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INL/INP - Investec Limited/Investec plc - Investec - pre-close briefing
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06
JSE share code: INL
ISIN: ZAE000081949
Investec plc
Incorporated in England and Wales
Registration number 3633621
JSE share code: INP
ISIN: GB00B17BBQ50
(jointly "Investec")
As part of the dual listed company structure, Investec plc and Investec
Limited notify both the London Stock Exchange and the JSE Limited of
matters which are required to be disclosed under the Disclosure,
Transparency and Listing Rules of the United Kingdom Listing Authority (the
"UKLA") and/or the JSE Listing Requirements.
Investec - pre-close briefing
15 September 2011
Investec is today hosting an investor pre-close briefing at 9:00 (BST time)
(10:00 South African time) which will focus on developments within the
group`s core business areas in the first half of the financial year ending
31 March 2012.
Operational and financial overview of the six months ending 30 September
2011
Against a backdrop of poor economic fundamentals and weak debt and equity
markets, operating conditions have been more difficult than originally
anticipated. The Asset Management and Wealth Management businesses have
continued to perform well as a result of increased average funds under
management and net inflows. The Specialist Banking businesses have
benefited from growth in net interest income and fee income but earnings
from principal activities have been under pressure. The group`s
geographical and operational diversity has, however, supported a sound
operational performance.
Salient financial features include:
* Operating profit (refer to definition in the notes) is expected
to be in line with the prior year, with four of the six operating
divisions showing an improved performance
* The UK and South African businesses are expected to post
operating profit ahead of the prior year and the Australian
business remains affected by elevated levels of impairments
* Since 31 March 2011:
- Core loans and advances are marginally down to GBP18.6
billion, however, in neutral currency (refer to explanation
in the notes) they have increased by 2%
- Customer deposits increased by 3% to GBP25.1 billion
- Third party assets under management decreased by 4% to
GBP85.6 billion, as a result of weak markets,
notwithstanding net inflows of c.GBP2.6 billion
* Core advances (excluding own originated securitised assets) as a
percentage of customer deposits were 70.0% (31 March 2011:72.4%).
* The group has a sound balance sheet with low gearing, substantial
cash and near cash and solid capital ratios.
Operating conditions are difficult as the global geopolitical landscape
remains uncertain. The group`s operational performance remains stable
underpinned by a solid recurring income base.
On behalf of the board
Hugh Herman (Chairman), Stephen Koseff (Chief Executive Officer) and
Bernard Kantor (Managing Director)
Operational overview - further details
Liquidity management
* Diversifying Investec`s funding sources has been a key element in
improving the quality of the group`s balance sheet and reducing its
reliance on wholesale funding.
* The group currently holds GBP10.2 billion in cash and near cash
balances (GBP5.8 billion in Investec Limited and GBP4.4 billion in
Investec plc) which amounts to 34% of its liability base.
Capital
* The group holds capital in excess of regulatory requirements targeting
a minimum tier one capital ratio of 11% and a total capital adequacy
ratio range of 14% to 17% on a consolidated basis for each of Investec
plc and Investec Limited.
Expected 31 Mar 30 Sep
capital 2011 2010
adequacy
ratios at
30 Sep 2011
Investec plc
Total 16.4% 16.8% 16.7%
Tier 1 11.1% 11.6% 12.1%
Investec Limited
Total 15.4% 15.9% 16.2%
Tier 1 11.7% 11.9% 12.1%
Asset quality
* The bulk of Investec`s credit and counterparty risk arises through its
Private Banking and Capital Markets activities. The Private Bank lends
to high net worth and high income individuals, whilst the Capital
Markets division transacts primarily with mid to large sized
corporates, public sector bodies and institutions.
* Impairments on core loans are expected to be lower than the prior
year.
* The group expects the credit loss ratio on total average loans and
advances to be approximately 0.90% (31 March 2011: 1.27%)
* Impairments in the Start business have increased largely due to
continued weak economic conditions in Ireland.
* The group therefore, expects a marginal increase in overall
impairments relative to the comparative period, but overall
impairments will be significantly lower than 2H2011.
Business commentary
Salient features of the operating performance of the group`s core business
areas are listed below and further details will be provided in the briefing
presentation which can be viewed on the group`s website.
Overview of expected performance: for the six months ending 30 September
2011 compared to the six months ended 30 September 2010
* Recurring income as a percentage of total operating income is expected
to be approximately 66% (2010: 63%).
* The group expects to report a satisfactory increase in total operating
income as a result of:
- An increase in net interest income
- A significant increase in net fees and commissions receivable
- A decline in income from principal transactions
* Expenses are expected to increase marginally ahead of operating income
as a result of:
- Acquisitions : Rensburg Sheppards plc; Masterlease UK
- An increase in headcount in certain divisions: Capital Markets,
Asset Management and Group Services
* As a result the group expects to report a moderate rise in the cost to
income ratio, although this ratio remains within the group`s target.
