Schroders plc (SDR) Earnings Call Transcript

Right. Good morning, everybody. Thank you for joining us. You're investing your time with us this morning. It really is great to see you, and welcome to everyone who has joined us on the Zoom call. So it is a great privilege to be sitting in front of you as the CEO of this amazing company. And I know you've really come to hear about the results and what we're going to be doing from a strategy perspective. But if you can indulge me, I want to spend a couple of minutes giving you my perspectives that will hopefully also show why I'm super energized about the group. So I'm going to start with a little bit of a story. So every weekend, I sit down with my 2 teenage daughters and I scan the newspapers. And we have a chat about what's going on. Like any good parent, I thought that was all about me preparing them for the outside world. And then, of course, what I realize is I get all the benefit because they give me the views from a 19-year-old. So it's super interesting. But of course, the conversation is entirely dominated by, "Dad, what's all this geopolitical uncertainty, immigration, demographics? Why is all this uneven growth leading to a changed political environment?" And then, of course, we inevitably get on to the thing of the transformative impact of climate change and AI, of course, they're way better than me on AI. Those are things that are going to impact their lives and the next generation's lives, and they're not going to go away. So the key thing for me every week, and it's not quite like Sky read the press, by the way at all, but the thing that's always amazing is they sit there and say, "How do I get certainty in what is an uncertain world?" And the only advice I ever give to them is that now is not the time to be a follower. I'm leaving that message with all of you to have in the back of your minds as we go through today because to lead, adapt and innovate, you have to be active. And I am a vocal advocate for active management because given the backdrop that came out of that conversation with my daughters, we've got to move the debate away from talking about barbells to actually how do we manage the balance between risk, return and cost. And in today's environment, if we can't have that debate, then I don't know when we can. We are the home of active management, a place where some of the industry's best talent aspires to work. And everything we do in managing those assets is for -- in the best interest of our clients. So I know because I've read some of your broker reports that many think I obsess about numbers. But the thing that I have grown to obsess about in 30 years are clients because no matter what industry you're in, if you win with clients, it's going to drive better outcomes for shareholders and better outcomes for our employees. So my obsession when I'm here at Schroders is not going to change. It's my lens on the world. It's actually why I joined Schroders. So I made a commitment that I would see a client every single day. So I've been pretty busy in the last 4 months. I've seen more than 120 clients. Bottom line, their feedback is amazing. They tell me what a great organization I now lead. And what's crucial from those conversations is evidence of the depth and breadth of our client relationships. They drive how we innovate. And the deep relationships, plus the breadth of capability in both public and private markets, actually drives our revenue growth. And to maintain our relationships and our reputation, we need to drive and deliver strong performance and not just investment performance, but business performance, too. So Meagen is going to talk to you about our 2024 results. But here is my headline you can write down. It's not good enough to deliver AUM growth and not operating profit growth. We care about delivering for value for our shareholders as well as our clients. But let's dwell for a moment on strong performance because strong consistent performance is exactly why our clients come to us is at the heart of what we do. So Johanna is going to talk about the statistics that we normally talk about a little bit later, but I want to focus on this chart on the left. So thank you, UBS. It is always nice to have someone else tell you how good you are. What it actually shows you is that we are the most consistently high-performing listed asset manager in Europe, active or passive. And we've been 1 of the top 2 in every single quarter for the last 20 quarters. And I'm pretty convinced our investors are hungry to make sure that blue line goes to the very top. That's why clients come to us. That's why we raised records amount of -- a record amount of money in '24. Our talented investors deliver through the cycle, 20 quarters, and the depth of our bench here at Schroders is astonishing. So I hope you get a sense that I am quite passionate about what we do, and I actually really believe Schroders is a tomorrow company, not a today company. And put simply, we're committed to independent active management driven by exceptional talent. We have broad, deep relationships with clients that allow us to innovate and remain relevant. And we have a really strong performance as investors, and we strive for that performance as a business. And I'll come back to this because it's really a great story. We have a brand position you just can't replicate. But look, I think it's important to recognize that Schroders is and will always remain an international business focused on growing markets, headquartered here in London, which we see as the center of talent and innovation for our industry globally. I don't have very tinted glasses on. I know there is a lot to do. We will simplify our business, scale it and deliver to make the best from our brilliant assets. And the entire leadership team that you have in the room today are now focused on getting this business back to profitable growth. And that's why all of you are here today to understand what we're going to do about that. So here's what I'm going to cover. First up, Meagen, our new CFO, is going to quickly take you through the 2024 results. Then we'll do Q&A. After this, you get a 30-minute break, which gives you an opportunity to meet with all of my ExCo colleagues. I put their photos up behind you, so you can spot them in the room. This is probably the best time for me to say that actually, last week, you'll have seen that we announced that Mary-Anne is stepping down. Where are you, Mary-Anne? Right at the front. She's stepping down as the CEO of our Wealth business. She joined us back in 2013 when Schroders acquired Cazenove Capital, and she has been totally central to that amazing growth story. So I am going to thank her actually on behalf of all shareholders for the great work that she has done. But actually, for me, personally, she's been a huge support over the last few months. But I'm also excited that Oliver Gregson is joining us in June. He brings a deep understanding of the Wealth Management business, most lately at the JPMorgan Parish. I'm looking forward to working with him to deliver the next phase of growth for that business and exploring actually where we can accelerate beyond what we're outlining today. After break, Meagen and I were joined on stage by our third Executive Director, Johanna, who is the Group CIO and CEO of Public Markets, and then we'll go through the strategy update. So without further ado, Meagen, over to you.

