SHARES in Schroders, the UK’s biggest independent fund manager, plunged by more than 10 per cent yesterday after it issued a profits warning and admitted that accounting errors had caused it to overstate profits by £11 million.

The accounting bungles, which relate to profits in 2000, were uncovered a week ago as the fund manager switched to a new computer system. Nick MacAndrew, Schroders’ chief financial officer, said that the company had failed to reconcile estimated monthly revenue with the actual revenue earned. He said: “It was an unfortunate human error.”

Next month Mr MacAndrew, chief financial officer for more than a decade, is to be replaced by Jonathan Asquith, who previously worked at Deutsche Morgan Grenfell with Michael Dobson, Schroders’ new chief executive. Mr MacAndrew is expected to get a substantial payoff. Schroders is also expected to review its external accountants, PricewaterhouseCoopers, which earned £5.2 million in audit and non-audit fees from Schroders in 2000. A spokesman said: “Like all companies, we keep auditors under review.”

Analysts said that the overstatement, bringing down profits in 2000 to £138 million, was an “embarrassment”. However commentators were more alarmed by the warning on 2001 profits, which are expected to be up to 10 per cent lower than the £70 million estimated.

The company’s shares dropped from 911p to 815½p before ending the day down 36p at 875p.

Mr Dobson, who has headed the company for just two months, said that the continued falls in stock markets worldwide had led to the warning. Schroders has also been hit by the loss of a number of clients, who switched funds to managers with a better performance record. In the first half of the year, disaffected clients switched more than £5 billion out of the company.

Mr Dobson is widely expected to shake up the company, which has suffered from poor performance in recent years. Mr Dobson succeeded David Salisbury, chief executive for just 15 months, who left after announcing a 68 per cent fall in half-year profits for 2001.

Yesterday Mr Dobson indicated that the company expected that Peter Sedgwick, chairman, would also shortly retire. He said: “It is an open secret.” However, he said the firm was not actively seeking a replacement at this time.

Analysts believe that Mr Dobson will try to turn round the fund managers within three years before seeking a buyer for the business. Bruno Schroder and his family trusts hold a controlling stake. It is widely expected that the family will eventually sell out.

The new chief executive has already run into difficulty with shareholders, who have questioned his £3.5 million annual remuneration package.

Schroders said that more details would be given about progress being made under the new management team and prospects for 2002 when it reported results next month. The company sold off its investment banking division to Citibank two years ago, and is still in the process of redeploying some of the cash raised from the sale.

The Times

-- Anonymous, January 17, 2002