Wrap Text
INP/INL: Unaudited combined consolidated financial results for the six months ended 30 September 2014
Investec plc
Incorporated in England and Wales
(Registration number 3633621)
JSE share code: INP
LSE share code: INVP
ISIN: GB00B17BBQ50
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06)
JSE share code: INL
NSX share code: IVD
BSE share code: INVESTEC
ISIN: ZAE000081949
Investec plc and Investec Limited (combined results)
Unaudited combined consolidated financial results for the six months ended 30 September 2014
Investec, the international specialist bank and asset manager, announces its results for the six months ended 30 September 2014
Highlights
- Operating profit before goodwill, acquired intangibles, non-operating items and taxation
and after other non-controlling interests ("operating profit") increased 26.9% in Rand to
R4,286 million (2013: R3,376 million)
- Recurring income as a percentage of total operating income amounted to 77.1%
(2013: 70.9%)
- Wealth & Investment's operating profit increased by 46.0% in Rand. Asset Management
reported operating profit in Rand 26.7% ahead of the prior year. Both divisions benefited from
higher levels of average funds under management and combined net inflows of R75 billion
- The Specialist Banking business reported an increase in operating profit of 22.3% in Rand
largely due to strong performances from the South African banking business and the UK
Corporate and Institutional business, and a lower loss reported by Australia, partially offset by
less investment income earned on the Hong Kong investment portfolio.
- The combined South African business reported operating profit 21.5% ahead of the prior year
in Rand, whilst the combined UK and Other businesses posted a 17.6% increase in operating
profit in Pounds Sterling
- The annualised credit loss charge as a percentage of average gross core loans and advances
amounted to 0.70%, with impairments decreasing 5.3% in Rand
- Capital remained well in excess of current regulatory requirements. All our banking subsidiaries
meet current internal targets. Investec Limited and Investec plc should comfortably achieve
a common equity tier one ratio above 10% by March 2016. Leverage ratios remain in excess
of 7%
- Liquidity remains strong with cash and near cash balances amounting to R166 billion
- As the group's Pounds Sterling results have been negatively impacted by the depreciation
of the average Rand: Pounds Sterling exchange rate of approximately 19% over the period,
both Rand and Pounds Sterling financial features are reflected in the highlights and financial
features summary below
Overview of results
Results in Rand Results in Pounds Sterling
Six months to Six months to Six months to Six months to
30 September 30 September % 30 September 30 September %
2014 2013^ change 2014 2013^ change
Operating profit before taxation* (million) R4 286 R3 376 26.9 GBP241 GBP222 8.6
Earnings attributable to shareholders (million) R1 742 R2 489 (30.0) GBP122 GBP163 (25.6)
Adjusted earnings attributable to ordinary shareholders** (million) R3 002 R2 486 20.8 GBP169 GBP163 3.6
Adjusted earnings per share** 350c 289c 21.1 19.7p 19.0p 3.7
Basic earnings per share 157c 247c (36.4) 11.6p 16.2p (28.4)
Headline earnings per share 312c 238c 31.1 17.6p 15.5p 13.5
Dividends per share 146c 131c 11.5 8.5p 8.0p 6.3
Cost to income ratio 67.8% 67.7%
Stephen Koseff, Chief Executive Officer of Investec said:
"These results demonstrate that we are delivering
on our promises. The results would have been
even stronger but for the continued weakness
of the Rand. The investments we have made in
the Asset Management and Wealth & Investment
businesses are supporting solid net inflows.
The performances in our South African bank and
the corporate and institutional bank in the UK
demonstrate the strength of our franchise."
At At At At
30 September 31 March % 30 September 31 March %
2014 2014^ change 2014 2014^ change
Balance sheet
Net asset value per share 6 557c 6 603c (0.7) 357.7p 376.0p (4.9)
Tangible net asset value per share 5 487c 5 426c 1.1 299.4p 309.0p (3.1)
Total equity (million) R72 033 R70 506 2.2 GBP3 931 GBP4 016 (2.1)
Total assets (million) R841 729 R827 649 1.7 GBP45 931 GBP47 142 (2.6)
Core loans and advances to customers (million) R292 869 R301 224 (2.8) GBP15 981 GBP17 157 (6.9)
Cash and near cash balances (million) R165 617 R160 405 3.2 GBP9 037 GBP9 135 (1.1)
Customer deposits (million) R407 813 R396 952 2.7 GBP22 253 GBP22 610 (1.6)
Third party assets under management (million) R2 121 258 R1 930 564 9.9 GBP115 726 GBP109 941 5.3
Return on average adjusted shareholders' equity 10.7% 10.0%
Return on average risk-weighted assets 1.24% 1.14%
Defaults (net of impairments and before collateral) as a percentage
of net core loans 2.24% 2.30%
Loans and advances to customers as a percentage of customer deposits 70.0% 72.0%
* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.
** Before goodwill, acquired intangibles, non-operating items and after total non-controlling interests.
^ Restated for IFRIC 21 – refer to commentary section of this report.
Bernard Kantor, Managing Director of Investec said:
"Whilst we have a good corporate and institutional
banking franchise in the UK, our focus remains
on developing our high income private banking
business and improving structural inefficiencies,
which we believe is key to unlocking future value in
the UK bank. Leveraging and growing our global
private client platform, together with Investec
Wealth & Investment presents an exciting
opportunity for the group."
Business highlights – operating profit in Rands
- Asset Management: increase of 26.7% to R1 370 million (2013: R1 081 million)
- Wealth & Investment: increase of 46.0% to R676 million (2013: R463 million)
- Specialist Banking: increase of 22.3% to R2 240 million (2013: R1 832 million)
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 two principal markets, the United Kingdom and South Africa 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 R85 billion.