Thank you, Richard, and thank you, everyone. It's a great privilege to be able to present my first set of results to you for Schroders today. For those who don't know me, I joined Schroders as a group COO 2 years ago. Having spent my time delivering transformation, I was curious and excited about being part of the next generation of leadership, leadership in an organization that I've long admired. Now as a COO, you need to understand the plumbing of the business and how the organization fits together. And then you need to seamlessly mold it to enable your investors to focus on delivering client -- better client outcomes. So that role at Schroders has given me a great insight as to how Schroders works front to back across the organization, understanding the levers for profit and the drivers of cost. Now as a CFO, I have a great opportunity to leverage those insights and to build a culture which is commercially focused. I have 3 main priorities: one, embedding cost discipline in our DNA as we scale; two, ensuring that our resources and our capital are focused where we get good shareholder returns; and thirdly, injecting the energy to deliver our transformation at pace. Now as I take you through the results today, I will highlight areas where we have strong foundations. And I will also show you where we have more work to do. You have asked us to improve our financial reporting and disclosures. We've listened, and I'll explain the plan on how we intend to move forward with greater clarity and transparency. With that, let's move on to the 2024 results. As you can see, our results came in a little ahead of our expectations, thanks largely to the better markets at the end of the year. There are 3 key things I want to call out on this slide. Firstly, our net operating income was stable. This despite the net outflows of Institutional and Solutions business highlighted in Q3. This is attributable to our growth in Wealth, Schroders Capital and also, importantly, the resilience of our mutual fund gross flows. Secondly, we contained our operating expenses to 2%. And finally, we can't overlook the fact that our operating profit was down, despite the 4% growth in AUM. Moving on to funds and flows. Our AUM finished the year 4% above at GBP 778.7 billion because of strong markets and investment performance. Key to me on this slide is our flows data. We saw an impressive GBP 129.7 billion of gross inflows this year, the highest we've had since 2020. This points to the sustained client interest and demand across all of our capabilities. In public markets, our mutual funds returned to net inflow after 2 years of outflow. This is possible only because of the quality and the breadth of our investment capabilities. We saw the greatest flow into fixed income and global equities and outflows in the higher-margin regional equity strategies. In Solutions, OCIO performed very well, but the positive flows were masked by the outflows in the Scottish Widows mandates. We'd normally expect those outflows to be about GBP 3 billion a year, but this was closer to GBP 14 billion as they chose to exit the bulk purchase annuity market and switch out of their quantitative equity strategies. This said, there is tremendous value in our partnership with Lloyds Banking. The group extends across relationship across Scottish Widows, Cazenove Capital and Schroders Personal Wealth. In Wealth Management, we had another strong year. Our total net new business was in line with our guidance in Q3, but our AUM was up 15%. If we just look at Cazenove Capital in the U.K., our organic net new business rate was industry-leading at 8% this year. In Schroders Capital, we finished the year in line with our Q3 guidance. Now what the net new business numbers don't tell you is that the gross fundraising increased to GBP 10.8 billion or 16% of our opening AUM. And finally, our JVs. These interests provide our shareholders with an attractive exposure to high potential markets. And in 2024, our net new number was positive across all the JVs. Access drove most of the flows, contributing GBP 3.4 billion of the GBP 6 billion in total. Turning on to operating income. The thing that jumps out to me on this slide is the benefit from investment performance and buoyant markets. This was partially eroded by the adverse FX movements, mainly due to our exposure in the U.S. dollar and the net outflows I just mentioned. Our performance fees and carry were down GBP 21 million on the previous year, but higher than we had guided in Q3. That was largely due to the strengthening of markets at the end of the year, which supported higher performance in our Public Markets business, alongside some earlier-than-expected distributions from several of our private equity funds where they were triggered in terms of the anticipated carry. Looking into 2025, the usual caveats apply. It's difficult to predict the levels of performance fees and carry in any one year. We are, however, currently assuming the level of fees in line with the GBP 63 million we earned in 2024. Our income from JVs and associates reduced slightly. This was largely driven by the BOCOM Fund Management venture, where we felt the full year impact of the fee-wide caps that were introduced in 2023. This was partially offset by the growth in AUM and the good momentum in the ventures of Axis and Schroders Personal Wealth. So overall, pulling our operating income together, it was marginally up year-on-year. It demonstrates the breadth and the sources of operating income that will give us stability through the various cycles. Let's take a closer look at the segments, starting with Asset Management. You will notice that we are now reporting Solutions as part of Public Markets. This is because we manage it together with Public Markets offerings in terms of the way in which we support our ability to meet our clients' demands. There are a couple of things that stand out from the slide for me. The first thing is the diverse sources of income in terms of our Asset Management business. And then secondly is the chart on the bottom left with the challenging operating profit trajectory, which we faced in the segment. We will talk more about this later in our plans as we address this as part of our strategy when Johanna talks. Moving on to Public Markets. Now there's a lot on the slide, so let me talk you through it. Starting with the chart on the top. We saw a 2% reduction in our net operating revenue for the Public Markets in 2024. The key drivers were the outflows in Solutions and the softening of margins in Mutual Funds and Institutional, reflecting the change in mix of what our clients are demanding. As the table on the bottom left shows, margins for both mutual funds and institutional were in line with our Q3 guidance. This year, for the first time, we have presented exit margins. We believe this gives a clear view on where we ended the year. Progress in 2025 will clearly be influenced by our client demand. In Mutual Funds, we generated positive net flows in the first quarter for -- from -- sorry, for each quarter from Q2 onwards. And the AUM in both Mutual flows (sic) [ Funds ] and Institutional combined grew by 6% year-on-year. This provides us with a really strong foundation to move forward. Now moving on to Solutions. I've heard that you'd really like to understand this business better, so what we've done is on the far left there is to provide a greater clarity on our mix. So whilst the overall outflows in insurance partnerships, principally driven by the Scottish Widows, our core Solutions strategies continue to perform well, generating GBP 8.8 billion of net inflows. This business combines our actuarial, advisory and investment capabilities to develop bespoke solutions for our clients based on their outcomes, and we typically see a higher level of average longevity here. The Solutions net operating revenue margin was 11 basis points, a little lower than our guidance, and our exit rate is expected to be much the same. So in summary, good demand across the breadth of our Public Markets business, and this is a cause for optimism. We will talk more in terms of how we stabilize the revenue in this business as part of our update later. Moving on to Schroders Capital. Now the most important aspect of our performance this year is the near doubling of the revenue contribution of this new -- of the new business, which you can see on the table on the left. On the right hand, you will see that we generated gross fundraising of GBP 10.8 billion, 16% of our opening AUM, with particular good contributions from private equity and private debt. This said, our new business was flat at GBP 6.4 billion. We must do better in this. The net operating revenue margin for the business was 57 basis points, a little higher than we guided in Q3, and this was mainly due to the higher real estate transaction fees and the shift towards private equity that we saw at the end of the year. The exit rate going into 2025 remains the same. The improvement in the revenue contribution from this new business is really important as we look to accelerate its growth. And again, we will tell you more about that later in our strategy update. Moving on to Wealth Management. This business has again demonstrated excellent performance. Operating profit increased 15% year-on-year, and the segment now makes up 27% of the group's operating profit. As you'll see from the bottom left-hand chart, a large part of this growth is driven by the success of Cazenove Capital and our strategy to build out on business owners, charities and high net worth individuals across the U.K. The net operating margin was in line with our Q3 guidance at 40 basis points, and we are exiting the year at the same rate. Moving on to expenses. You'll see that we've included our central costs on this slide. This is really important because as we lean forward, our discipline on costs will be across our full expense base. In 2024, we focused on embedding better cost discipline across the organization. This, along with the restructuring measures we took in 2023, enabled us to keep our compensation ratio flat at 46% and contain the increase in expenses to less than 2%. This notwithstanding the inflationary pressure and the ongoing investment into our business. The bridge on the right breaks down -- breaks this down. We generated savings of GBP 34 million through our focus on costs and the benefits of the restructuring that we put through in 2023. This included things like the change of our technology strategy, our -- cloud technology strategy and the relocation of our wealth service center to Horsham. GBP 13 million of this was reinvested in the business, notably building out our wealth technology platform. The remainder of the benefit was offset by the effects of inflation of GBP 58 million and those costs that are linked to our higher AUM. In 2025, our focus is on driving further cost efficiencies and delivering sustainable operating leverage. I will come back to you on this as we go through our cost and go through our cost guidance for 2025 as part of our strategy update later. And now let me talk you through our capital position. Our capital surplus over the regulatory requirements and the Board established allowance increased from GBP 551 million to GBP 838 million. This is principally due to our Tier 2 bond issuance, which provided us with increased financial agility, capital diversification and additional liquidity. Importantly, given that we are regulated as a bank, the surplus will enable us to absorb the impacts of Basel 3.1 anticipated in 2027. Important to note that a significant portion of this balance will be used organically to invest in the growth and accelerate Schroders Capital and our Wealth Management businesses, whilst recognizing that our capital generation will reduce during this transformation period. I will talk more about our disciplined capital approach as we get to our strategy update. Clearly, it's a really important part. So to conclude on our '24 results. We generated operating profit of GBP 641 million, down 3% compared to the prior year. After taking into account our nonoperating items, our profit before tax was GBP 558 million, up 14%, supported by the absence of any restructuring costs this year. In light of these results, our Board has proposed a final dividend of 15p per share, and that would provide a total dividend of 21p -- 21.5p for the year. Now before I finish, I wanted to focus on some forward-looking changes that we're making to our financial reporting framework. As I mentioned earlier, one of my commitments to you is to bring simplicity, clarity and transparency to our financial reporting and disclosures. You've told us that the way we present our results is not intuitive or consistent with our peers. So going forward, we'll be providing clearer and more standardized approach to help you track our progress. There are 3 key changes we're making to our reporting framework. Firstly, simplifying the way in which we represent our operating profit. We are simplifying our statutory profit to include all costs with operating expenses. We will separately report an adjusted operating profit measure that excludes acquisition-related costs and one-off items to help you understand the ongoing operational performance of our business. You'll find more detail of this in your data packs. Now we've purposely left the year-end results in the current format to enable you -- to help you manage your models, but we will report on the new basis from the half year. Secondly, in Q1, we will be providing greater clarity and granularity on our AUM, flows and margins. This is to help you understand the different components of our business and our business dynamics and principally to reflect how we engage with our clients. The breakout of our core Solutions business that I showed you earlier is a great example of that. We will provide detailed reconciliations of the changes in both of those into our data packs that will be delivered to you in May. And finally, as Richard mentioned in Q3, we are committed to providing regular updates, AUM and flows on a quarterly basis. I hope that gives you useful insight to our 2024 results, and I'll pass back to Richard as we open up for some Q&A.

I got my pad ready, Meagen. So this is going to be super frustrating because I'm going to ask you all not to cover questions related to strategy because we're going to come back to that. So we can just focus on 2024, that would be great. Super eager straight away actually. So can I just say for the benefit of everyone in the room and online, usual things apply, name, where you're from, limit of 3 questions. David, for everyone online, is behind the wall at the back of the room moderating what we can see through Zoom. So I am going to start in the room and because you have his hand up super quickly, I'm going to go straight to him.

It's Hubert Lam from Bank of America. And thank you for the new disclosures. Really appreciate it. So I guess, I'll stick to the results questions. Firstly, on the fee margin for Mutual Funds, I think the exit rate is about 2 basis points lower than what you reported in '24. Can you maybe explain what's driving that? I assume it's mix, but could there be potential for further downside as we get through the year? The first question. And second question is on NII assumptions, Wealth Management. How should we think about that with the base rate expected to come down further? And is that going to present further potential pressure on margins, even though the exit rate seems like it's unchanged? And lastly, can you explain also what's your outlook for the JVs and associates with what's happening in China? Do you see that stabilizing or growing going forward?

Richard?

So this is really hard for me because I still want to jump in on some of the CFO questions. So I'm going to let Meagen do the first 2, and then maybe I'll just deal with the third one now, right? So on the JVs, we're going to talk about them a lot more in the strategy session. So I'm going to hold that question, Hubert. And if we don't answer it, I'm sure you're going to ask it again anyway, but let's just hold it. Meagen, do you want to take the first 2?

