Wrap Text
Unaudited combined consolidated financial results
for the year ended 31 March 2018
Investec plc
Incorporated in England and Wales
(Registration number 3633621)
JSE ordinary share code: INP
LSE ordinary share code: INVP
ISIN: GB00B17BBQ50
Investec Limited
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
Investec plc
and Investec Limited
(combined results)
Unaudited combined
consolidated financial results
for the year ended 31 March 2018
This announcement covers the results of the Investec group for the year ended 31 March 2018.
Basis of presentation
Statutory basis
Statutory information is set out in a separate section in this announcement.
In order to present a more meaningful view of the group's performance the
results continue to be presented on an ongoing basis as explained further below.
Ongoing basis
The results presented on an ongoing basis exclude items that in
management's view could distort the comparison of performance between
periods. Based on this principle, the remaining legacy business in the UK
continues to be excluded from underlying profit.
This basis of presentation is consistent with the approach adopted for the
prior year ended 31 March 2017. A reconciliation between the statutory and
ongoing income statement is provided.
Unless the context indicates otherwise, all comparatives included in the
commentary relate to the year ended 31 March 2017. Group results have
benefited from a 6.6% appreciation of the average Rand: Pound Sterling
exchange rate over the year. Amounts represented on a currency neutral basis
for income statement items assume that the relevant average exchange rates
for the year to 31 March 2018 remain the same as those in the prior year.
Amounts represented on a currency neutral basis for balance sheet items
assume that the relevant closing exchange rates at 31 March 2018 remain
the same as those at 31 March 2017.
Overview of results
Solid client activity levels supporting underlying
performance
- The group's asset and wealth management businesses have generated
substantial net inflows of GBP7.3 billion, which together with favourable
market levels has supported higher average funds under management
- The banking businesses have benefited from sound levels of corporate
and private client activity driving strong loan book growth over the year
- The group has continued to invest into the business, positioning itself for
further growth across its client franchise businesses and ensuring that it
remains competitive and relevant in the markets in which it operates
- Impairments on the legacy portfolio have increased in anticipation of
accelerated exits of certain assets in line with the group's strategy of
managing down this portfolio
- Taking into account the abovementioned factors, the group has achieved
satisfactory operating performance against a challenging backdrop in
its two core geographies, underpinned by sound growth in key earnings
drivers and a solid recurring income base.
Statutory operating profit salient features
- Statutory operating profit before goodwill, acquired intangibles,
non-operating items and taxation and after other non-controlling
interests ('operating profit') increased 1.4% to GBP607.5 million
(2017: GBP599.1 million) - a decrease of 3.5% on a currency
neutral basis.
- The effective tax rate amounted to 9.6% (2017: 18.5%) mainly
impacted by the lower rate in South Africa following the release of
provisions no longer required.
- Statutory adjusted earnings per share (EPS) before goodwill, acquired
intangibles and non-operating items increased 10.1% from 48.3 pence
to 53.2 pence - an increase of 4.1% on a currency neutral basis.
Satisfactory performance from the ongoing business
- Ongoing operating profit increased 5.6% to GBP701.0 million
(2017: GBP663.7 million) - an increase of 1.2% on a currency
neutral basis.
- Ongoing adjusted EPS before goodwill, acquired intangibles and non-
operating items increased 13.3% from 54.1 pence to 61.3 pence - an
increase of 8.1% on a currency neutral basis.
- Annuity income as a percentage of total operating income amounted
to 76.3% (2017: 72.0%).
- The credit loss charge as a percentage of average gross core loans
and advances amounted to 0.26% (2017: 0.29%), remaining at the lower
end of the group's long-term range despite an increase in impairments.
- Third party assets under management increased 6.5% to
GBP160.6 billion (31 March 2017: GBP150.7 billion) - an increase
of 6.2% on a currency neutral basis.
- Customer accounts (deposits) increased 6.5% to GBP31.0 billion
(31 March 2017: GBP29.1 billion) - an increase of 5.9% on a currency
neutral basis.
- Core loans and advances increased 11.6% to GBP24.8 billion
(31 March 2017: GBP22.2 billion) - an increase of 11.0% on a currency
neutral basis.
The UK legacy portfolio continues to be actively
managed down
- The legacy portfolio reduced from GBP476 million at 31 March 2017 to
GBP313 million through asset sales, redemptions and write-offs.
- The legacy business reported a loss before taxation of GBP93.5 million
(2017: GBP64.6 million) reflecting an increase in impairments for
accelerated exits anticipated to occur on certain legacy assets.
Maintained a sound balance sheet
- Capital remained in excess of current regulatory requirements.
The group is comfortable with its common equity tier 1 ratio target at a
10% level, as its current leverage ratios for both Investec Limited and
Investec plc are above 7%. Both Investec Limited and Investec plc
reported a common equity tier 1 ratio ahead of this target.