For further information
Investec +27 (0) 11 286 7070 or +44 20 (0) 7597 5546
Stephen Koseff, Chief Executive Officer
Bernard Kantor, Managing Director
Ursula Nobrega, Investor Relations (mobile:+27 (0) 82 552 8808)
Brunswick (SA PR advisers)
Cecilia de Almeida
+27 (0) 11 502 7300
Presentation/conference call details
A presentation on the results will commence at 9:00 UK time/11:00 SA time. Viewing options
as below:
- Live on South African TV (Business day TV channel 412 DSTV)
- A live and delayed video webcast at www.investec.com
- Toll free numbers for the telephone conference facilities
– SA participants: 0800 200 648
– UK participants: 0808 162 4061
– rest of Europe and other participants: +800 246 78 700
– Australian participants: 1800 350 100
– USA participants: 1855 481 6362
Investec plc
Incorporated in England and Wales
(Registration number 3633621)
JSE share code: INP
LSE share code: INVP
ISIN: GB00B17BBQ50
Registered office:
2 Gresham Street, London
EC2V 7QP, United Kingdom
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Company secretary:
D Miller-
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06)
JSE share code: INL
NSX share code: IVD
BSE share code: INVESTEC
ISIN: ZAE000081949
Registered office:
100 Grayston Drive
Sandown, Sandton, 2196
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Company secretary:
N van Wyk
Directors:
F Titi (Chairman),
S Koseff# (Chief Executive),
B Kantor# (Managing Director),
G R Burger# (Group Risk and Finance Director),
C A Carolus, H J du Toit#, P K O Crosthwaite-,
Z B M Bassa*, C R Jacobs-^,
Lord Malloch-Brown-^, K L Shuenyane^,
B Fried-, D Friedland,
H Fukuda OBE-, I R Kantor,
P R S Thomas
# Executive
- British
* Appointed 01 November 2014
^ Appointed 08 August 2014
Sponsor:
Investec Bank Limited
Combined consolidated income statement
Six months to Six months to Year to
GBP'000 30 September 2014 30 September 2013* 31 March 2014*
Interest income 912 645 979 825 1 905 383
Interest expense (580 259) (661 411) (1 253 704)
Net interest income 332 386 318 414 651 679
Fee and commission income 590 666 561 079 1 136 902
Fee and commission expense (63 660) (76 203) (147 481)
Investment income 45 975 61 828 166 809
Trading income arising from
– customer flow 51 285 54 431 103 914
– balance sheet management and other trading activities (9 199) 13 668 10 587
Other operating income 5 052 8 577 18 554
Total operating income before impairment losses on loans
and advances 952 505 941 794 1 940 964
Impairment losses on loans and advances (66 400) (83 087) (166 152)
Operating income 886 105 858 707 1 774 812
Operating costs (645 204) (634 667) (1 307 243)
Depreciation on operating leased assets (1 089) (3 856) (6 044)
Operating profit before goodwill and acquired intangibles 239 812 220 184 461 525
Impairment of goodwill (4 783) (854) (12 797)
Amortisation of acquired intangibles (7 394) (6 702) (13 393)
Operating costs arising from integration, restructuring and partial
disposal of subsidiaries – (15 239) (20 890)
Operating profit 227 635 197 389 414 445
Net (loss)/profit on sale of subsidiaries and disposal groups held
for sale (18 593) – 9 821
Profit before taxation 209 042 197 389 424 266
Taxation on operating profit before goodwill (45 167) (38 376) (78 910)
Taxation on acquired intangibles and acquisition/disposal/integration
of subsidiaries (33 852) 5 827 7 289
Profit after taxation 130 023 164 840 352 645
Profit attributable to Asset Management non-controlling interests (9 356) (2 950) (11 031)
Loss/(profit) attributable to other non-controlling interests 957 1 493 (10 849)
Earnings attributable to shareholders 121 624 163 383 330 765
Earnings attributable to shareholders 121 624 163 383 330 765
Impairment of goodwill 4 783 854 12 797
Amortisation of acquired intangibles 7 394 6 702 13 393
Operating costs arising from integration, restructuring and partial
disposal of subsidiaries – 15 239 20 890
Net loss/(profit) on sale of subsidiaries and disposal groups held
for sale 18 593 – (9 821)
Taxation on acquired intangibles and acquisition/disposal/integration
of subsidiaries 33 852 (5 827) (7 289)
Preference dividends paid (21 935) (23 961) (35 268)
Accrual adjustment on earnings attributable to other equity holders 4 869 5 411 (386)
Currency hedge attributable to perpetual equity instruments (115) 1 419 1 842
Earnings before goodwill impairment and non-operating items 169 065 163 220 326 923
Headline adjustments (18 203) (29 783) (35 361)
Headline earnings 150 862 133 437 291 562
Earnings per share (pence)
– Basic 11.6 16.2 34.3
– Diluted 11.0 15.3 32.3
Adjusted earnings per share (pence)
– Basic 19.7 19.0 37.9
– Diluted 18.7 18.0 35.8
Dividends per share (pence)
– Interim 8.5 8.0 8.0
– Final N/A N/A 11.0
Headline earnings per share (pence)
– Basic 17.6 15.5 33.8
– Diluted 16.7 14.7 32.3
Number of weighted average shares (million) 858.1 859.6 862.6
* Restated for IFRIC 21 – refer to commentary section of this report.
Combined consolidated statement of comprehensive income
Six months to Six months to Year to
GBP'000 30 September 2014 30 September 2013* 31 March 2014*
Profit after taxation 130 023 164 840 352 645
Other comprehensive income/(loss):
Items that may be reclassified to the income statement:
Fair value movements on cash flow hedges taken directly to other
comprehensive income** (5 124) (7 772) (3 582)
Gains on realisation of available-for-sale assets recycled through the
income statement** (4 432) (3 123) (2 972)
Fair value movements on available-for-sale assets taken directly to other
comprehensive income** 9 158 (17 588) 347
Foreign currency adjustments on translating foreign operations (115 842) (276 215) (407 479)
Items that will not be reclassified to the income statement:
Remeasurement of net defined pension asset – – (5 870)
Total comprehensive income/(loss) 13 783 (139 858) (66 911)
Total comprehensive income/(loss) attributable to non-controlling interests 9 698 (16 188) (12 724)
Total comprehensive loss attributable to ordinary shareholders (17 850) (147 631) (89 455)
Total comprehensive income attributable to perpetual preferred securities 21 935 23 961 35 268
Total comprehensive income/(loss) 13 783 (139 858) (66 911)
* Restated for IFRIC 21 – refer to commentary section of this report.
** Net of taxation GBP(0.9) million (six months for 30 September: GBP3.1 million, year to 31 March 2014: GBP7.1 million).
Summarised combined consolidated cash flow statements
Six months to Six months to Year to
GBP'000 30 September 2014 30 September 2013* 31 March 2014*
Cash inflows from operations 308 376 338 959 668 725
(Increase)/decrease in operating assets (986 865) 300 556 (979 947)
Increase/(decrease) in operating liabilities 1 638 568 (103 257) 1 290 173
Net cash inflow from operating activities 960 079 536 258 978 951
Net cash inflow from investing activities^ 81 915 128 257 24 313
Net cash outflow from financing activities (168 665) (254 137) (234 601)
Effects of exchange rate changes on cash and cash equivalent (46 188) (195 790) (281 225)
Net increase in cash and cash equivalents 827 141 214 588 487 438
Cash and cash equivalents at the beginning of the period 4 049 011 3 561 573 3 561 573
Cash and cash equivalents at the end of the period 4 876 152 3 776 161 4 049 011
* Restated for IFRIC 21 – refer to commentary section of this report.
^ Includes the cash flow effect on the sale of subsidiaries and disposal groups held for sale. Refer to commentary section of this report.
Cash and cash equivalents is defined as including cash and balances at central banks, on demand loans and advances to banks and non-sovereign and non-bank
cash placements (all of which have a maturity profile of less than three months).