Yes. Sure. Thank you for your question. So just starting on the mutual fee margins, as mentioned, our mutual fee margins have really dropped off as a result of a change in our client appetite. We've seen a change in mix in 2 places. One, there has been a move towards more fixed income products with high interest rates. And secondly, as we've seen, clients' appetite move away from some of our local strategies into the global equity strategies. So we have guided on that as the exit rate as well. I'd leave it to you in terms of where client appetite and interest rates will go in terms of the market. In terms of the second one, net interest rates inside our Wealth business, now Cazenove's Wealth business in terms of earning interest passes through most of the benefit of any of our interest earnings, where they hold on to about 50 basis points in terms of the interest earning in that business. We really don't -- that is pretty stable. We don't anticipate any major impact on that business. Clearly, as clients move toward more risk off, that is a great opportunity for us to generate more income on our equity products, but we don't see any impact on that business today.

Who's next, really?

Sorry. We didn't answer the third one.

I did. I did comment that we will come back to it. Go ahead.

All right. Okay. Go ahead.

So, yes, Bruce Hamilton from Morgan Stanley. Just a quick one on the -- again, thanks for the improved disclosure. That's great. Comp to revenue is something that historically you've looked at, and I suspect you may talk about this in the strategy update. But where was that number running? Because, obviously, there's a balance between talent retention and trying to drive efficiency. So is that something you're completely stepping away from? Or what was the sort of number in '24? And any way to think about '25?

Yes. I'm happy to answer that one. So thanks, Bruce. So as we have guided in the -- in our R&S, and we'll speak later about, we're looking at total costs going forward. And therefore, our guidance is really looking at a cost-to-income ratio as our key guidance to market. It's really important to bring that discipline into the organization in terms of how we think through costs. Clearly, from a comp-to-income ratio, we had a 40% -- 40.4% cost to income -- 46.4% cost-to-income ratio this year, which was consistent with prior years. Talent is massively important. We will consider investing in talent. And as we go on to the strategy section, we will talk about some specific actions we're taking to acquire some talent in specific areas. So yes, no issue on talent. But in terms of cost, we will guide on a cost-to-income ratio going forward.

And Bruce, just to add to that, we're committed to getting a grip on costs, right? And actually, if we try and split out non-comp to revenue ratio, it creates some perverse outcomes about where we want to do things. So one of our firm beliefs is that we should get the best people doing the things that we can at Schroders, whether that's internally or externally. So we want a little bit of freedom as we go through this transformation plan to actually manage our cost as a whole, not actually in components. We're going to go right to the back actually first because -- I'm sorry, Angeliki, I don't have my glass on. I can't see you that far away, sorry.

Mandeep Jagpal, RBC Capital Markets. Two for me as well. I'll try to stick to just the results. First one on margin, slight margin increase in private assets versus guidance. Could you provide some details on what the drivers were there? And then on capital, how much of the surplus of GBP 838 million is actually available to be utilized, for example, investing in the business, distributions and M&A?

Will you take those, Meagen?

Yes, I can take both of those. Firstly, on guidance -- sorry, on the margin guidance on the Private Markets business, we saw that rise slightly towards the end of the year, ending on an exit rate of 57 basis points. That was largely driven to a switch in our private equity mandates, where we've seen the runoff mandates exiting at a lower rate than the new business that we had attained in Q4. That remains our best source in terms of margin in that business. And then secondly, in terms of capital, we will talk in the strategy update in terms of a significant amount of that capital that we will be investing organically in the growth of our business. As I mentioned, that is the amount that sits outside and above our regulatory hurdles as well as our Board early warning signals. So it's all available.

All surplus.

All surplus.

Angeliki? Angeliki, you've broken the microphone.

This is Angeliki Bairaktari from JPMorgan. A question on Schroders Capital flows, please. Thank you so much for giving us the gross flows together with the net. As we sort of look forward, do you expect to see more fundraising? And I was wondering if you have an update on the LTAF initiative that you have been pursuing over the past year. If you can give us some color on sort of how many flows the LTAFs have actually collected. And second question with regards to the Wealth Management business, just to follow up on the NII question. We have seen NII flattish despite the drop in interest rates, and I hear you on the 50 bps that you retained. But in terms of sort of the different dynamics within that business, what are you seeing in terms of deposit flows versus investments in gilts versus perhaps investments in riskier assets at the moment?

Maybe -- actually, Meagen, why don't you start off on the growth flows? And I am might -- because I have the benefit of asking the audience, we've got Georg and Mary-Anne here. So we might go to Georg just to touch the LTAFs and then Mary-Anne just to touch on what we're seeing with the flows in Wealth.

Sure. So just to be clear, the gross -- it was gross flow in our Private Markets business. Our gross flows in the market -- fundraising was GBP 10.8 billion, as we mentioned. The good news there is we have dry powder of GBP 4.2 billion, which is still available to be deployed. We don't have any issues in deployment. That is a very healthy and -- a healthy deployment rate, and we are above market averages on that. In terms of where we're seeing the flows, our private equity business has done extremely well. It's well positioned in the market, which Richard will pick up later in our strategy sessions. And we continue to see good flow into both private equity and our infrastructure debt products.

Georg, you have to just come on the stage. Just -- maybe just give you as a minute on where we are with the LTAFs. I want everyone online to see what a good-looking chap you are.

Thank you, Richard. So -- and Angeliki, briefly on the LTAFs, we've launched LTAFs in several areas. You might have followed the news on the venture capital side. We've been awarded a mandate between BBB and Phoenix, which is GBP 500 million committed and starting to invest soon. It's currently being built, but it's been publicly announced. And we have 2 LTAFs, again, in the joint venture with Phoenix through Future Growth Capital, and they are both approved now and starting to be ramped up with the seed capital from FGC. And I think we said publicly that we're expecting this to become GBP 2.5 billion, but they're still small at this stage. And then we've launched an LTAF via our Solutions business, Climate+, which is above GBP 100 billion roughly now. And then lastly, there is an LTAF on the renewable energy side, which is approaching GBP 200 million roughly.

And Mary-Anne, did you want to just touch on how we're seeing cash and gilts flow?

Sure. Absolutely. So on -- I think on -- I think I might -- hopefully, you can hear me, yes. On the gilts, we are still -- Angeliki, we are still seeing some interest in the gilts. But I think 1 of the major -- 2 major points really to note. One, they're -- it's a sign that we are being very successful in our ability to attract entrepreneurs. You'll remember, those of you who were here at our sort of Wealth in Focus Day that we said we wanted to expand that franchise beyond London and the Southeast, and we've done that very successfully regionally. And those flows tend to come when entrepreneurs exit their business. And typically, those entrepreneurs that exit the business are actually quite risk averse. They need time to reflect. They need time to think about what they're going to do next. And so having that first conversation to say just invest in a gilt for higher rate taxpayers, it's actually a very useful and a very attractive way to sort of hold your money until we decide how to structure your assets, what else matters. But what we are seeing as well is year-on-year, we are converting the previous year's gilts, if you will, into more risky assets as they then decide what their investment strategy is. So I hope that's helpful.

And Angeliki, of course, that's central to our Cazenove business model is actually the fact because we're a bank, we can take large deposits and move them from cash to gilts to risk assets pretty seamlessly. So it's a big differentiator for us, Mary-Anne.

It is, as is our sort of sophisticated financial planning advice where we're talking to clients about how they want to structure their assets going forward.

thanks, Mary-Anne. Where were we next? David, are you going to ask me a difficult question?

Let's see. Dave McCann from Deutsche-Numis. And it shouldn't be too difficult. These are obviously backward looking at this point. Again, echo the comments and thanks for the new disclosure. That's really helpful. And just on one of the new piece disclosure, the segmental information you've given us on the Solutions business. Are there any major differences in the revenue margins between those categories you've outlined? That would just be useful to know. And then second question. I guess, slightly surprised there was no new share buyback announced today. So maybe just your thoughts on why you didn't take the opportunity to, yes, I guess, refresh and reload that program.

On the second one, again, hold that question, David, because I think we're going to talking about how we might use our capital in the strategy section. So I'm sure you will come back to me if you're not convinced at that point, but we can definitely take the first question.

So thanks, David. And the way we've broken down our Solutions business, there are really 3 components to that. There's the multi-asset funds, which generally get a revenue of about 30 basis points. And then there's the OCIO components, the fiduciary management, where we generally come out below 10 basis points in terms of those broader mandates -- large-scale mandates like Tesco.

Mike?

Mike Werner from UBS. Meagen, I think you mentioned on something and when you were talking about the capital surplus about the potential impact in '26 of Basel 3.1. I was just wondering if you could just give a little bit more color just to see what -- how we should think about that going forward.

Sure. Thanks, Mike. As you know, Basel 3.1 has not -- where we're heading on Basel 3.1 has not yet been clarified. We're working really closely with the PRA in understanding nuances, and I think it will depend very much in terms of what we got on our balance sheet at that point. So it's very difficult for us to predict, but we do know we need to hold something, and that's really what we indicated.

Any one at the back?

It's Greg Simpson from BNP Paribas. Three quick ones on my end. Firstly, can you provide any color around flows by client geography, particularly in Mutual Funds, U.S. versus Asia versus Europe? Secondly, there was a comment in the release that year-to-date flows are modestly positive. Can you provide any color? Has that positive momentum in Mutual Funds last year kind of continued into this year? Or has that slipped back? And thirdly, just any comment on impact in Wealth from the budget? Any behavioral changes given there is some changes to pensions and inheritance tax?