Asset Management
* Solid long term investment performance across investment capabilities,
with 100% of segregated accounts outperforming benchmark since
inception/GIPs inception
* Continued strong net inflows in excess of GBP2.0 billion
* Strong performance well ahead of last year
* Since 31 March 2011 assets under management have decreased by 2% to
GBP57.6 billion
Wealth & Investment
* Performing ahead of the prior year
- Higher average funds under management
- Net inflows of c.GBP550 million
- 100% of Rensburg Sheppards plc included for a full six months in
1H2012
* Since 31 March 2011 assets under management have decreased by 6% to
GBP27.6 billion
Property Activities
* Performance in line with expectations but lower than the prior year
Private Banking
* Overall return to profitability
- There has been some uptick in activity levels
- Moderate increase in impairments relative to the comparative
period, but significantly lower than 2H2011
* UK: has returned to profitability
* South Africa: performance behind last year
* Australia: professional finance performed well, but economic
conditions in the non-mining sector have remained muted resulting in a
higher impairment charge in the run down property book
* Since 31 March 2011 core loans have remained flat at GBP13.3 billion
and deposits have decreased by 2% to GBP12.2 billion
Investment Banking
* Weak market conditions resulted in a subdued performance
* UK: reasonable performance in corporate finance, which is offset by a
weak performance from securities activities, direct investments and
private equity
* South Africa well down on the prior year:
- Mark downs on listed investments held in the Direct Investment
portfolio and lower dividends received from the Private Equity
portfolio
- Poor performance from the institutional stockbroking business a
result of lower volumes
Capital Markets
* Satisfactory performance ahead of the prior year
* Strong performance from the South African business and a solid
performance from UK and Australia
* Since 31 March 2011 core loans have remained flat at GBP4.8 billion
Other Activities
* Central Funding and Central Costs results largely in line with the
prior year
Other information
Additional aspects
* Effective tax rate: expected to be between 19 - 20%
* Weighted number of shares in issue for the six months ending 30
September 2011 expected to be approximately 792 million
Additional aspects - Independent Commission on Banking ("ICB")
* On 12 September the ICB published its recommendations for regulatory
change to the UK banking industry, for assessment by the UK government
* The ICB has recommended that the recommendations are implemented by
2019
* The group is still assessing the impact for Investec Bank plc in the
UK
* The group`s initial impressions are that the bulk of its activities
(other than the Investment Banking and Trading businesses), including
a substantial portion of its Capital Markets business, could be held
in the ring-fenced bank as these businesses deal with corporate and
individual clients
* However, the flexibility provided by the ICB in what can be included
or excluded from the ring-fenced bank ensures that any realignment
that may be required in the bank`s business model will be moderate
* Notes:
1. Key trends set out above, unless stated otherwise, relate to the
five-months ended 31 August 2011, and compare the first half of
the 2012 financial year (1H2012) to the first half of the 2011
financial year (1H2011).
2. The financial information on which this statement is based has
not been reviewed and reported on by the group`s auditors.
3. References to operating profit relate to normalised operating
profit, where normalised operating profit refers to net profit
before tax, goodwill, acquired intangibles and non-operating
items but after adjusting for earnings attributable to non-
controlling interests.Trends within the divisional sections
relate to normalised operating profit.
4. The neutral currency calculation for core loans assumes the
Rand:GBP and Australian Dollar:GBP closing exchange rates remain
the same as at 31 August 2011 when compared to 31 March 2011.
5. Please note that matters discussed in the briefing and
highlighted above may contain forward looking statements which
are subject to various risks and uncertainties and other factors,
including, but not limited to:
- the further development of standards and interpretations
under International Financial Reporting Standards (IFRS)
applicable to past, current and future periods, evolving
practices with regard to the interpretation and application
of standards under IFRS.
- domestic and global economic and business conditions.
market related risks.
* A number of these factors are beyond the group`s control.
* These factors may cause the group`s actual future results,
performance or achievements in the markets in which it operates
to differ from those expressed or implied.
* Any forward looking statements made are based on the knowledge of
the group at 15 September 2011.
6. The group`s reporting currency is Pounds Sterling. Certain of the
group`s operations are conducted by entities outside the UK. The
results of operations and the financial condition of these
individual companies are reported in the local currencies in
which they are domiciled, including Rands, Australian Dollars and
Euros. These results are then translated into Pounds Sterling at
the applicable foreign currency exchange rates for inclusion in
the group`s combined consolidated financial statements. In the
case of the income statement, the weighted average rate for the
relevant period is applied and, in the case of the balance sheet,
the relevant closing rate is used. The following table sets out
the movements in certain relevant exchange rates against Pounds
Sterling over the period:
5 months Year ended 6 months
ended 31 Mar 2011 ended
31 Aug 2011 30 Sep 2010
Currency per Close Ave Close Ave Close Ave
GBP1.00
South African 11.45 11.12 10.88 11.16 11.00 11.29
Rand
Australian 1.52 1.52 1.55 1.65 1.63 1.70
Dollar
Euro 1.13 1.13 1.13 1.17 1.15 1.18
Dollar 1.63 1.63 1.60 1.55 1.57 1.52
Presentation details
The briefing starts at 9:00 (BST time) (10:00 South African time) and will
be broadcast live via video conference from the group`s offices in
Johannesburg to London. The briefing will also be available via a live and
recorded telephone conference call, a live and delayed video webcast, a
delayed podcast and a delayed Mp3. Further details in this regard can be
found on the website at: www.investec.com
Timetable:
Interim period: 30 September 2011
Release of interim results: 17 November 2011
For further information please contact:
Investec Investor Relations
UK: +44 (0) 207 597 5546
South Africa: +27 (0) 11 286 7070
investorrelations@investec.com
About Investec
Investec is an international specialist bank and asset manager that
provides a diverse range of financial products and services to a niche
client base in three principal markets, the United Kingdom, South Africa
and Australia as well as certain other countries. The group was established
in 1974.
Investec focuses on delivering distinctive profitable solutions for its
clients in six core areas of activity namely, Asset Management, Wealth &
Investment, Property Activities, Private Banking, Investment Banking and
Capital Markets.
In July 2002 the Investec group implemented a dual listed company structure
with listings on the London and Johannesburg Stock Exchanges. The combined
group`s current market capitalisation is approximately GBP3.3 billion.
Date: 15/09/2011 09:50:01 Supplied by www.sharenet.co.za
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