Combined consolidated balance sheet
At
GBP'000 30 September 2014 31 March 2014* 30 September 2013* 31 March 2013*
Assets
Cash and balances at central banks 3 178 509 2 080 190 1 943 845 1 782 447
Loans and advances to banks 2 598 625 3 280 179 2 420 703 3 136 051
Non-sovereign and non-bank cash placements 567 683 515 189 474 151 420 960
Reverse repurchase agreements and cash
collateral on securities borrowed 1 120 419 1 388 980 1 565 256 2 358 672
Sovereign debt securities 2 656 672 3 215 432 3 465 113 4 077 217
Bank debt securities 1 422 390 1 568 097 1 733 907 1 879 105
Other debt securities 469 524 605 378 574 285 449 216
Derivative financial instruments 1 994 238 1 619 415 2 001 005 1 983 132
Securities arising from trading activities 920 244 870 088 978 648 931 603
Investment portfolio 909 407 825 745 852 199 928 893
Loans and advances to customers 15 577 508 16 281 612 16 519 838 17 484 524
Own originated loans and advances to
customers securitised 403 742 875 755 871 161 930 449
Other loans and advances 427 865 1 693 569 1 899 718 2 033 973
Other securitised assets 937 508 3 576 526 3 806 822 4 003 208
Interests in associated undertakings 23 664 24 316 25 728 27 950
Deferred taxation assets 87 070 131 142 132 750 165 457
Other assets 1 562 378 1 474 992 1 720 278 1 959 550
Property and equipment 99 792 108 738 124 398 134 101
Investment properties 529 600 509 228 395 277 451 975
Goodwill 363 518 433 571 456 284 466 906
Intangible assets 149 892 159 169 167 871 178 567
Non-current assets/disposal groups
classified as held for sale 4 105 517 41 637 – –
40 105 765 41 278 948 42 129 237 45 783 956
Other financial instruments at fair value through
profit or loss in respect of liabilities to customers 5 825 535 5 862 959 5 400 964 6 226 142
45 931 300 47 141 907 47 530 201 52 010 098
Liabilities
Deposits by banks 2 101 544 2 721 170 2 351 429 3 047 636
Derivative financial instruments 1 178 641 1 170 232 1 208 577 1 443 325
Other trading liabilities 886 628 861 412 850 068 851 939
Repurchase agreements and cash collateral on
securities lent 1 282 672 1 316 087 1 333 388 1 940 158
Customer accounts (deposits) 22 253 475 22 609 784 23 231 372 24 460 666
Debt securities in issue 1 929 850 1 596 630 1 636 276 1 901 776
Liabilities arising on securitisation of own
originated loans and advances 105 266 729 534 892 173 926 335
Liabilities arising on securitisation of other assets 744 014 3 041 435 3 036 339 3 303 606
Current taxation liabilities 189 222 208 041 200 818 210 475
Deferred taxation liabilities 83 088 97 116 108 935 110 622
Other liabilities 2 202 592 1 572 877 1 862 165 1 890 359
Liabilities directly associated with non-current
assets/disposal groups held for sale 1 977 507 – – –
34 934 499 35 924 318 36 711 540 40 086 897
Liabilities to customers under investment
contracts 5 824 152 5 861 389 5 399 181 6 224 062
Insurance liabilities, including unit-linked liabilities 1 383 1 570 1 782 2 080
40 760 034 41 787 277 42 112 503 46 313 039
Subordinated liabilities 1 240 528 1 338 752 1 409 701 1 751 806
42 000 562 43 126 029 43 522 204 48 064 845
Equity
Ordinary share capital 225 224 224 223
Perpetual preference share capital 153 153 153 153
Share premium 2 457 327 2 473 131 2 490 408 2 494 618
Treasury shares (93 650) (85 981) (62 762) (89 545)
Other reserves (590 248) (467 247) (376 541) (93 537)
Retained income 1 640 801 1 652 016 1 546 285 1 353 298
Shareholders' equity excluding non-controlling
interests 3 414 608 3 572 296 3 597 767 3 665 210
Other Additional Tier 1 securities in issue 30 012 – – –
Non-controlling interests 486 118 443 582 410 230 280 043
– Perpetual preferred securities issued by
subsidiaries 239 466 252 713 261 425 279 041
– Non-controlling interests in partially held
subsidiaries 246 652 190 869 148 805 1 002
Total equity 3 930 738 4 015 878 4 007 997 3 945 253
Total liabilities and equity 45 931 300 47 141 907 47 530 201 52 010 098
* Restated for IFRIC 21 – refer to commentary section of this report.
Summarised combined consolidated statement of changes in equity
Six months to Six months to Year to
GBP'000 30 September 2014 30 September 2013* 31 March 2014*
Balance at the beginning of the period 4 015 878 3 945 253 3 945 253
Total comprehensive income/(loss) for the period 13 783 (139 858) (66 911)
Share-based payments adjustments 28 710 33 204 66 905
Dividends paid to ordinary shareholders (95 637) (81 906) (150 053)
Dividends paid to perpetual preference shareholders (3 233) (23 961) (35 268)
Dividends paid to non-controlling interests (28 896) (265) (5 838)
Issue of ordinary shares 38 901 31 650 31 650
Issue of Other Additional Tier 1 securities in issue 30 012 – –
Issue of equity by subsidiaries 3 179 – 35 477
Acquisition of non-controlling interests 35 (254) (270)
Non-controlling interest relating to disposal of subsidiaries 1 214 164 067 166 940
Partial disposal of subsidiary 39 818 – –
Movement of treasury shares (113 026) (46 614) (98 688)
Capital conversion of a subsidiary – 126 681 126 681
Balance at the end of the period 3 930 738 4 007 997 4 015 878
* Restated for IFRIC 21 – refer to commentary section of this report.
Segmental geographic and business analysis of operating profit before goodwill, acquired
intangibles, non-operating items, taxation and after other non-controlling interests
For the six months to 30 September 2014
UK and Other
GBP'000 UK and Other Australia Total Southern Africa Total group
Asset Management 37 684 – 37 684 38 996 76 680
Wealth & Investment 26 912 – 26 912 11 126 38 038
Specialist Banking 17 959 (4 988) 12 971 113 080 126 051
Total group 82 555 (4 988) 77 567 163 202 240 769
Other non-controlling interest – equity (957)
Operating profit 239 812
Commentary
Investec plc and Investec Limited (combined results)
Unaudited combined consolidated financial results for the six months ended 30 September 2014
OVERALL GROUP PERFORMANCE
Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests ("operating
profit") increased 8.6% to GBP240.8 million (2013: GBP221.7 million) – an increase of 21.8% on a currency neutral basis. Group results have
been negatively impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of approximately 19% over the period.
The combined South African business reported operating profit 21.5% ahead of the prior period in Rand, whilst the combined UK and Other
businesses posted a 17.6% increase in operating profit in Pounds Sterling.
Wealth & Investment's operating profit increased by 23.3%. Asset Management reported operating profit 6.6% ahead of the prior period. Both
divisions benefited from higher levels of average funds under management and net inflows. Operating profit in the Specialist Banking business
increased 6.0% largely due to strong performances from the South African banking business and the UK Corporate and Institutional business,
and a lower loss reported by Australia, partially offset by less investment income earned on the Hong Kong investment portfolio.
Salient features of the period under review are:
- Adjusted earnings attributable to shareholders before goodwill, acquired intangibles and non-operating items increased 3.6% to
GBP169.1 million (2013: GBP163.2 million) – an increase of 16.4% on a currency neutral basis.
- Adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 3.7% from 19.0 pence to
19.7 pence – an increase of 16.3% on a currency neutral basis.
- Recurring income as a percentage of total operating income amounted to 77.1% (2013: 70.9%).
- The annualised credit loss charge as a percentage of average gross core loans and advances amounted to 0.70%, with impairments
decreasing by 20.1% to GBP66.4 million.
- Third party assets under management increased 5.3% to GBP115.7 billion (31 March 2014: GBP109.9 billion).
- Customer accounts (deposits) decreased 1.6% to GBP22.3 billion (31 March 2014: GBP22.6 billion), however, adjusting for the sale of
Investec Bank (Australia) Limited (as detailed in the "Notes to the commentary" section below) results in an increase of 5.6%.
- Core loans and advances decreased 6.9% to GBP16.0 billion (31 March 2014: GBP17.2 billion), however, adjusting for the sale of Investec
Bank (Australia) Limited and Kensington (as detailed in the "Notes to the commentary" section below) results in an increase of 6.3%.
- The board declared a dividend of 8.5 pence per ordinary share (2013: 8.0 pence) resulting in a dividend cover based on the group's
adjusted EPS before goodwill and non-operating items of 2.3 times (2013: 2.4 times), consistent with the group's dividend policy.
STRATEGIC REVIEW
Over the past year the group has focused on simplifying and reshaping its Specialist Banking business with a view to improving returns and
has successfully restructured and sold certain businesses. These transactions include the sale of Investec Bank (Australia) Limited to the
Bank of Queensland Limited (which became effective on 31 July 2014) and the pending sales of the UK Kensington business and the Irish
Start mortgage business. Further information is provided in the "Notes to the commentary" section below. Upon completion of these pending
transactions the group is expected to bolster its common equity tier one ratio in Investec plc from 9.5% to approximately 11.0%; significantly
improve its leverage ratio in Investec plc from 7.6% to approximately 8.7%; reduce legacy assets in the UK by approximately GBP1.5 billion
and reduce total loans and securitised assets by approximately GBP4.1 billion.
BUSINESS UNIT REVIEW
Asset Management
Asset Management increased operating profit by 6.6% to GBP76.7 million (2013: GBP71.9 million) benefiting from higher average funds under
management and net inflows of GBP2.7 billion. Total funds under management amount to GBP71.7 billion (31 March 2014: GBP68.0 billion).
Operating margin has improved to 35.7%. The sale of the 15% stake in the business to management was completed on 31 July 2013.