So Meagen, do you want to take the first one? I'll take the last one.

Sure. Yes. If we look at our geographical split of flows, our Mutual Fund flows in Europe, where we have our SICAV have been extremely positive. They were the big contributor to that GBP 1.3 billion net positive flow over the last year. Slight -- Asia has been slightly muted as a result of our investor appetite -- or not investor, our client appetite in terms of where they're wanting to position, and they've moved out of some of those local strategies more into our core global strategies.

Greg, it's very interesting on the U.S. flows, Meagen, for the third consecutive year now, we've actually been in positive flow. So all of those people who keep saying 40 Act funds are dead and everyone is going to be in an ETF, that is not our experience. So through the heart of the platform, we are consistently generating really good positive flow.

Yes. And then the second question, just in terms of flows year-to-date on our comments on outlook, we're really focused there in terms of our Institutional business where we've landed as a large mandate, specifically the St. James Place mandate, which was well documented in the press where we've landed the GBP 5 billion mandate really off the back of our great equity and sustainability mandate. So that's what we're guiding on.

Greg, I think the -- in relation to the budget, I assume the question I'm really talking about is the change in the non-dom tax regime. The great thing about our business, because we have Schroders Wealth Management that enables us to serve international clients, actually, we haven't seen -- I'm going to park the question of where people might live. We haven't seen a mass exodus of money flowing out of our business in Wealth Management. Actually, far from it. So I'm not going to get into it actually, but I can assure you that the impact of the budget on us as a business managing high net worth individuals, Wealth has not been impacted. Any more in the room before I go online? So David, do we have any questions online?

There's no question so far, but there's a Q&A button in the top right-hand corner of the screen. So if you've got a question, you can type out the question, add your name and where you're from, and we'll read it out for you. But there's nothing at the moment.

Well, if there isn't anything, we might have to pick those up in our next Q&A session, actually, because I think we're going to go into a break now. We're going to give everyone and everybody in the room, but conscious the next session is quite long. I deliberately wanted to give you 30 minutes to meet with the ExCo. They have not been scripted. There have no talking points. It is your opportunity to go and ask them any questions that you want and get a really honest answer. So with that, can we -- I'll be back in the room at just 10:10, and we'll carry on with the strategy update. Thanks a lot. [Break]

Welcome back, everybody. I've been told while I was having coffee that this is what you're really all waiting for. And if you wonder why I was just over there, I was looking at my friend Pete who manages all the AV, and he was giving me the thumbs up to everyone who have managed to rejoin us online. So our strategy update this morning, we're going to describe how we're going to drive profitable growth here at Schroders. And I'm going to build on my opening comments, but let's be really clear about what the problem solve there -- problem statement is. We've invested significantly in this business over the last few years, but we have not delivered the shareholder returns that we would want. And now frankly is the time to fix that. So the first thing I want to do is look at the 3 keys to our success. So celebrating and building on the huge strength that we've got in this business. We're unashamedly active in everything that we do. And we spent the last few years, as I said, building our capabilities, so we remain relevant for clients. And secondly, we've got to be honest with ourselves about what needs to be fixed. Our business has become complex, costly and a little unfocused. And thirdly, we need to act at pace to simplify, scale and deliver the change that we need. So by the end of this session, we'll have set out what the plan is, a clear plan about how we're going to do this and, importantly, the financial benefits that come from that. You'll notice a change in tone in what we're saying today. And above all, I want, under my leadership, this organization to be super client focused, relentlessly focused on client outcomes. And as I said, I'm leading from the front on this. But the more we can draw together, the breadth and depth of our capabilities, the more we reinforce our reason to be here, the reason that active management is here. And as I said, now is the time for that. First and foremost, I'm going to talk about our key strengths. Now I hope you recognize the things on the left-hand side. I touched earlier on the brands, our geographic footprint, wealth, performance and our partnerships. I'm going to touch on each of these. I love this slide. Everyone knows we've got a great brand. I don't think everyone realizes how great it is. So this is the results of the NMG survey for the seventh consecutive year. We have been rated the fifth most recognized brand in asset management. Just look at where we are relative to our peers. Importantly, look where we are relative to our European peers. The strength of this brand gives us a high-quality calling card with current and future clients. It reflects our integrity and the trust that clients place in us. You can't replicate that. You can't buy it. It's unique. Second, let's talk about the strength of our franchises in the U.K., Europe and Asia. So this chart shows that we're really well positioned in the areas of greatest growth, particularly in Asia Pacific, where investable wealth is growing at its fastest rate. And then there's our Wealth Management business. So we have a top 4 market share position in each of the subsegments of Wealth. And given the fragmentation of the market and the strength of our proposition, there is plenty of headroom for us to grow. So I'm going to go further and say that our investment capability and wealth expertise combined, as I said earlier, are significant competitive advantages for us. Our Wealth business benefits from our investment capacity and capability in both public and private markets and from the economies of scale that you get from our corporate infrastructure. I talked about performance, so let's just reflect on the 20 years of history that we have in building successful partnerships, whether that is gaining access for our shareholders to high-growth markets in China and India, and you bet, I'm definitely going to come back to those before the end, or accessing the 25% of the retail banking market through our joint venture with Lloyds. These are hugely valuable assets for us. So let's turn to arguably what we need to do better. Firstly, addressing the headwinds in Public Markets. Over the last few years, we have been running really hard to stand still. Net outflows are, of course, explainable in part by the broader macroeconomic events, higher interest rates, higher concentration in global markets and the competition from cash, of course. So we continue to live with that margin erosion. But let's be really clear, that is not caused by the per unit price declining. It is caused by the shift in our client demand. And as people have moved into fixed income, we have seen margin erosion. But we've also spread ourselves too thinly. We can't be everything to everywhere and everyone. And our job is now to focus our capital, both our people and our financial resources where we know we can win. And this is going to reverse the revenue decline that we've been experiencing in recent years in Public Markets and stabilize that business. So in Schroders Capital, again, I want to be really clear, we can't do everything. We built expertise in discrete specialisms, and that is where we're now going to focus so we can drive flow and operating leverage. And I think, as we really introduce those differentiated investment opportunities to our clients, there is huge opportunity. I'm going to give you a really silly example. So today, only 7% of our Public Markets clients buy Schroders Capital products. That is a huge opportunity to increase that by even a small amount. But we've been slow in committing our own balance sheet for co-investments, a key aspect of creating alignment with our clients. And as institutional buyers become much more specialized, we need to match that capability in our client group. Both of these are totally fixable. And thirdly, we need to be honest about our track record on acquisitions. We have undertaken all of these acquisitions in the last 10 years and more. And yes, they have broadened out our capabilities. And yes, it's an important part about how we are growing Schroders Capital. But we know that many of them have not delivered the financial returns that we had hoped for. Now some of this is because the market conditions fundamentally changed. I never expected the gilts crisis. But going forward, we have to be much more disciplined about assessing what these assets need to deliver and how they do that because everyone has to justify their place in our portfolio. So we're doing work to understand how to improve the profit trajectory of each business where we believe there is more to be done. And in some cases, we're already repositioning them. Let me give you a couple of examples. So BlueOrchard has now been repositioned to be a semi-autonomous specialist impact investor with a direct route to clients, and that's because their impact investments are too niche to put through our general sales channels. Schroders Greencoat, we're making less dependent on the listed fund market, creating higher returning products that broaden the distribution capability and actually focusing on international expansion. Importantly, our client lens gives us confidence that in the long term, the opportunities for renewable infrastructure are huge. So when thinking in the future about acquisitions or, indeed, organic investments, we're also much more deliberate about where we place our capital. Meagen is going to cover this in a minute. She's super passionate about it, just to warn you. So next, cost and complexity. We have invested for growth and built an enviable business infrastructure. But as I said, we've become more and more complex operationally. And I'm going to give you a silly example. Why does this business need 5,500 suppliers? So Meagen is going to talk you through the transformation plan in detail. And suffice it to say, there is a massive opportunity to simplify and scale in the areas where we need to match client demand. And actually, we have the ability to control our costs much more because they're in our direct control. This is my least favorite slide of the presentation, and I suspect it's the least favorite slide for our shareholders. We've already decided to make changes to executive remuneration to tie our reward much more closely to EPS growth. All of the executive team in the room today now have long-term incentive plans in place, which align their compensation back to shareholder returns. So I hope what I've said so far has given you a sense that we're being realistic, but also suitably self-critical about the challenges that are facing us. So what are we going to do about it? Well, our focus is on fixing the fundamentals in the business over the next 18 to 24 months, creating the space and, importantly, the optionality for us then to move forward with delivering accelerated growth. And as we address these challenges, we won't lose sight of why we're here, and that's to serve clients. So we have refreshed our purpose, creating prosperity together. Most important word on this slide, together. It's a strong signal to everyone at Schroders about how we need to work together to deliver the best outcomes for our clients. But it's also a very important signal to our clients that it's about how we work together with them and other partners in the investment ecosystem to really respond to their complex problems. So what we do at Schroders is we think from the client out back into our organization. So what's the client drivers? And we look at that through multiple lenses. We, of course, look at it through a geographic lens, but we also use these 4 segments: wealth, long-term asset owners, insurance and pensions. And this is making sure we bring the full knowledge and experience of the Schroders Group into how we position what is needed in the marketplace. Understanding client needs in each segment allows us to spot common investment themes and tailor our offer accordingly. You can see there are 3 investment themes, which are tightly interwoven to how we see the demand across these segments. So Wealth is a segment that actually we see growing fastest. It's got a compound growth rate of 7%. Actually, in Asia, that growth rate is even higher at 10%. Of all of these segments, it is our largest. It's where we have most revenue and most of our clients. They're responding to growing demand for diversified portfolios that balance income generation. They are navigating huge regulatory uncertainty, huge macro change, demanding personalized solutions and increasing the social priorities that we need to place on products because that ultimately is what the end client in Wealth needs. So Schroders is super well placed in this segment and our experience gained from our own Wealth business, again, as I mentioned earlier, this is why we think the synergy in the group, our experience gained from our own Wealth business really helps us to develop and refine our propositions in this space. So long-term asset owners such as sovereign wealth funds and endowments are seeking access to effectively real assets, and they're allocating capital to private markets. They're navigating the impact of sustained high rates and central bank policies, which, of course, necessitate really strong risk management and informed investment selections. Insurance companies are facing the challenge of adapting for resilience, and they're seeking duration matched returns and predictable income flows. They must address inflation risk and adapt to shifting demographics. And finally, pension schemes, they face the dual challenge of securing stable income for retirees, whilst managing long-term liabilities. They see scheme consolidation, which we're likely to see here in the U.K., we've already seen elsewhere in the world. And what it actually does is it creates an opportunity for asset managers to respond to specialist need. We look at the proposals in the DB sector in the U.K. to move to run on is a fabulous opportunity for members and sponsors to create mutually beneficial returns. So why have I just told you all of that? What I want to reinforce is we think about what are the needs driving -- from our clients that drive us to think about tightly interwoven investment themes that fix them, so return opportunities, income generation and future proofing. Let me bring it to life. So Karine has spent the last few months with client group going through this process to build plans for each country through the lens of the segment and the investment theme. So we now have a sales strategy and a sales plan for all of our client group actually really focused on understanding what they need -- clients need in that market, in that segment and delivering that through our sales channels. It's not just about increasing client relevance. It's actually about boosting our sales effectiveness. So let me transition from looking at our client lens and back into how we then bring that to life into our 3 markets -- into our 3 businesses. So on this slide, I'm going to give you an overview of the growth initiatives and cost efficiencies that we have underway, and I'll come back and give you more detail on these after you've heard from Johanna and Meagen. But I wanted to show you them upfront and to give you a flavor of some of the more substantial actions that we have underway. So in Public Markets, we're focusing on our market-leading capabilities, we are increasing accessibility to product, and we are driving efficiencies by looking at this business front to back. In Schroders Capital, we're focusing on those specialisms where we know we can win, being ready to use more of our balance sheet and building out a specialist sales team. We remain super alert to expanding our wealth channel and, importantly, partnerships to grow that business. And in Wealth Management, this is actually doing more of what we do really, really well today, and that means growing the number of senior relationship managers in Cazenove, advisers in Benchmark as well as create -- selective acquisitions as we have been doing over the years. And importantly, I'll talk about the changes that we need to make to the technology. Thanks to the new streamlined executive team that, hopefully, you managed to chat to most of them over the break, there is now clear lines of responsibility for delivering these initiatives as well as rightsizing the cost base in a super disciplined fashion. This is quite a significant culture change for Schroders. So let's make this a little bit more concrete for you. So on this slide, I've highlighted our key deliverables for 2025 because what we're doing today is outlining a 3-year plan. So I want to be very clear about what you're going to see from us in '25. Let me pick out a couple of these things. So in '25, we will have taken out GBP 40 million from our cost base, and we are simplifying the product range. We have already mentioned that we've closed more than 10% of our funds already, and we're looking to do much, much more. And that's about, by the way, not just saving money, but making sure our fund and product range reflects what client need is. And actually, we're evolving client group even further to make sure that, that sales powerhouse can really -- we can see the benefits of that, we can increase our return on marketing and we get a clear line of sight into the client. So what does this all translate to in financial terms? So let's be clear about the overall aim, that is to return this group back to earnings growth, starting gradually in '25 and accelerating through '26 into '27. The most immediate contribution to this is to achieve GBP 150 million of cost savings between '25 and '27. And then if we turn to revenue, we're going to reverse the trend that we had and stabilize revenues by FY '27 in Public Markets. In Schroders Capital, we're going to deliver cumulative GBP 20 billion of net new business, with that growth accelerating over the 3-year period. And in Wealth Management, I'm going to stick with our targets. They're already market-leading. So we're going to stick with 5% to 7% growth in opening AUM per year. So collectively, these changes should enable us to reduce our cost-to-income ratio from 75% to 70% on the new basis that Meagen outlined. So let me now hand over to Johanna because as the CIO, she's going to do a much better job of explaining why she's passionate about active management and why it's important to our future. Thanks, Johanna.

