese wholly owned fund management company and our South Korean business by transferring the retail business to a local distributor. This allows us to focus on what we're really good at, in China allocating more capital deliberately across the individual business that we have, and in South Korea focusing exclusively on private markets. The consequence of this portfolio restructuring is that we've taken a charge of £56 million. While it's impacted our profits, I really want to stress that these restructuring charges relate to balance sheet items. They're non-cash and they've got very limited impact on capital. I want us to be relentlessly focused on clients. I hope I'm landing that message. That's why we've simplified the structure of our client group and enhanced the effectiveness of our global sales effort. We've set up dedicated teams for sales activation and delivery, and we've reshaped our marketing function. We've also made strides to simplify our product range, and we're working to close or merge 14.5% of that fund range with minimal impact on revenues. We're in the process of working through that rationalisation exercise so there is more to come. And by the way, even though we've driven a busy agenda, that is not at the expense of client focus. Client engagement is actually up 20% year on year. That makes me feel pretty confident as we head into the second half. We're also investing in our talent and hiring people into key strategic growth areas. We're continuing to build out dedicated specialty sales team for Shredders Capital We've got six new hires onboarded in the last few months, and we expect to have the full 40 strong team by the end of the year, helping us to accelerate our growth in private markets. We've also made changes to build strength and capacity in our leadership team. Our new CEO of Wealth Management, Oliver Gregson, joined us from JPMorgan a little under two months ago. He's already brought tremendous energy and has a real ambition for what our wealth management business can achieve in its next phase of growth. We have another key hire starting on Monday in Matt Uman, who will lead our client group. His significant experience leading global sales teams is going to bring fresh ideas and add momentum to the actions we took in the last few months. And I'm delighted that Corinne Stenberg is changing roles to assume responsibility for strategic partnerships, including our ventures with BOCOM and Axis. And this role underscores just how vital partnerships have become to the group's strategy. There's real momentum across the business, which is positioning us strongly for future growth. But let me turn now to new business and what we've written in the first half. So I'm really pleased to see the momentum that we're building alongside some strong client successes. We generated gross sales of 68 billion in the first six months, which is up 8% year on year. So going through this slide left to right, Public markets had a tougher Q1 but rebounded in Q2. This was driven by the 4 billion SJP mandate we told you about previously and a 3.3 billion sustainability mandate from a European pension scheme. So I'm going to take a little detour here in a moment to talk about our global equities capability, which delivered 6.9 billion of net new business for us. our global equity strategies remain top quartile over one, three and five years. Our focus on active management, the dedication to high quality research and our desire to be the home to exceptional investment teams has enabled the Schroders Global Equity Retail Fund to outperform its benchmark by nearly 200 basis points per annum since 2014. 200 basis points per annum since 2014. And just as a reminder, that's net of fees. Our recent global equities marketing campaign has resulted in a doubling of sales meetings compared to last year, and this showcases what we can really do when we focus our efforts. The nine leading market capabilities in public markets we spoke to about have collectively delivered positive net flows in the first half. Schroders Capital generated net new business of 2.3 billion so far this year, and that's 6 billion of fundraising, up 17%. Our fundraising reinforces where we think we have a competitive edge. We've closed the €2 billion junior infrastructure debt fund, the fourth vintage of this successful series, confirming Schroders Capital's ability to originate differentiated transactions. Our focus in the second half is to take this offering into the wealth market. And we also completed the first 500 million close of the UK Innovation Altaf, the first investment structure of its kind for UK venture capital. It joins a growing suite of Altafs offered by Shredders Capital and the joint venture Future Growth Capital, designed to enable UK pension scheme investors to support the Manchin House Accord and taking advantage of the robust returns and diversification benefits Shredders Capital provides. As previously indicated to you, our net new business target in private markets is weighted towards the outer years of our financial forecast, so we're on target. Turning to wealth, you can see that flows accelerated in the second quarter when we hit our 5% net new business target. The slower growth in Q1 reflected the usual impact of tax payments on client portfolios. Then on JVs, we've seen a bit of a rebound in Q2, driven by our Bocon venture, which recorded inflows of 1.6 billion, mainly as the demand for money market funds surged. In total, we generated positive net flows of 6.4 billion in Q2. So we're off to a good start, but there's lots more for us to do. We remain absolutely focused on execution. We're ready to launch our European active ETFs and we're going to continue to invest in those parts of our business where we can drive growth. For 2026, one thing to highlight is that we'll be setting out in more detail our strategy for wealth management. And finally, of course, our investment performance. As you can see, we continue to deliver strong long-term results for our clients. Our three-year number rebounded since the end of 2024 and now stands at 65%. While the one-year figure has dipped largely due to moves in the dollar on mandates with a sterling bias benchmark, our longer-term track record remains robust, with 76% outperforming over five years. The medium and longer-term outperformance is testament to the strength and consistency of our investment teams and approach. So everyone now really wants all the detail on the numbers, Megan, so back to you.