Wealth & Investment
Wealth & Investment operating profit increased by 23.3% to GBP38.0 million (2013: GBP30.8 million) supported by higher average funds
under management, net inflows of GBP1.5 billion and improved operating margins. Total funds under management amount to GBP43.7 billion
(31 March 2014: GBP41.5 billion). The division in the UK has benefited from the investment in its platforms and the employment of additional
professional investment managers. The business in South Africa has continued to successfully leverage off the division's global investment
platform and the group's integrated Private Client offering ("One Place").
Specialist Banking
Specialist Banking operating profit increased by 6.0% to GBP126.1 million (2013: GBP118.9 million).
South Africa saw a strong increase in net interest income driven by loan book growth and a positive endowment impact. The unlisted
investment portfolio performed well during the period. The group continued to grow its professional finance business and the investment and
trading property portfolios delivered a sound performance. Corporate activity remained broadly in line with the prior period. The business
reported a decline in impairments with the credit loss ratio on average core loans and advances improving to 0.29% (31 March 2014: 0.42%).
In the UK the ongoing business reported operating profit of GBP70.2 million (2013:GBP75.0 million), whilst the legacy business reported a loss
of GBP52.2 million (2013: a loss of GBP49.2 million). The business reported an improvement in its cost of funding and experienced strong
growth in corporate fees, notably in the corporate finance and corporate treasury teams. Results were negatively impacted by lower returns
earned on the Hong Kong investment portfolio and marginally higher impairments.
Further information on key developments within each of the business units is provided in a detailed report published on the group's website:
http://www.investec.com
FINANCIAL STATEMENT ANALYSIS
Total operating income
Total operating income before impairment losses on loans and advances increased by 1.1% to GBP952.5 million (2013: GBP941.8 million).
Net interest income increased by 4.4% to GBP332.4 million (2013: GBP318.4 million) largely due to book growth, lower cost of funding in
the UK and a positive endowment impact in South Africa. This was partially offset by a lower return earned on the legacy portfolios which are
running down and the sale of Investec Bank (Australia) Limited.
Net fee and commission income increased by 8.7% to GBP527.0 million (2013: GBP484.9 million) as a result of higher average funds under
management and net inflows in the asset management and wealth management businesses. The Specialist Banking business benefited from
a solid performance from the corporate finance and corporate treasury businesses, notably in the UK, and the professional private banking
business in South Africa continued to perform well.
Investment income decreased by 25.6% to GBP46.0 million (2013: GBP61.8 million). The group's unlisted investment portfolio in the UK and
South Africa delivered a solid performance. This was offset however, by a weaker performance from the Hong Kong portfolio.
Trading income arising from customer flow decreased by 5.8% to GBP51.3 million (2013: GBP54.4 million) whilst trading income from other
trading activities reflected a loss of GBP9.2 million (2013: profit of GBP13.7 million) due to foreign currency losses largely offset in non-
controlling interests as discussed below.
Other operating income includes associate income and income earned on an operating lease portfolio.
Impairment losses on loans and advances
Impairments on loans and advances decreased from GBP83.1 million to GBP66.4 million. Since 31 March 2014 gross defaults have improved
from GBP658.7 million to GBP612.7 million. The percentage of default loans (net of impairments but before taking collateral into account) to
core loans and advances amounted to 2.23% (31 March 2014: 2.30%). The ratio of collateral to default loans (net of impairments) remains
satisfactory at 1.29 times (31 March 2014: 1.27 times).
Operating costs
The ratio of total operating costs to total operating income was 67.8% (2013: 67.7%). Total operating costs grew by 1.7% to GBP645.2 million
(2013: GBP634.7 million) reflecting: an increase in headcount in the asset management and wealth management businesses to support growth
initiatives; inflationary increases in fixed costs in the Specialist Bank in home currencies; an increase in variable remuneration given increased
profitability in certain businesses; a reduction in costs arising from the sale of certain businesses in Australia.
Impairment of goodwill
The goodwill impairment largely relates to the restructure of the Australian business.
Amortisation of acquired intangibles
Amortisation of acquired intangibles largely relates to the Wealth & Investment business and mainly comprises amortisation of amounts
attributable to client relationships.
Net loss after tax on sale of subsidiaries and disposal groups held for sale
Net loss on sale of subsidiaries and disposal groups held for sale comprises a net profit on the sale of Investec Bank (Australia) Limited offset
by a net loss on the pending sale of the Kensington UK and Start Irish operations as detailed in the "Notes to the commentary" section below.
The net loss after taxation can be analysed further as follows:
GBP'million
Net gain before goodwill and taxation 46.7
Goodwill (65.3)
Net loss on sale of subsidiaries and disposal groups held for sale (18.6)
Related tax expense (35.4)
Net loss after tax (54.0)
Taxation
The effective tax rate amounts to 18.8% (2013:17.4%).
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests mainly comprises:
- GBP9.4 million profit attributable to non-controlling interests in the Asset Management business.
- GBP8.3 million profit attributable to non-controlling interests in the Investec Property Fund Limited.
- A reduction of GBP9.6 million relating to Euro denominated preferred securities issued by a subsidiary of Investec plc which are reflected
on the balance sheet as part of non-controlling interests. (The transaction is hedged and a forex transaction loss arising on the hedge
is reflected in operating profit before goodwill with the equal and opposite impact reflected in earnings attributable to non-controlling
interests).
BALANCE SHEET ANALYSIS
Since 31 March 2014:
- Total shareholders' equity (including non-controlling interests) decreased by 2.1% to GBP3.9 billion. The weakening of the closing Rand
exchange rate relative to Pounds Sterling has resulted in a reduction in total equity of GBP117 million.
- Net asset value per share decreased 4.9% to 357.7 pence and net tangible asset value per share (which excludes goodwill and intangible
assets) decreased by 3.1% to 299.4 pence largely as a result of the depreciation of the Rand as described above.
- The return on adjusted average shareholders' equity increased from 10.0% to 10.7%.
Liquidity and funding
As at 30 September 2014 the group held GBP9.0 billion in cash and near cash balances (GBP4.5 billion in Investec plc and R82.3 billion in
Investec Limited) which amounted to 32.7% of its liability base. Loans and advances to customers as a percentage of customer deposits
amounted to 69.5% (31 March 2014: 72.0%).
Capital adequacy and leverage ratios
The group is targeting a minimum common equity tier one capital ratio above 10% by March 2016 and a total capital adequacy ratio range of
14% to 17% on a consolidated basis for each of Investec plc and Investec Limited respectively. The group's anticipated fully loaded Basel III
common equity tier 1 capital adequacy ratios in both Investec plc and Investec Limited are reflected in the table below.
Segmental geographic and business analysis of operating profit before goodwill, acquired
intangibles, non-operating items, taxation and after other non-controlling interests*
For the six months to 30 September 2013
UK and Other
GBP'000 UK and Other Australia Total Southern Africa Total group
Asset Management 33 446 – 33 446 38 494 71 940
Wealth & Investment 20 690 – 20 690 10 151 30 841
Specialist Banking 25 740 (13 925) 11 815 107 081 118 896
Total group 79 876 (13 925) 65 951 155 726 221 677
Other non-controlling interest – equity (1 493)
Operating profit 220 184
* Restated for IFRIC 21 – refer to commentary section of this report.
30 Sep 2014 31 Mar 2014
Investec plc^
Capital adequacy ratio 16.4% 15.3%
Tier 1 ratio 11.4% 10.5%
Common equity tier 1 ratio 9.5% 8.8%
Common equity tier 1 ratio (anticipated Basel III "fully loaded"*) 9.6% 8.8%
Leverage ratio (current) 7.6% 7.4%
Leverage ratio (anticipated Basel III "fully loaded"*) 6.4% 6.2%
Investec Limited
Capital adequacy ratio 15.0% 14.9%
Tier 1 ratio 11.2% 11.0%
Common equity tier 1 ratio 9.5% 9.4%
Common equity tier 1 ratio (anticipated Basel III "fully loaded"*) 9.4% 9.3%
Leverage ratio (current*) 8.2% 7.8%
Leverage ratio (anticipated Basel III "fully loaded"*) 7.2% 6.7%
* Based on the group's understanding of current and draft regulations. "Fully loaded" is based on Basel III capital requirements as fully phased in by 2022.