Thanks, Richard. Good morning, everyone. Just by way of introduction, I've been at Schroders for 18 years now, and 6 of those have been CIO. So I've really witnessed firsthand how Schroders has been able to adapt to the evolving needs of its clients and also navigate through many crises. Now active management for us is more than just alpha and beta. For us, it is a culture that permeates every single 1 of our 3 business lines. It is a curiosity that leads us to invest in innovation. It's a determination to do the absolute best for our clients. And it's also a strong belief that a forward-looking approach to the risks that our clients confront is absolutely essential. Now in my 28-year investment career, I have to say it's never felt easy. Every cycle has presented its challenges. But we are confronted by an unusual set of risks today. For example, it is impossible to have a conversation with a client without talking about the record levels of index concentration. Today, 10 of the largest companies in the S&P 500 represent 37% of the index. The last time we saw this level of concentration was a bit before my time, at the peak of the railroad boom over a century ago. This matters because it means that a passive exposure to market cap-weighted index now contains elevated levels of stock-specific risk, which, in our view, needs to be managed actively to be appropriately controlled. More broadly, we've seen a dramatic shift in the macroeconomic environment. The rise of more populous policies is leading to higher debt levels, an inflationary environment and protectionism. On top of this, our clients are facing regulatory challenges and disruption within their own industries. Now against this backdrop, our clients continue to seek our expertise and advice. The right-hand chart illustrates this. In each of the past few years, our active business has seen GBP 120 billion of gross inflow. Clients allocate to Schroders because it has the people, culture and performance to meet their changing needs. The focus on research and excellence, which our active approach implies, positions us as thoughtful experts whose knowledge can be pivoted to solve our clients' more complex problems and meet their overarching objectives. So let me give you some examples of how we are working with our clients through the lens of those 3 investment themes that Richard introduced. Now, first of all, return opportunities. We're seeing strong demand for our global and international equities, which have seen net new business of over GBP 16 billion over the last 5 years as clients seek to benefit from global opportunities, but are possibly concerned about the concentration of the indices. Our active stock picking approach ensures that exposure to the mega caps is managed and deliberate, underpinned by our fundamental research. Schroders meets with 30 companies globally every day and produces 11,000 company research pieces every year across public and private markets. Secondly, we've seen significant demand for our income strategies amongst our Wealth clients as populations age. Insurance clients are also naturally searching for strategies that deliver yield. Initially, a few years ago, it was about reaching for yield in a world of 0 rates. Today, it is about encouraging clients to move out of cash into strategies that can give them significant upside and inflation protection, while still managing downside risk. We're doing this by combining bonds, equities and alternative strategies such as insurance-linked securities and securitized debt. Finally, clients increasingly look to us to think about future-proofing, as we're calling it. We have 270 portfolio Directors, consultants, financial planners, solution managers and strategists offering advice to our clients across our 3 business lines. This is obviously a critical part of our Wealth business and was also an important driver of our recent OCIO win with Tesco last year. The strategic advice we offer is multifaceted, but embedding considerations on climate and sustainability in portfolios is a great example of how we can customize our capabilities to meet client needs. Many clients want to understand and be accountable for the climate risk in their portfolios, but they also need to meet their risk and return objectives. And supporting them in solving this complex trade-off has led to some significant client wins, such as the St. James Place mandate, which has already been touched on. Strategies such as renewable infrastructure with Greencoat are a great component for our insurance clients as they seek to meet regulatory requirements or for our long-term asset owners who are looking to seize opportunities from the energy transition. Now of course, central to everything we do is investment performance. Richard mentioned earlier that I'll take you through the numbers in a bit more detail, but let me start with the less good news. Our 3-year numbers are a bit softer. We have seen 3-year performance fall to just under 60%, reflecting the fact that some of our absolute return-focused strategies struggled in 2022 when interest rates rose and major asset classes fell. But the numbers are already rebounding. One-year performance is strong with 70% of assets across Public, Private and Wealth outperforming in 2024, and we're very pleased to see these results. And our 5-year performance is unrelentingly consistent with 76% of assets outperforming, in line with our long-term average. How have we achieved this? Active management is our sole focus, no distractions. And our culture is built on fostering investment talent and ensuring the highest level of accountability for investment performance day by day, year by year and basis point by basis point. So we are proud of the value that we deliver for our clients, and we remain fully committed to our active mission. Our focus on active gives us a clear purpose and sets the highest standards. In our quest to deliver the best solutions for our clients, we strive to continuously improve, sparking innovation and creativity. The extensive experience of our investors and the development of investment processes that foster resilience through difficult environments has never been more relevant in today's complex world. And our long-term outlook with a wide and diversified range of approaches gives time for strategies, which might be out of favor to succeed and deliver. Now our investment teams couldn't deliver this level of focus without our partners on the business and the operational side. And I sometimes joke that Meagen's grip on the operational platform and on our business is actually what allows me to get at least a little bit of sleep at night. So thank you, Meagen, and I'll hand over to you now.

