UPDATE 3-Schroders profit tops forecast, good start to 2010

Thu Mar 4, 2010 6:51am EST

Related Topics

* Underlying profit 200 mln pounds, vs forecast 181 mln

* Funds under management rise to 148.4 billion pounds

* Cautious outlook despite strong start to year

* Shares up 4.3 percent, top FTSE 100 riser

(Adds CFO, share price, further details)

By Raji Menon

LONDON, March 4 (Reuters) - British fund firm Schroders (SDR.L) posted forecast-beating 2009 profit, helped by a return of risk appetite that saw strong net inflows into its products, and said 2010 had started well.

Schroders, whose shares were up 4.3 percent at 1145 GMT on Thursday to be the top FTSE 100 .FTSE gainer.

The company said it was seeing " high levels of net inflows in Institutional and Intermediary and we see further significant organic growth opportunities longer term".

Finance director Kevin Parry said he was worried in the short term that a new fall in markets could send retail investors scurrying for safety.

"We are somewhat cautious to see how matters develop in the months. Clearly there are a number of economic challenges that every government is facing and, in our business, this clearly matters," he told Reuters.

Schroders said 2009 pretax profit before exceptional items fell 31 percent to 200 million pounds ($301 million), ahead of a 181 million forecast in a poll by Thomson Reuters I/B/E/S.

Analysts at JP Morgan Cazenove, which retained its 'overweight' recommendation, said: "Overall this is a good set of results and the upbeat tone of the statement is encouraging".

'CRACKING'

The firm saw record net inflows of 15.0 billion pounds in 2009 compared to net outflows of 9.6 billion in 2008. Net institutional inflows were 4.9 billion pounds, while the bulk -- 9.6 billion -- came in the more skittish retail segment.

"Inflows were at unprecedented levels. This really is a cracking performance," said Parry. "The institutional number is important because we have had net outflows there for many years and having net inflows is the reward for our repositioning to meet contemporary demand."

Parry said profit was hit by the lower net revenue margins and reduced performance fees which saw a near 10 percent fall in net revenue to 789 million pounds.

Lower margins were due to the high level of new business in fixed income and institutional, which is typically lower margin business. Performance fees also fell nearly a third to 34.5 million pounds.

Parry said investment performance has been strong across equities, fixed income and alternatives with 79 percent of funds outperforming benchmark or peer group over three years, although many funds are not yet back to the levels they must reach in order to accrue performance fees. Overall assets under management at end-December grew to 148.4 billion pounds compared with 110.2 billion pounds at end-2008, thanks to buoyant equity markets in late 2009.

Last month, rival Henderson (HGGH.L) reported a 21.5 percent fall in 2009 profit while F&C Asset Management (FCAM.L) saw net outflows of 1.3 billion pounds in the fourth quarter. (Editing by David Cowell and Dan Lalor) ($1 = 0.6640 pound)

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