^ The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group
operates. For Investec plc this does not include the deduction of foreseeable dividends when calculating CET1 as now required under the CRR and EBA technical standards.
The impact of the final proposed ordinary and preference dividends totalling GBP54 million for Investec plc would be around 40 bps.
OUTLOOK
The group has reshaped its business model, both through the sales of businesses referred to above and the restructuring that has taken
place over the past few years. Whilst economic conditions have improved in the developed world, volatility and uncertainty remain a
feature. Additionally, South Africa's economic growth has been weak with a difficult outlook, which could negatively affect growth prospects.
Notwithstanding, the group believes that these strategic initiatives place Investec in a favourable position to make progress in its core client-
and geographic- markets.
On behalf of the boards of Investec plc and Investec Limited
Fani Titi Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
19 November 2014
NOTES TO THE COMMENTARY SECTION ABOVE
PRESENTATION OF FINANCIAL INFORMATION
Investec operates under a Dual Listed Companies (DLC) structure with primary listings of Investec plc on the London Stock Exchange and
Investec Limited on the JSE Limited.
In terms of the contracts constituting the DLC structure, Investec plc and Investec Limited effectively form a single economic enterprise in
which the economic and voting rights of ordinary shareholders of the companies are maintained in equilibrium relative to each other. The
directors of the two companies consider that for financial reporting purposes, the fairest presentation is achieved by combining the results and
financial position of both companies.
Accordingly, the interim results for Investec plc and Investec Limited present the results and financial position of the combined DLC group
under International Financial Reporting Standards (IFRS), denominated in Pounds Sterling. In the commentary above, all references to Investec
or the group relate to the combined DLC group comprising Investec plc and Investec Limited.
Unless the context indicates otherwise, all comparatives included in the commentary above relate to the six months ended
30 September 2013.
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 30 September 2014 when compared to 31 March 2014. Amounts represented on a
currency neutral basis for income statement items assume that the average exchange rates of the group's relevant exchange rates, as reflected
below, remain the same as at 30 September 2014 when compared to 30 September 2013.
FOREIGN CURRENCY IMPACT
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 position of the individual companies are reported in the local currencies in which they are domiciled, including
Rands, Australian Dollars, Euros and US Dollars. 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:
Six months to Year to Six months to
30 Sep 2014 31 Mar 2014 30 Sep 2014
Currency per Period Period
GBP1.00 end Average Period end Average end Average
South African Rand 18.33 17.86 17.56 16.12 16.29 15.03
Australian Dollar 1.85 1.81 1.80 1.72 1.73 1.63
Euro 1.28 1.24 1.21 1.19 1.20 1.17
US Dollar 1.62 1.68 1.67 1.59 1.62 1.54
Exchange rates between local currencies and Pounds Sterling have fluctuated over the period. The most significant impact arises from the
volatility of the Rand. The average exchange rate over the period has depreciated by 18.8% and the closing rate has depreciated by 4.4%
since 31 March 2014.
SALE OF INVESTEC BANK (AUSTRALIA) LIMITED
The sale of Investec Bank (Australia) Limited's Professional Finance and Asset Finance and Leasing businesses and its deposit book to Bank
of Queensland Limited was effective 31 July 2014 for cash proceeds of GBP122 million.This has resulted in the derecognition of approximately
GBP2 billion of assets and approximately GBP2.2billion of liabilities associated with the businesses sold.
The group continues to have a presence in Australia, focusing on its core activities of Specialised Finance, Corporate Advisory, Property Fund
Management and Asset Management. The remaining business will operate as a non-banking subsidiary of the Investec group. As a result, the
group has decided to no longer report the activities of its Australian businesses separately with these activities now reported under the "UK and
Other" geographical segment and the "UK and Other" Specialist Banking segment.
PENDING SALES OF KENSINGTON GROUP PLC AND START MORTGAGE HOLDINGS LIMITED
On 9 September 2014 the group announced the sale of its UK intermediated mortgage business Kensington Group plc ("Kensington")
together with certain other Investec mortgage assets to funds managed by Blackstone Tactical Opportunities Advisors L.L.C. and TPG Special
Situations Partners for GBP180 million in cash based on a tangible net asset value of the business of GBP165 million at 31 March 2014.
On 15 September 2014 the group announced the sale of its Irish intermediated mortgage business Start Mortgage Holdings Limited ("Start")
together with certain other Irish mortgage assets to an affiliate of Lone Star Funds.
The Start transaction has been approved by the regulator, whilst the Kensington transaction is still subject to regulatory approval.
As the group views these transactions as highly probable, the group has accounted for these transactions in terms of IFRS 5 and has thus
reflected all assets and liabilities associated with the sale as a single asset and liability line on the face of the consolidated balance sheet as
described as "non-current assets/liabilities or disposal groups held for sale".
ACCOUNTING POLICIES AND DISCLOSURES
These unaudited summarised combined consolidated financial results have been prepared in terms of the recognition and measurement criteria
of International Financial Reporting Standards, and the presentation and disclosure requirements of IAS 34, (Interim Financial Reporting).
The accounting policies applied in the preparation of the results for the period to 30 September 2014 are consistent with those adopted in the
financial statements for the year ended 31 March 2014 except as noted below.
IFRIC 21 'Levies'
The group has adopted IFRIC 21 'Levies' from 1 April 2014. The interpretation clarifies that the obligating event that gives rise to a liability to
pay a levy is the activity that triggers the payment of the levy and an entity does not have a constructive obligation to pay a levy that will be
triggered in a future period as a result of being economically compelled to continue to operate in that future period. The new interpretation
has been applied retrospectively and its application has caused the recognition date for the Financial Services Compensation Scheme levy in
the UK to be changed from 31 December prior to the beginning of the relevant levy year to the following 1 April. The group has accordingly
restated the prior periods to reflect this change.
The impact of the restatement in the 6 months to 30 September 2013 is an increase in Operating Costs and Other liabilities of GBP1.1 million
and a decrease in Taxation on operating profit before goodwill and Deferred taxation liabilities of GBP0.2 million. The impact in the year
to 31 March 2013 is a decrease in Operating Costs and Other Liabilities of GBP4.7 million and an increase in Taxation on operating profit
before goodwill and Deferred taxation liabilities of GBP1.0 million. The net impact on Retained income at 31 March 2014 is an increase of
GBP2.8 million.
The financial results have been prepared under the supervision of Glynn Burger, the Group Risk and Finance Director. The financial statements
for the six months to 30 September 2014 will be posted to stakeholders on 28 November 2014. These accounts will be available on the
group's website at the same date.
PROVISO
- Please note that matters discussed in this announcement 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 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 19 November 2014.
- The information in the announcement for the six months ended 30 September 2014, which was approved by the board of directors on
19 November 2014, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2014
financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of sections
498(2) or 498(3) of the UK Companies Act.