Thank you, Johanna. I'm really pleased you get a little bit of sleep at night. What Johanna has highlighted is that driving change in our organization is a team sport. It needs us to be collaborative, intentional and meticulously planned. Today, I hope that we are giving you the sense that there's a commitment for change right across Schroders and the potential we have to transform this business is enormous. When we began -- or we have begun -- sorry, we have begun a multifaceted program that delivers these benefits over 3 years with 2 key objectives: simplification and scale and the combined goal of delivering profitable growth. Firstly, simplification. We're simplifying how and where we do things, maximizing our synergies, leveraging our technology to improve productivity and reshaping our organization structures. We'll be using our service centers more efficiently, and we'll be managing our product range. Secondly, scale. We're creating economies of scale by making better use of the power of our brand and our strategic supplier networks. And we're putting our resources and capital to work to scale in focused areas where we have differentiated capabilities and, most importantly, where we meet client needs. I'd like to highlight that these changes are focused and targeted. They're not a blunt cost-out instrument. I've been asked many times today what percentage of headcount or percentage of cost we're taking out. That is not what we're doing. What we're doing is a focused transformation to ensure we free up our working capital and our resources to do what Schroders does best. So let me talk you through those changes in a little bit more detail. I'm sure by now the message of our strong foundations has come across loud and clear. Now what I'll be adding is my perspective in terms of our great infrastructure and our great people. I'm confident that we have the talented individuals front to back within this organization to drive us to success. Drawing on my perspectives as a COO, I've got 3 -- I saw 3 main opportunities across our infrastructure and operating platform to drive and create shareholder value. The first is enabling scale, leveraging our new technology such as AI, data and our distributed ledger. Our next step is to simplify and standardize how we do things, improving productivity, so that we can maximize the value of the strong foundations that we've already put in place. Over the last 10 years, we've steadily been investing significant amounts in our operating and technology platform. That means we've migrated to best-of-breed applications like Aladdin or eFront on the private asset side. We've modernized our technology estate and deployed cloud, AI and data platforms like Snowflake. A great example of this is in our equities -- our quantitative equity strategy in global equities. We've deployed a data and investment platform that allows us to operate those portfolios at scale and bring competitively priced alpha to clients at limited marginal cost. Secondly, we are enhancing how we give our clients access to our investment expertise. We're an active manager, as Johanna has said. And by launching our European active ETFs, we will provide a new form of distribution, which increases the convenience and accessibility to clients. We can now deliver our world-class investment capabilities in multiple structures at marginal cost and, importantly, at scale. In the industry or as a transformation agent, we'll often refer to this as the Coke strategy. You create it once and you publish it everywhere, allowing us to deliver at marginal cost. Finally, I believe we have an opportunity to better leverage our buying power, our brand and our strategic partner. We don't need the variety of systems and suppliers that we've gathered over the last decade. We can simplify, scale and deliver better outcomes at a lower cost point. Now I want to spend a bit of time, as I'm sure all the analysts are keen to hear, on the intended pathway to that ambition of GBP 150 million of savings. I would start by saying that we have completed a detailed assessment of our cost drivers front to back and East to West across our business. We have used this to design a transformation program, which is focused and considered all our commitments across the business. Business risk, our talent and maintaining good investment excellence is at the core of what we're doing. We've already taken action, which has delivered GBP 20 million of run rate savings in Q1 this year. This included streamlining our management team, establishing a transformation office to ensure we can hold people accountable and resizing some of our corporate functions. The largest impact of this change was on our technology function, where our development spend has been refocused to areas where we want to grow and where we know we have differentiated technology capabilities. The remainder of the targeted savings form part of a detailed transformation plan that extends over the next 3 years and covers the 2 main themes. Firstly, simplification and scaling of our business process. There's an opportunity to simplify our organization design, rationalize our product range and maximize the synergies across our service centers. We expect these activities to generate GBP 85 million of savings. Secondly, we are leveraging our buying power and our strategic operating partnerships. We will reduce our extended supplier network, and we will work with our strategic partners to generate savings of GBP 45 million. This program of work will be delivered over the next 3 years and will cost us approximately GBP 200 million. The transformation spend is weighted to the first 2 years of the program and the savings accumulated over the 3 years in approximately equal proportions. This gives us a payback period of around 2 years for our shareholders. As I said earlier, our focus is on total costs. And in building greater cost efficiency into our business, we will deliver an operating cost-to-income ratio below 70% by the end of the full year 2027. This subject to normal market conditions. Now let me come back to what that means for 2025. We expect that these initiatives will generate GBP 40 million of savings in 2025. We've already made the GBP 20 million of savings. And assuming stable markets and FX, we're budgeting on an improvement of our cost-to-income ratio, including our central costs of 1 basis point. I want to be clear that delivering these changes and bringing greater operating leverage to our business will not be done at the expense of our client experience or the growth of our business. It's about focusing our resources and our capital on what Schroders does best. So let me highlight, I'm sure you're all thinking how is this achievable. Schroders has a remarkable track record in our ability to deliver across large-scale transformation programs. Many of these have been done in conjunction with our strategic partners, most recently, the transformation of our Wealth business in which we delivered on time and on budget. We relocated a substantial number of roles from our Zurich center to our Horsham service center, delivering GBP 11 million of savings to that business. And really, importantly, throughout that journey, we continue to grow our Wealth business with 15% AUM growth in 2024 and the continued acquisition of high-value client franchise like the Whitley Management acquisition, which we managed to complete onboarding this last weekend. So I'd like to close with emphasizing our commitment and, as Richard said earlier, my passion around capital discipline. We will bring further discipline to our capital allocation across both OpEx and CapEx to drive improved shareholder returns, whilst continuing to invest in the business and build out our capital base. We've introduced a more disciplined capital assessment process, which looks at capital through the lens of return on tangible equity, ensuring that our returns exceed our cost of equity and deliver profitable growth for our shareholders. As a reminder, under our capital framework, which Richard set out last year, we allocate capital in 3 ways. Firstly, to drive profitable organic growth. This includes the investments which Richard alluded to earlier, and we'll pick up in more detail, investing in our sales capabilities and our allocations of up to GBP 500 million of seed to co-invest with Schroders Capital to accelerate the growth. Secondly, through inorganic investment. A great example is the small acquisitions like the Whitley example I just mentioned. And finally, through dividends to our shareholders. Our capital base supports our growth ambitions, while returning attractive dividend yields to our shareholders. We'll look to hold the dividend at its current level over the next few years as we bring the payout ratio towards 50% of our adjusted operating profit. So to summarize, our transformation is a team effort, front to back across Schroders. It's not about a blunt cost-out target, and it's not about pursuit of scale at the expense of our investment excellence. It's about focus to deliver what we do best and that meets our client outcomes. As a reminder, we will deliver 3 key benefits that underpin the strategic objective of growth: one, cost savings as we embed the operating leverage to scale; two, discipline in our resource and capital allocation as we ensure we can grow our shareholder returns; and three, a renewed focus and energy, a cultural change to build the fitness that Schroders needs to drive the business forward. Now I'll hand back to Richard, who will talk more about how this transformation will benefit our clients.

