Wrap Text
Investec (comprising Investec plc and Investec Limited) – pre-close briefing statement
Investec Limited Investec plc
Incorporated in the Republic of South Africa Incorporated in England and Wales
Registration number 1925/002833/06 Registration number 3633621
JSE share code: INL LSE share code: INVP
NSX share code: IVD JSE share code: INP
BSE share code: INVESTEC ISIN: GB00B17BBQ50
ISIN: ZAE000081949
Investec (comprising Investec plc and Investec Limited) – pre-close briefing statement
17 September 2015
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 2016.
Financial overview of the six months ending 30 September 2015
The operating environment in the UK has shown continued improvement supporting good
levels of activity in the banking businesses. In South Africa the corporate and private banking
businesses have benefitted from positive business momentum, notwithstanding an overall
weakness in macro-economic conditions. Recent currency and equity market volatility (if
sustained) is likely to create headwinds in the Wealth & Investment and Asset Management
businesses.
Against this backdrop, the UK Specialist Banking business is expected to report results
significantly higher than the prior year, whilst the South African Specialist Banking business is
expected to report results well ahead of the prior year in Rands. Overall, the global Specialist
Banking business is expected to report results substantially ahead of the prior year.
The Wealth & Investment and Asset Management divisions are expected to report results
marginally behind the prior year. Both divisions have continued to experience net inflows of
GBP1.1 billion and GBP1.5 billion, respectively.
Overall group results have been negatively impacted by the depreciation of the average
Rand: Pounds Sterling exchange rate of approximately 8% over the period.
Taking into account the above mentioned factors, operating profit (refer to definition in the
notes) is expected to be comfortably ahead of the prior year in Pounds Sterling.
Salient financial features include:
- Revenue (net of depreciation on operating leased assets) is expected to be moderately
ahead of the prior year
- Recurring income as a percentage of total operating income is expected to be
approximately 72% (2014: 77%)
- Impairments are expected to be approximately 20% lower than the prior year
- Expenses are expected to be marginally higher than the prior year
- For the period 31 March 2015 to 31 August 2015:
- Third party assets under management decreased 6% to GBP116.2 billion – a
decrease of 2% on a currency neutral basis
- Customer accounts (deposits) decreased 3% to GBP22.0 billion – an increase of
5% on a currency neutral basis
- Core loans and advances decreased 1% to GBP17.0 billion – an increase of 6%
on a currency neutral basis
On behalf of the board
Fani Titi (Chairman), Stephen Koseff (Chief Executive Officer) and Bernard Kantor (Managing
Director)
Liquidity and capital management
- The group has continued to diversify and improve the quality of its funding sources
- The group has had higher average liquidity levels in the UK driven by the sale of group
assets in the prior year. These balances have decreased by 10% since March 2015
- The group has continued to see good progress from Investec Cash Investments in South
Africa leading to higher cash balances
- The group’s cost of funds has remained broadly stable
- Cash balances remain strong. Currently the group holds GBP9.5 billion in cash and near
cash balances (GBP5.0 billion (R104.5 billion) in Investec Limited and GBP4.5 billion in
Investec plc) which amounts to 37% of its liability base
- Advances as a percentage of customer deposits at 30 August 2015 was 75.0%
(31 March 2015: 74.0%)
- For the six months to 30 September 2015 for both Investec plc and Investec Limited:
- Capital ratios are expected to be within the group’s target total capital adequacy
range
- The common equity tier 1 ratio is expected to be slightly below the group’s 2016
target of 10% for Investec Limited; Investec plc remains ahead of this target
- The leverage ratio is sound and remains well above the group’s target of 6% on
an estimated Basel 3 fully loaded basis.
Asset quality and impairment trends
- The total income statement impairment charge is expected to be approximately 20%
lower than the prior year
- Impairments on the UK legacy portfolio continue to decline
- Impairments in South Africa are expected to be in line with the prior year
- The group expects the credit loss ratio on total average core loans and advances to be
approximately 0.60%-0.65% (March 2015: 0.68%; September 2014: 0.70%).
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.
Asset Management
- Net inflows of approximately GBP1.5 billion to end of August 2015
- 1H2016 earnings impacted by market and currency volatility and lower performance fees
in South Africa
- Good business momentum supported by competitive investment performance
- Since 31 March 2015 assets under management have decreased by 8% to GBP71.1
billion – a decrease of 4% on a currency neutral basis.