- This announcement is available on the group's website: www.investec.com
Analysis of assets and liabilities at fair value and amortised cost
Instruments
At 30 September 2014 Instruments at amortised Insurance Non-financial
GBP'000 at fair value cost related instruments Total
Assets
Cash and balances at central banks 6 491 3 172 018 – – 3 178 509
Loans and advances to banks 118 182 2 480 443 – – 2 598 625
Non-sovereign and non-bank cash placements 1 319 566 364 – – 567 683
Reverse repurchase agreements and cash collateral
on securities borrowed 641 269 479 150 – – 1 120 419
Sovereign debt securities 2 464 490 192 182 – – 2 656 672
Bank debt securities 614 217 808 173 – – 1 422 390
Other debt securities 388 165 81 359 – – 469 524
Derivative financial instruments 1 994 238 – – – 1 994 238
Securities arising from trading activities 920 244 – – – 920 244
Investment portfolio 909 407 – – – 909 407
Loans and advances to customers 729 810 14 847 698 – – 15 577 508
Own originated loans and advances to customers
securitised – 403 742 – – 403 742
Other loans and advances – 427 865 – – 427 865
Other securitised assets 796 778 140 730 – – 937 508
Interests in associated undertakings – – – 23 664 23 664
Deferred taxation assets – – – 87 070 87 070
Other assets 33 388 1 213 577 – 315 413 1 562 378
Property and equipment – – – 99 792 99 792
Investment properties – – – 529 600 529 600
Goodwill – – – 363 518 363 518
Intangible assets – – – 149 892 149 892
Non-current assets/disposal group classified
as held for sale 4 065 628 – – 39 889 4 105 517
13 683 626 24 813 301 – 1 608 838 40 105 765
Other financial instruments at fair value through profit
or loss in respect of liabilities to customers – – 5 825 535 – 5 825 535
13 683 626 24 813 301 5 825 535 1 608 838 45 931 300
Liabilities
Deposits by banks – 2 101 544 – – 2 101 544
Derivative financial instruments 1 178 641 – – – 1 178 641
Other trading liabilities 886 628 – – – 886 628
Repurchase agreements and cash collateral
on securities lent 415 769 866 903 – – 1 282 672
Customer accounts (deposits) 946 110 21 307 365 – – 22 253 475
Debt securities in issue 508 785 1 421 065 – – 1 929 850
Liabilities arising on securitisation of own originated loans
and advances – 105 266 – – 105 266
Liabilities arising on securitisation of other assets 735 625 8 389 – – 744 014
Current taxation liabilities – – – 189 222 189 222
Deferred taxation liabilities – – – 83 088 83 088
Other liabilities 71 486 1 801 330 – 329 777 2 202 593
Liabilities directly associated with non-current assets/
disposal groups held for sale 1 977 507 – – – 1 977 507
6 720 551 27 611 862 – 602 087 34 934 500
Liabilities to customers under investment contracts – – 5 824 152 – 5 824 152
Insurance liabilities, including unit-linked liabilities – – 1 382 – 1 382
6 720 551 27 611 862 5 825 534 602 087 40 760 034
Subordinated liabilities – 1 240 528 – – 1 240 528
6 720 551 28 852 390 5 825 534 602 087 42 000 562
Financial instruments carried at fair value
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are
categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique used. The different levels are identified
as follows:
Level 1 – quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie as prices) or
indirectly (ie derived from prices)
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Assets and liabilities related to the long-term assurance business attributable to policyholders have been excluded from the analysis as the
change in fair value of related assets is attributable to policyholders. The linked assets are classified as level 1.
Total Level within the fair value hierarchy
at 30 September 2014 instruments
GBP'000 at fair value Level 1 Level 2 Level 3
Assets
Cash and balances at central banks 6 491 6 491 – –
Loans and advances to banks 118 182 118 182 – –
Non-sovereign and non-bank cash placements 1 319 – 1 319 –
Reverse repurchase agreements and cash collateral on
securities borrowed 641 269 – 641 269 –
Sovereign debt securities 2 464 490 2 464 490 – –
Bank debt securities 614 217 173 770 440 447 –
Other debt securities 388 165 350 540 17 399 20 226
Derivative financial instruments 1 994 238 937 140 1 027 045 30 053
Securities arising from trading activities 920 244 920 244 – –
Investment portfolio 909 407 116 021 160 950 632 436
Loans and advances to customers 729 810 – 690 531 39 279
Other securitised assets 796 778 – – 796 778
Other assets 33 388 33 388 – –
Non-current assets/disposal groups classified as held for sale 4 065 628 – 4 065 628 –
13 683 626 5 120 266 7 044 588 1 518 772
Liabilities
Derivative financial instruments 1 178 641 385 035 787 616 5 990
Other trading liabilities 886 628 861 091 25 537 –
Repurchase agreements and cash collateral on securities lent 415 769 – 415 769 –
Customer accounts (deposits) 946 110 – 946 110 –
Debt securities in issue 508 785 – 508 785 –
Liabilities arising on securitisation of other assets 735 625 – – 735 625
Other liabilities 71 486 39 923 31 563 –
Liabilities directly associated with non-current assets/disposal
groups held for sale 1 977 507 – 1 977 507 –
6 720 551 1 286 049 4 692 887 741 615
Net assets 6 963 075 3 834 217 2 351 701 777 157
Transfers between level 1 and level 2
There have been no transfers between level 1 and level 2 in the current period.
Level 3 instruments
Total level 3 Fair value Fair value movements
financial movements through through other
GBP'000 instruments income statement comprehensive income
The following table is a reconciliation of the opening balances to the
closing balances for fair value measurements in level 3 of the fair
value hierarchy:
Net opening balance at 1 April 2014 869 172 844 026 25 146
Total gains or losses 18 613 18 393 220
In the income statement 18 302 18 393 (91)
In the statement of comprehensive income 311 – 311
Purchases 35 732 35 722 10
Sales (154 973) (154 383) (590)
Issues 1 338 1 338 –
Settlements 10 200 10 200 –
Transfers into level 3 60 227 60 227 –
Transfers out of level 3 403 403 –
Transfer into non-current assets/disposal groups held for sale (43 602) (43 602) –
Foreign exchange adjustments (19 953) (19 953) –
Balance as at 30 September 2014 777 157 752 371 24 786
The following table quantifies the gains or losses included in the income statement and other comprehensive income recognised on level 3
financial instruments:
Six months to 30 September 2014
GBP'000 Total Realised Unrealised
Total gains or losses included in the income statement for
the period
Net interest expense (456) (456) –
Fee and commission expense (14 144) (15 333) 1 189
Investment income 27 069 (9 043) 36 112
Trading income arising from customer flow 5 336 (206) 5 542
Trading income arising from balance sheet management and other
trading activities 445 (202) 647
Other operating income 52 – 52
18 302 (25 240) 43 542
Six months to 30 September 2014
GBP'000 Total Realised Unrealised
Total gains or losses included in other comprehensive income for
the period
Fair value movements on available-for-sale assets taken directly
to other comprehensive income 311 – 311
311 – 311
For the period ended 30 September 2014, instruments to the value of (GBP2.3 million) were transferred from level 3 into level 2 due to the
valuation methodologies being reviewed and observable inputs are used to determine the fair value. GBP1.9 million worth of assets have been
transferred from level 3 to level 2 due to an observable market input becoming available.
In addition GBP43.6 million of instruments previously classified as level 3 were transferred to level 2 as a result of being held as assets and
liabilities held for sale at 30 September 2014. This has resulted in a change in valuation technique from their original holding at fair value to
fair value less costs to sell which is in accordance with IFRS 5 and is measured by reference to the agreed sale documents. The assets and
liabilities held for sale also include assets and liabilities which were previously measured at amortised cost which are now held at fair value less
costs to sell.
There were transfers from level 2 to the level 3 category to the value of GBP60.2 million because the underlying circumstances of the instrument
changed and as a result, the significant valuation inputs became unobservable in the market.
The group transfers between levels within the fair value hierarchy when the observability of inputs change or if the valuation methods change.
Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type
The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are not evidenced
by prices from observable market data. The following table shows the sensitivity of these fair values to reasonably possible alternative
assumptions, determined at a transactional level:
Range which Reflected in the income statement
Balance unobservable (GBP'000)
sheet Significant unobservable input has been Favourable Unfavourable
value Valuation method input changed stressed changes changes
Assets
Other debt securities 20 226 394 (443)
Discounted cash flows Credit spreads (5%) – 5%* 118 (118)
Other Other (6%) – 5%* 276 (325)
Derivative financial 30 053 13 710 (6 263)
instruments
Discounted cash flows Volatilities (2%) – 2%* 2 212 (810)
Discounted cash flows Credit spreads (50bps) – 50bps 873 (817)
Black Scholes Volatilities 20%/50%* 1 684 (1 053)
Other*** Various*** *** 7 099 (2 908)
Other (11%) – 10%* 1 842 (675)
Investment portfolio 607 651 109 116 (68 241)
Price earnings multiple EBITDA (10%) –10% or 5x 1 096 (4 344)
EBITDA
Other*** Various*** *** 96 210 (54 577)
Other (10%) – 10% 11 810 (9 320)
Loans and advances 39 279 2 223 (5 197)
to customers Discounted cash flows Cash flows (9%) – 3%* 1 102 (3 755)
Other 1 121 (1 442)
Other securitised 796 778 20 693 (21 300)
assets^ Other Underlying market price (5%)/5%* 19 493 (19 493)
Discounted cash flows Credit spreads – 6 months/
+ 12-month
adjustment to
CDR curve 1 200 (1 807)
Liabilities
Derivative financial 5 990 Basis risk and yield curve (10 bps) – 10bps 2 429 (609)
instruments
Liabilities arising 735 625 Modelled bond prices Credit spreads (6.5bps) – 6.5bps 1 210 (751)
on securitisation
of other assets^
Other Underlying market price (5%)/5%* 22 244 (21 679)
752 372 172 019 (124 483)
Range which Reflected in other comprehensive
Balance unobservable income (GBP'000)
sheet Significant unobservable input has been Favourable Unfavourable
value Valuation method input changed stressed changes changes
Assets
Investment portfolio 24 785 1 333 (884)
Price earnings multiple EBITDA (10%) – 10%* 1 304 (855)
or 5x EBITDA
Other (10%) – 10%* 29 (29)
^ The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.
*** Other – The valuation sensitivity for the private equity and embedded derivatives (profit share) portfolios has been assessed by adjusting various inputs such as expected cash
flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the
sensitivity of the investments cannot be determined through the adjustment of a single input.
In determining the value of level 3 financial instruments, the following are the principal inputs that can require judgement:
Credit spreads
Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit
spread for an instrument forms part of the yield used in a discounted cash flow calculation. In general a significant increase in a credit spread in
isolation will result in a movement in fair value that is unfavourable for the holder of a financial instrument.
Discount rates
Discount rates are the interest rates used to discount future cash flows in a discounted cash flow valuation method. The discount rate takes into
account time value of money and uncertainty of cash flows.
Volatilities
Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns
for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value
over time.
Cash flows
Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.
EBITDA
A company's earnings before interest, taxes, depreciation and amortisation. This is the main input into a price earnings multiple valuation method.
Level 2 financial assets and financial liabilities
The following table sets out the group's principal valuation techniques at 30 September 2014 used in determining the fair value of its financial
assets and financial liabilities that are classified within level 2 of the fair value hierarchy:
Valuation basis/techniques Main inputs
Assets
Non-sovereign and non-bank cash Discounted cash flow model Discount rates
placements
Reverse repurchase agreements and Discounted cash flow model, Hermite Discount rates
cash collateral on securities borrowed interpolation
Black-Scholes Volatilities
Bank debt securities Discounted cash flow model Discount rates, swap curves and NCD curves
Other debt securities Discounted cash flow models Discount rates, swap curves and
NCD curves, external prices, broker quotes
Derivative financial instruments Discounted cash flow model, Hermite Discount rate, risk free rate, volatilities, forex
interpolation, Industry standard derivative forward points and spot rates, interest rate swap
pricing models including Black-Scholes curves and credit curves
Investment portfolio Discounted cash flow model, net asset value Discount rate and fund unit price, cash flows
model
Comparable quoted inputs Net assets
Loans and advances to customers Discounted cash flow model Discount rates
Liabilities
Derivative financial instruments Discounted cash flow model, Hermite Discount rate, risk free rate, volatilities, forex
interpolation, Industry standard derivative forward points and spot rates, interest rate swap,
pricing models including Black-Scholes credit and curves
Other trading liabilities Discounted cash flow model Discount rates
Repurchase agreements and cash Discounted cash flow model, Hermite Discount rates
collateral on securities lent interpolation
Customer accounts (deposits) Discounted cash flow model Discount rates
Debt securities in issue Discounted cash flow model Discount rates
Other liabilities Discounted cash flow model Discount rates
Fair value of financial assets and liabilities measured at amortised cost
at 30 September 2014
GBP'000 Carrying amount Fair value
Assets
Cash and balances at central banks 3 172 018 3 172 018
Loans and advances to banks 2 480 443 2 471 517
Non-sovereign and non-bank cash placements 566 364 566 364
Reverse repurchase agreements and cash collateral on securities borrowed 479 150 479 211
Sovereign debt securities 192 182 197 676
Bank debt securities 808 173 840 461
Other debt securities 81 359 95 212
Loans and advances to customers 14 847 698 14 894 765
Own originated loans and advances to customers securitised 403 742 403 742
Other loans and advances 427 865 382 224
Other securitised assets 140 730 140 730
Other assets 1 213 577 1 193 654
24 813 301 24 837 574
Liabilities
Deposits by banks 2 101 544 2 168 127
Repurchase agreements and cash collateral on securities lent 866 903 893 314
Customer accounts (deposits) 21 307 365 21 179 286
Debt securities in issue 1 421 065 1 464 481
Liabilities arising on securitisation of own originated loans and advances 105 266 109 877
Liabilities arising on securitisation of other assets 8 389 8 389
Other liabilities 1 801 330 1 786 345
Subordinated liabilities 1 240 528 1 322 059
28 852 390 28 931 878
PROVISO
- Please note that matters discussed in this announcement 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 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 19 November 2014.
- The information in the announcement for the six months to 30 September 2014, which was approved by the board of directors on
19 November 2014, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March
2014 financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of
sections 498(2) or 498(3) of the UK Companies Act.
Investec plc
Ordinary dividend announcement
Registration number: 3633621
Share code: INP
ISIN: GB00BI7BBQ50
Declaration of dividend number 25
In terms of the DLC structure, Investec plc shareholders who are not South African resident shareholders may receive all or part of their
dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and
paid on the SA DAN share issued by Investec Limited.
Investec plc shareholders who are South African residents, may receive all or part of their dividend entitlements through dividends declared
and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAS share issued by Investec
Limited.
Notice is hereby given that an interim dividend number 25 of 8.5 pence (2013: 8.0 pence) per ordinary share has been declared by the board
from income reserves in respect of the six months ended 30 September 2014 payable to shareholders recorded in the members' register of
the company at the close of business on Friday, 12 December 2014, which will be paid as follows:
- for non-South African resident Investec plc shareholders, through a dividend payment by Investec plc from income reserves of 8.5 pence
per ordinary share
- for South African resident shareholders of Investec plc, through a dividend payment by Investec plc from income reserves of 8.5 pence
per ordinary share
The relevant dates for the payment of dividend number 25 are as follows:
Last day to trade cum-dividend
On the London Stock Exchange (LSE) Wednesday, 10 December 2014
On the Johannesburg Stock Exchange (JSE) Friday, 05 December 2014
Shares commence trading ex-dividend
On the London Stock Exchange (LSE) Thursday, 11 December 2014
On the Johannesburg Stock Exchange (JSE) Monday, 08 December 2014
Record date (on the JSE and LSE) Friday, 12 December 2014
Payment date (on the JSE and LSE) Monday, 29 December 2014
Share certificates on the South African branch register may not be dematerialised or rematerialised between Monday, 08 December 2014
and Friday, 12 December 2014, both dates inclusive, nor may transfers between the UK and SA registers take place between Monday,
08 December 2014 and Friday, 12 December 2014, both dates inclusive.
Additional information for South African resident shareholders of Investec plc
- Investec plc UK tax reference number: 2683967322360.