Thanks, Meagen. So I'm going to give you a brief rundown of the 3 businesses and why I believe we can succeed and where we're going to focus our efforts. Now I've got about 30 minutes to go through 3 businesses, so that means I'm going to go at a fair pace. There's a lot actually that I would love to cover. So we're going to find the right opportunity in the coming months where you can spend time with the CEOs of those 3 businesses to understand them in a bit more detail. So let me start with Public Markets. And I think it's interesting, isn't it? It's been a long time since we've spoken about Public Markets. And on reflection, the language we've used, that I used of pivoting away -- sorry, pivoting towards Private Markets and pivoting towards Wealth may have left you thinking we were moving away from our Public Markets business or that we're a little embarrassed by it. Far from it. This is a well-established, highly profitable and highly cash-generative business whose contribution to our group is fundamental. So let me begin by building on what Johanna has said about why Public Markets still has a huge growth potential and how it relates back to those 3 investment themes. So we've got 9 capabilities shown up here on this slide, 4 in equities, 4 in fixed income, and we have multi-asset and solutions. These 9 capabilities actually account for 85% of our Public Markets revenue. They sit right at the intersection between where we have world-class capabilities and where there is client demand. Of course, they represent not just what is vogue at a point in the cycle. These are where we see long-term structural growth opportunities. So at any point, they're not all going to be in inflow. They're not all going to be the highest performers, but they do have 3 things in common. Firstly, they are spearheaded by exceptional investors who cultivate and lead brilliant teams. I've shown you my favorite slide today. I'm going to give you my favorite statistic. These 9 teams represent 4,300, that's 4,300 years of experience across 250 investors. Ben here in the Investor Relations team has pointed out that, actually, the pyramids aren't that old. We don't have any investors, by the way, who are that old. But the second thing they do is they deliver investment performance over the long term. They are true to label. They deliver client returns. And the returns that clients expect, thanks to really clear investment philosophies and processes, which are robust. In today's world, how refreshing to have something that actually does what it says on the tin. And thirdly, they all provide solutions that aren't easily replicated by passives. They provide essential building blocks for client portfolios. So the need to harness return opportunities on the left-hand side of this chart, we're actually seeing mainly across our wealth pensions and long-term asset owner segments, and that is being mainly met by our equities team, as Johanna mentioned. And let me just run through a few of these just to give you a flavor of why we know these are world-leading capabilities. In global equities, where clients face the index concentration Johanna mentioned, our global equity team led by Alex Tedder has gone from strength to strength. Our fundamental, thematic and quantitative equity products are all contributing to the growth. And actually, in the last 6 months, we've won mandates where people are moving back out of passive because only active can fix the complex problems that they're facing. The value investors have been -- it's been a challenging decade, hasn't it, for value investing. And many of our peers left the market or they changed styles. We backed our value team, and I'm really proud of the fact that we now have one of the largest dedicated value teams outside of the U.S. This team is pretty central to the St. James' Placement that we mentioned, which I'm going to talk about in just 1 second. And while U.S. equities have been the best performing region in 10 of the last 14 years, let us not forget that in the previous 20, the entire story was emerging markets. Return opportunities are not constant. And our emerging markets equity team and our Asian equity team are further great examples of us sticking with winning teams through the cycle. And of course, this means we're right there to ensure we can capture opportunities for clients when they arise. So our credit teams are really fixing the need for income products, particularly in the Wealth segment, and they have captured the rebound in sentiment since the bear market in 2022. U.K. and European credit, for instance, have raised in excess of GBP 9 billion in net new business in the last 2 years. We're incredibly proud of the European credit team that is a dedicated team of 10 investors led by Patrick Vogel as well as our global unconstrained team and our U.S. team. And whilst emerging markets are a little bit out of favor, our team of 16 individuals with an average of 17 years experience between them are delivering market-beating returns with a balanced approach to risk. And our multi-asset and solutions team, of course, build portfolios that clients need around future-proofing. And this includes the outsourced models to support clients with investment and governance needs. And we've seen this particularly resonate in the U.K. with defined benefits and defined contribution schemes. So our core solutions team led by James Barham really is creating outcome-based solutions for clients through fiduciary management and outsourced CIO services. In 2024, we delivered more than 25 fiduciary management mandates, and there is a strong pipeline as we come into 2025. We need to position resources in our Public Markets business behind these 9 world-leading capabilities where we know client demand is growing. The natural next question is, what happens to everything we do that is not on the slide? Well, hopefully, by now, you've worked out that my starting point is clients. So we're not going to do anything that impacts the client franchise. But what we are going to do is to take our incremental resources, and we're going to put them behind these 9 capabilities. And that includes taking 80% of our sales efforts in Public Markets and focusing it on these 9 capabilities. So I mentioned the St. James' Place win. Let's look at -- actually, I want to give you a client's example of how we bring our Public Markets business to life. This win was in the news fairly recently. From April, Schroders is going to manage the GBP 5 billion flagship global sustainable equity fund. The portfolio is blending our market-leading global sustainable value and global sustainable growth strategies together to produce a balanced and highly active portfolio. Importantly, the fund actually meets the sustainable -- sustainability focused SDR label, which was central to St. James' Place's demands. And I have to say we wouldn't have been able to achieve that without a fantastic effort from our policy, governance and sustainability teams. So this example actually shows where we think the future of Public Markets -- our Public Markets business sits and the growth that is going to be driven behind it, meeting client needs with market-leading investment capabilities pulled together. But given the amount of time I read in the newspapers about the growth in passive destroying our business, I wanted to share a few concrete bits of evidence to refute that claim. Despite the headlines, active public markets remain large and are expected to grow by 2027 to $72 trillion. That's across all asset classes within public markets. Active public assets account for half of global AUM and 46% of global revenues. And what I find really interesting is that the flows between active funds is 2.5x higher than the flows into passive funds. So there is and there will continue to be a huge opportunity with this market for us to address. And of course, winners are going to have to be excellent at delivering investment performance and delivering client service. And that, of course, is what we do. Our Public Markets business has the scale to reach clients around the world and the diversification to ensure that we can remain relevant to clients at any point in the cycle. We are diversified by geography, by asset class and by our client segments. And Meagen outlined this morning the trends that are impacting our Public Markets margins and why these are decreasing. Our margins will actually reflect what our clients demand. So that's the business as it looks today. So let's talk about what we're going to do that is different as we back winners and broaden client access. So our target is to stabilize the downward trend that we have experienced in revenues by FY '27, and we're going to do this by making 3 changes. You're already getting insight into how I think, by the way, 3 businesses, 3 actions, 3 changes, right? So those are the common theme as we go through the rest of the morning. Firstly, we're absolutely putting our resources, as I said, behind those 9 market-leading capabilities where demand is growing. What does that look like? 80% of our sales efforts focused across markets on those 9 strategies. And this is also where we're going to think about our innovation and our investments. Our efforts on innovation will, again, think about how we create more client resilience and focus our outcomes on these products. Second, you've heard several times about launching active ETFs in Europe. That is about increasing client access. These ETFs, we're going to focus on the strategies where we can deliver at scale, such as global equities and fixed income. The recent creation of our equity solutions team will also allow us to better customize mandates at scale. And customization, as you all appreciate, is becoming increasingly important for our institutional clients, and we're now able to package the capabilities that we mentioned in a much more bespoke manner, tailored exactly as we did with SJP to client needs. And finally, we're making changes to enhance the operating platform that will continue to simplify our product range. As I said, we have aspirations to do much, much more than the 10% we have done already. This doesn't just reduce operational complexity, but it reduces complexity in client group, allowing us to focus that sales effort in a much better way. We're aligning our operating platform from front all the way through to back and streamlining our research efforts to ensure our investment teams are operating both effectively and efficiently. And by making these 3 changes, we will deliver the target of stabilized revenues by FY '27. Turning to our second business, Schroders Capital. Now I have a little bit of a warning here. So you all know our corporate brand colors are blue. But to make our differentiated Schroders Capital business stand out, we chose orange. It does mean the following slides are quite right. One of the reasons, by the way, the lights are up is because when we turn the lights down, everyone had a lovely orange glow about them when I put this slide on the screen. But whether it is the need to address the duration matched assets in pensions and insurance or accessing the full liquidity spectrum from private debt within wealth or supporting the energy transition for long-term asset owners, this business has the ability to provide diversification of assets across all client segments. Schroders Capital now stands at GBP 70 billion of AUM. And as in Public Markets, our capabilities are structured in a way that addresses these key investment themes. Whilst we operate in all 4 of the main Private Market pillars, our path to accelerated growth lies in focus and driving our flow into the areas of overlap between our specialist capabilities and the client themes. In addressing the need for diversification, clients look to our private equity business. Now when I go out on the road, lots of people ask me about our private equity business. It is a world leader in small- and medium-enterprise buyouts. We're harnessing the transformation opportunities of high-growth businesses, and that provides a differentiated offering. It isn't a Blackstone. It's a totally differentiated product. And it allows realizations because those businesses are often purchased by larger companies or other private equity houses want to buy them. We have a strong and scaled private debt and credit alternatives franchise with GBP 24 billion of assets under management. We offer clients flexible solutions across liquidity spectrum. But we don't operate in the direct lending space. We forecast that asset-backed finance will grow faster than the more mainstream private debt offerings. We're well placed in these specialties. And for example, we run the world's largest catastrophe bond fund with GBP 2.3 billion in assets. And in real estate debt, the team now manages GBP 2.6 billion of lending. And real estate is providing future-proofing through portfolio resilience. Our focus is in growth areas such as hospitality and logistics. We manage our properties as I think you hope we manage our business, not just owning the asset, but understanding how we improve it. And we run one of the most extensive franchises in real estate across the U.K. and Europe. And finally, in infrastructure, we've been operating in renewable energy for over 20 years. Some of you will have heard me say before, I am very proud of the fact that we are the largest owner of renewable energy assets in the U.K. What I forgot to keep telling people is that we're the largest owner of renewable energy assets in Ireland as well as the largest owner of renewable asset of wind across Europe. So let's talk about one specific client example. We've had a long and trusted relationship with the Ireland Strategic Investment Fund since they were the cornerstone investor when we did the IPO in 2017 of our European renewable fund. But since then, we have worked really close -- closely with them, and it became really clear to us that their key objective is to help the Irish government manage to the net zero target that they have committed to in a way that is commercial targeted and supports growth in the economy. So we worked with them collaboratively to enable them to be the cornerstone investor of our Schroders Greencoat fund. And importantly, the launch of that new European fund enables us to keep working with them so we can respond to future opportunities as they arise. So let's zoom out back up as we did with Public Markets to look at the market as a whole. I don't think I need to tell you that the Private Markets constitute a large and growing revenue pool, but let me remind you, nonetheless, of the detail. Private Markets AUM is forecast to grow at 11% compound to reach GBP 27 trillion and 17% of global AUM by 2027. Private Markets revenues are forecast to grow at broadly the same rate and the growth opportunity, therefore, is pretty clear. That's why we've been positioning Schroders Capital to capture that growth opportunity. You can see here that over the last 5 years, we've grown Schroders Capital AUM at 15% and revenue at 16% compound, respectively, and that's been achieved through both organic activity. We've actually raised GBP 50 billion of gross fundraising, averaging 21% of opening AUM. But of course, we've also broadened our capabilities through selective acquisitions. So whilst this percentage on the face of it looks good relative to the industry, we're absolutely going to improve that gross fundraising and net new business further, which brings me on to the target for Schroders Capital. So we are committed to generating cumulative net new business of GBP 20 billion over the next 3 years. And we're going to do this fondly enough through 3 levers. Firstly, we're going to invest in and scale the higher returning specialist capabilities that we know that we have, where we're differentiated and we can see strong demand. We know that our clients want to see us commit more of our balance sheet alongside there. So to that end, we have set aside GBP 500 million of -- for seed and co-investments. That's significantly higher than the GBP 156 million that we have today. And to create capacity for this investment, we're already recycling resources by divesting of smaller noncore capabilities where we don't see the required levels of future client demand. A really great example of this is how we've restructured and streamlined our real estate business. Secondly, we're driving flow into these targeted growth capabilities by building a specialist sales team, a team of up to 40 dedicated individuals who can accelerate our revenue growth, particularly in the institutional channel. We recognize that clients have developed their own in-house expertise on private markets and what we want to ensure that we have specialist to specialist conversations. Building out that team is already underway. And finally, we're going to leverage the group's strong position in the Wealth segment and the growing demand for Private Market solutions. We have a huge competitive advantage over standalone Private Markets players because for the last 100 years, we have been working with the Wealth channel, and we know what clients need in that channel. So in summary, we're going to take decisive action to across Schroders Capital to increase flows over the next 3 years to achieve a cumulative net new business of GBP 20 billion. So turning now to Wealth Management. Let's go back to what the market needs. And the interesting thing about Wealth, of course, is the drivers are very different by client subsegment. So again, let me take you through our assessment of the drivers. So our family office and ultra-high net worth business clearly needs a state planning philanthropy and a real focus on intergenerational wealth transfer. High net worth individuals are looking for liquidity and exit advice, particularly as entrepreneurs. Our Charities and endowments business are really looking for impact investing. So Cazenove Capital, our largest Wealth business, has GBP 62 billion of assets under management is dedicated to serving all of these client subsegments with discretionary wealth management, financial planning and advisory services here in the U.K. Here's my second favorite statistic. The retention stats in this business are, frankly, phenomenal. In 2024, we had a 99% retention rate for both clients and advisers. I'm really annoyed with Mary-Anne that, that wasn't 100%. So Cazenove Capital is represented internationally, of course, by Schroders Wealth Management, and that international presence allows us to cater for an international client base. But our affluent clients are typically looked after with comprehensive financial planning and investment services. And Schroders Personal Wealth, the joint venture with Lloyds, focuses on the needs of this client base. Now we've talked a lot about SPW in the path and the journey that, that business has been on. But it has made significant progress in '24, both in terms of growth and profitability. It now serves over 55,000 clients, that's up 13% year-on-year, and actually delivered growth in average AUM per client of 10%. And finally, the adviser community requires platform services to support their clients efficiently and effectively. And Benchmark has established itself as a significant player in financial planning and now manages more than GBP 21 billion of assets on its proprietary platform. Their focus on technology and innovation is really allowing us to serve advisers effectively, enhancing their ability to meet their end client needs. So clients and advisers across these segments benefit from the collective resources of Schroders. Again, this is a plug for the why we're better together point, which includes our strong operating platform and, of course, the deep asset management expertise. Without that, we would not be able to provide the portfolio services to Schroders Personal Wealth or the model portfolio services that we provide to Benchmark. So in total, our Wealth Management business manages GBP 143 billion in assets, reflecting the strength and depth of our wealth offering. So you see each of these businesses, I'm giving you a client example, and I wanted to give you my last client example with you actually hearing from a client. In this case, Tanya, who is the Finance Director of the RSPCA. And she's going to tell you about how our approach help them enhance their sustainability credentials and think about managing assets in a much more cost-effective manner. [Presentation]