Wealth & Investment
- Solid net inflows of GBP1.1 billion to end of August 2015
- Average funds under management negatively impacted by weaker equity markets and
the Rand
- Overall performance of the global business is expected to be marginally lower than the
prior year:
- due to investment expenditure on growth initiatives (digital offering, continued
select investment in senior professionals)
- good performance from the South African business in Rand supported by net
inflows
- Since 31 March 2015 assets under management have decreased by 3% to GBP44.6
billion – an increase of 1% on a currency neutral basis.
Specialist Banking
- The global Specialist Banking business is expected to post results substantially ahead of
the prior year
- In summary key aspects include:
- Net interest margin
- Loan growth in neutral currency of 6%
- The group remains very liquid
- UK net interest impacted by the sale of group assets in the prior year
- Net interest increase in the UK ongoing business and South African
businesses supported by book growth
- Net fees and commissions
- Private client transactional and professional finance activities performing
well
- Good performance from the South African corporate treasury and
structuring businesses
- UK corporate fees in line with the prior year
- Fee income impacted by sale of Investec Bank (Australia) Limited in the
prior year
- Investment and trading income
- Significant improvement in investment income
- Sound performance from the South African portfolios and normalised
performance from the Hong Kong portfolio
- Higher earnings from the fixed income portfolio in the UK
- Customer flow trading income increased
- Costs
- South Africa is expected to report an increase in fixed costs due to an
increase in headcount
- Costs in the UK ongoing business have increased largely due to
investment in the Private Banking business
- Substantial decrease in costs relating to group sale assets and legacy
business
- Additional information on the UK Specialist Banking business:
- The Ongoing UK business is expected to report results significantly
ahead of the prior year largely as a result of increased activity levels in
the corporate and private banking businesses and a normalised
performance from the Hong Kong investment portfolio
- Both impairments and costs in the Legacy business are expected to be
lower
- As a result, the Legacy business is expected to report a smaller loss than
the prior year
- Total legacy portfolio assets are expected to decline to GBP0.67 billion
(31 March 2015: GBP0.73 billion).
Other information
Additional aspects
- Effective tax rate: expected to be approximately 20% - 21%
- Net non-controlling interests of approximately GBP18 million (profits attributable) relating
to the Asset Management business, FX hedge accounting and the consolidation of the
Property Fund
- Weighted number of shares in issue for the six months to 30 September 2015 is expected
to be approximately 873 million.
- Notes:
1. Key trends set out above, unless stated otherwise, relate to the five months ended
31 August 2015, and compare the first half of the 2016 financial year (1H2016) to the
first half of the 2015 financial year (1H2015).
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 adjusted operating profit, where adjusted
operating profit refers to net profit before tax, goodwill, acquired intangibles and non-
operating items but after adjusting for earnings attributable to other non-controlling
interests and before non-controlling interests relating to Asset Management. Trends
within the divisional sections relate to adjusted operating profit.
4. Adjusted EPS is before goodwill, acquired intangibles and non-operating items but
after tax and after adjusting for earnings attributable to all non-controlling interests.
5. Amounts represented on a currency neutral basis for balance sheet items assume
that the closing exchange rates of the group’s relevant exchange rates, as reflected
below, remain the same as at 31 August 2015 when compared to 31 March 2015.
6. 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
17 September 2015.
7. 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:
Five months to Year to Six months to
31-Aug-15 31-Mar-15 30-Sep-14
Currency Period Average Period Average Period Average
end end end
per GBP1.00
South African Rand 20.38 19.01 17.97 17.82 18.33 17.86
Australian Dollar 2.15 2.03 1.95 1.85 1.85 1.81
Euro 1.37 1.39 1.38 1.28 1.28 1.24
US Dollar 1.53 1.54 1.49 1.62 1.62 1.68
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 end: 30 September 2015
Release of interim results: 19 November 2015
For further information please contact:
Investec Investor Relations
UK: +44 (0) 207 597 5546 or + 44 (0)207 597 4493
South Africa: +27 (0) 11 286 7070
investorrelations@investec.com
Sponsor
Investec Bank Limited
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 and Europe, South Africa and Asia/Australia, as well as certain other countries. The
group was established in 1974 and currently has approximately 8 200 employees.
Investec focuses on delivering distinctive profitable solutions for its clients in three core areas
of activity namely, Asset Management, Wealth & Investment and Specialist Banking.
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 GBP4.8 billion.
Date: 17/09/2015 09:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