- Shareholders registered on the South African register are advised that the distribution of 8.5 pence, equivalent to a gross dividend of
146 cents per share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11:00 (SA time)
on Wednesday, 19 November 2014.
- The issued ordinary share capital of Investec plc is 613 609 642 ordinary shares.
- The dividend paid by Investec plc to South African resident shareholders subject to South African Dividend Tax (Dividend Tax) of 15%
(subject to any available exemptions as legislated).
- No Secondary Tax on Companies ("STC") credits have been utilised in respect of this ordinary share dividend declaration.
- Shareholders registered on the South African register who are exempt from paying the Dividend Tax will receive a net dividend of
146.00000 cents per share.
- Shareholders registered on the South African register who are not exempt from paying the Dividend Tax will receive a net dividend of
124.10000 cents per share (gross dividend of 146.0000 cents per share less Dividend Tax of 21.9000 cents per share).
By order of the board
D Miller
Company Secretary
19 November 2014
Investec Limited
Ordinary share dividend announcement
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE ordinary share code: INL
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
Declaration of dividend number 118
Notice is hereby given that an interim dividend number 118 of 146 cents (2013: 131 cents) per ordinary share has been declared by the
board from income reserves in respect of the six months ended 30 September 2014 payable to shareholders recorded in the shareholders'
register of the company at the close of business on Friday, 12 December 2014.
The relevant dates for the payment of dividend number 118 are as follows:
Last day to trade cum-dividend Friday, 05 December 2014
Shares commence trading ex-dividend Monday, 08 December 2014
Record date (on the JSE) Friday, 12 December 2014
Payment date (on the JSE) Monday, 29 December 2014
The interim gross dividend of 146 cents per ordinary share has been determined by converting the Investec plc distribution of 8.5 pence per
ordinary share into Rands using the Rand/Pounds Sterling average buy/sell forward rate at 11:00 (SA time) on Wednesday, 19 November 2014.
Share certificates may not be dematerialised or rematerialised between Monday, 08 December 2014 and Friday, 12 December 2014, both
dates inclusive.
Additional information to take note of:
- The Investec Limited company tax reference number: 9800/181/71/2
- The issued ordinary share capital of Investec Limited is 285 748 623 ordinary shares.
- The dividend paid by Investec Limited is subject to South African Dividend Tax (Dividend Tax) of 15% (subject to any available exemptions
as legislated).
- No Secondary Tax on credits ("STC") have been utilised in respect of this ordinary share dividend declaration.
- Shareholders who are exempt from paying the Dividend Tax will receive a net dividend of 146.00000 cents per ordinary share.
- Shareholders who are not exempt from paying the Dividend Tax will receive a net dividend of 124.10000 cents per ordinary share (gross
dividend of 146.00000 cents per ordinary share less Dividend Tax of 21.90000 cents per ordinary share).
By order of the board
N van Wyk
Company Secretary
19 November 2014
Investec plc
Preference share dividend announcement
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
Non-redeemable non-cumulative non-participating preference shares ("preference shares")
Declaration of dividend number 17
Notice is hereby given that preference dividend number 17 has been declared from income reserves for the period 01 April 2014 to 30 September
2014 amounting to 7.52055 pence per preference share payable to holders of the non-redeemable non-cumulative non-participating preference
shares as recorded in the books of the company at the close of business on Friday, 05 December 2014.
For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 7.52055 pence per preference share is equivalent to a gross
dividend of 129.54100 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11:00
(SA Time) on Wednesday, 19 November 2014.
The relevant dates relating to the payment of dividend number 17 are as follows:
Last day to trade cum-dividend
On the Channel Islands Stock Exchange (CISX) Wednesday, 03 December 2014
On the Johannesburg Stock Exchange (JSE) Friday, 28 November 2014
Shares commence trading ex-dividend
On the Channel Islands Stock Exchange (CISX) Thursday, 04 December 2014
On the Johannesburg Stock Exchange (JSE) Monday, 01 December 2014
Record date (on the JSE and CISX) Friday, 05 December 2014
Payment date (on the JSE and CISX) Monday, 15 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 01 December 2014 and Friday, 05 December 2014 both
dates inclusive, nor may transfers between the UK and SA registers may take place between Monday, 01 December 2014 and Friday,
05 December 2014, both dates inclusive.
For SA resident preference shareholders, additional information to take note of:
- Investec plc tax reference number: 2683967322360
- The issued preference share capital of Investec plc is 15 081 149 preference shares.
- The dividend paid by Investec plc to South African resident shareholders is subject to South African Dividend Tax (Dividend Tax) of 15%
(subject to any available exemptions as legislated).
- No Secondary Tax on Companies ("STC") credits have been utilised in respect of this preference share dividend declaration.
- The net dividend amounts to 110.10985 cents per preference share for preference shareholders liable to pay the Dividend Tax and
129.54100 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
19 November 2014
Investec plc
Rand denominated preference share dividend announcement
Registration number: 3633621
Share code: INPPR
ISIN: GB00B4B0Q974
Rand denominated non-redeemable, non-cumulative, non-participating perpetual preference shares ("preference shares")
Declaration of dividend number 7
Notice is hereby given that preference dividend number 7 has been declared from income reserves for the period 01 April 2014 to
30 September 2014 amounting to 433.55137 cents per preference share payable to holders of the Rand denominated non-redeemable
non-cumulative non-participating perpetual preference shares as recorded in the books of the company at the close of business on Friday,
05 December 2014.
The relevant dates relating to the payment of dividend number 7 are as follows:
Last day to trade cum-dividend Friday, 28 November 2014
Shares commence trading ex-dividend Monday, 01 December 2014
Record date Friday, 05 December 2014
Payment date Monday, 15 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 01 December 2014 and Friday, 05 December 2014, both
dates inclusive.
For SA resident preference shareholders, additional information to take note of:
- Investec plc tax reference number: 2683967322360
- The issued preference share capital of Investec plc is 2 275 940 preference shares.
- The dividend paid by Investec plc to South African resident shareholders is subject to South African Dividend Tax (Dividend Tax) of 15%
(subject to any available exemptions as legislated).
- No Secondary Tax on Companies ("STC") credits have been utilised in respect of this preference share dividend declaration.
- The net dividend amounts to 368.51866 cents per preference share for preference shareholders liable to pay the Dividend Tax and
433.55137 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
19 November 2014
Investec Limited
Preference share dividend announcement
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE Share Code: INPR
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000063814
Non-redeemable non-cumulative non-participating preference shares ("preference shares")
Declaration of dividend number 20
Notice is hereby given that preference dividend number 20 has been declared from income reserves for the period 01 April 2014 to
30 September 2014 amounting to 354.91885 cents per share payable to holders of the non-redeemable non-cumulative non-participating
preference shares as recorded in the books of the company at the close of business on Friday, 05 December 2014.
The relevant dates for the payment of dividend number 20 are as follows:
Last day to trade cum-dividend Friday, 28 November 2014
Shares commence trading ex-dividend Monday, 01 December 2014
Record date Friday, 05 December 2014
Payment date Monday, 15 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 01 December 2014 and Friday, 05 December 2014, both
dates inclusive.
Additional information to take note of:
- The Investec Limited company tax reference number: 9800/181/71/2
- The issued preference share capital of Investec Limited is 32 214 499 preference shares in this specific class.
- The dividend paid by Investec Limited is subject to South African Dividend Tax (Dividend Tax) of 15% (subject to any available exemptions
as legislated).
- No Secondary Tax on Companies ("STC") credits have been utilised in respect of this preference share dividend declaration.
- The net dividend amounts to 301.68102 cents per preference share for shareholders liable to pay the Dividend Tax and 354.91885 cents
per preference share for preference shareholders exempt from paying the dividend tax.
By order of the board
N van Wyk
Company Secretary
19 November 2014
Sponsor
Investec Bank Limited
www.investec.com
Date: 20/11/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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