So I owe Tanya a big favor because what I wanted her to explain is why she love Cazenove. And so we went off and we asked to shoot that video. And without any scripting, what she actually explained to you was the power of our group because Cazenove Capital ensure that solutions individually would not have been able to win that mandate. So I really wanted her to explain to you how awesome Cazenove was, but I think she's really done a good job of underscoring the power of our group. So the U.K. is our primary wealth market, where assets are forecast to grow to GBP 8 trillion by 2027 with the wealthier segments importantly growing fastest. Whilst large, the U.K. market is exceptionally fragmented. And in the high net worth segment, for example, the top 10 participants account for just 35% of the market. So this means there is plenty of room for Cazenove Capital to continue to take market share. Our client relationships are so important in Wealth Management, where we continuously challenge ourselves about how we ensure our advisers are empowered to deliver exceptional service because the client we have in Wealth will always remain the top priority. As a result of that focus, over the last 5 years, we've experienced compound annual growth rates in AUM, net operating revenue and operating profit of 9%, 11% and 12%, respectively. And our ambition is to continue to grow. No pressure, Oliver, but maybe we can go a bit faster. We're keeping our historical target, which is at the top end of the market already, of 5% to 7% per annum growth. And to deliver this, we're focused on 3 key strategies. Firstly, enhancing the Cazenove Capital senior relationship managers with extensive experience and, of course, growing, as I mentioned earlier, our Benchmark adviser network. Secondly, we'll continue to make selective acquisitions that complement our existing capabilities. And I think within this part of the business, we've really demonstrated a successful track record in acquisitions and integration of business. And that really underscores our commitment to creating the right partnerships. And thirdly, we're going to upgrade our technology platform. And in particular, we have to do a complete replatforming of Cazenove Capital, and we'll continue to improve our SPW operating model as we've talked about in the past. So in summary, I'm excited about the journey ahead for the Wealth business. And as I said, I'm really looking forward to working with Oliver when he arrives. I know he's already got lots of ideas. So let me spend a minute or 2 on our JVs and associates. Hubert, I hope I'm going to answer your question. I've already touched on SPW, so I'm going to focus on China and India. So in China, our Fund Management Company joint venture has $68 billion of AUM, and we established that back in 2005. The performance of this JV, of course, reflects current market volatility. But let us not forget, China is still the second largest asset management market globally and still has the highest growing mass affluent sector. That is an awesome market. That joint venture gives us an important seat at the table of growth. India, 14th largest asset management market with the highest level of growth in 2024. In fact, actually, since 2020, it's grown north of 20% every single year. We own 30% of Axis Asset Management. It's established a youngster. It was only established in 2009. It's a youngster by the Indian market terms. And it's already secured an eighth largest asset management company spot. And of course, the distribution is supported through Axis Bank, the third largest private sector bank in India with 5,500 branches. So I think our joint ventures, Hubert, are a totally underappreciated source of value for our shareholders. In aggregate, we have GBP 117 billion of AUM through our joint ventures and associates, and they generate just under GBP 50 million of operating profit for Schroders. Now if we take current multiples in India because they are observable, and that implies a valuation of that company of about GBP 1 billion. So peer comps in China, a little bit harder to come by. But if we apply that same multiple to the Chinese FMC, that business is worth GBP 2 billion. So you've now been sat here for a long time, so let me summarize before we go to Q&A. I think this slide actually pulls everything together. I told you that I think Schroders is a tomorrow company, not a today company. And to make sure that we are, we're simplifying the business. We're removing costs, we're removing complexity, and we are driving focused and selective investments for growth. We know what we're good at, but we also know we can't do everything. We have a clear plan to return the business back to profitable growth, and that's supported by clear targets. Over the next 18 to 24 months, we're going to simplify the operating model, drive efficiency and build out our core areas of strength, enabling us to accelerate growth in the latter part of the 3-year program. So you'd be glad to know I have now finished, and I'm going to hand back over to you. Just as a reminder for everyone, a lot of excitement here in the front left, put your hands up, please introduce yourself, where you're from and limit it to 3 questions. Initially, Meagen is going to join me on stage. Fortunately, our 3 CEOs are all miced up, so I get to phone a friend. You know I'm in trouble if I have to ask the audience. And of course, everyone online, please feel free to follow the instructions on submitting your questions, and we'll come back to you after we take the questions in the room.