- Liquidity remained strong with cash and near cash balances amounting to
GBP12.8 billion.
Dividend increase of 4.3%
- The board proposes a final dividend of 13.5 pence per ordinary share
equating to a full year dividend of 24.0 pence (2017: 23.0 pence) resulting
in a dividend cover based on the group's adjusted EPS before goodwill
and non-operating items of 2.2 times (2017: 2.1 times), consistent with
the group's dividend policy. The dividend increase of 4.3% is in line with
the currency neutral increase in adjusted earnings per share of 4.1%.
Stephen Koseff, Chief Executive Officer of Investec said:
"Operating performance during the year was underpinned by sound growth
in loans and funds under management and a solid recurring income base,
despite a challenging backdrop in South Africa and the UK. The Wealth
& Investment and Asset Management businesses generated substantial
net inflows, with Asset Management exceeding GBP100 billion of funds
under management for the first time. The Specialist Bank continued to see
good client acquisition in its core franchise businesses which we have built
and developed over a number of years. We have implemented an orderly
succession plan and feel confident that we are handing over a business that
is well placed to continue to grow both its market position and profitability
over the foreseeable future."
Bernard Kantor, Managing Director of Investec said:
"Over the last 40 years we have been building a platform that is capable
of being leveraged for further growth. Investec is now a meaningful player
across many business areas, both in the UK and South Africa, and we
believe the platform is robust, relevant and well positioned for future value
creation. We are confident that Hendrik du Toit and Fani Titi, as joint chief
executives from October, will lead Investec to new successes for the benefit of
shareholders and all our stakeholders."
For further information please contact:
Investec +27 (0) 11 286 7070 or +44 (0) 20 7597 5546
Stephen Koseff, Chief Executive Officer
Bernard Kantor, Managing Director
Ursula Nobrega, Investor Relations (mobile:+27 (0) 82 552 8808)
Carly Newton, Investor Relations (+44 (0) 20 7597 4493)
Brunswick (SA PR advisers)
Marina Bidoli
Tel: +27 11 502 7405/+27 83 253 0478
Newgate (UK PR advisers)
Jonathan Clare/Alistair Kellie/Charlotte Coulson/Zoe Pocock
Tel: +44 (0) 20 7680 6550
Presentation/conference call details
A presentation on the results will commence at 09:00 UK time/10:00 SA time
on 17 May 2018. 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: 011 535 3500
- UK participants: 0 808 143 3720
- Rest of Europe and other participants: + 27 11 535 3500
- Australian participants: 0 280 152 168
- USA participants: 1 855 242 3083
About Investec
Investec is an international specialist bank and asset manager that provides
a diverse range of financial products and services to a select client base in
three principal markets - the UK and Europe, South Africa and Asia/Australia
as well as certain other countries. The group was established in 1974 and
currently has approximately 10 150 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
GBP5.5 billion.
The commentary below largely focuses on the results of the ongoing
business.
Overall group performance - ongoing basis
Operating profit before goodwill, acquired intangibles, non-operating items
and taxation and after other non-controlling interests ('operating profit')
increased 5.6% to GBP701.0 million (2017: GBP663.7 million) - an increase
of 1.2% on a currency neutral basis.
The combined South African businesses reported operating profit 3.3%
ahead of the prior period (in Rands), whilst the combined UK and Other
businesses posted a 1.2% increase in operating profit in Pounds Sterling.
Business unit review - ongoing basis
Asset Management
Asset Management operating profit increased by 8.0% to GBP178.0 million
(2017: GBP164.8 million) supported by higher average funds under
management arising from strong net inflows of GBP5.4 billion and favourable
market and currency movements. Earnings were negatively impacted by
lower performance fees in South Africa. Total funds under management
amounted to GBP103.9 billion (31 March 2017: GBP95.3 billion).
Wealth & Investment
Wealth & Investment operating profit increased by 5.7% to GBP98.6 million
(2017: GBP93.2 million). The business benefited from higher average
funds under management supported by higher equity market levels
over the year and solid net inflows of GBP2.0 billion. Total funds under
management amounted to GBP56.0 billion (31 March 2017: GBP54.8 billion).
Specialist Banking
Specialist Banking operating profit increased by 4.3% to GBP474.0 million
(2017: GBP454.4 million).
The South African business reported an increase in operating profit in
Rands of 6.9% supported by sound corporate and private client activity levels
as well as an increase in associate earnings from the IEP Group. This was
partially offset by lower investment income. Core loans and advances
increased 8.7% to R256.7 billion (31 March 2017: R236.2 billion). The
credit loss ratio on average core loans and advances amounted to 0.28%,
remaining flat at the lower end of its long-term average, despite the business
reporting an increase in impairments.
The UK and Other businesses reported a 9.3% decrease in operating profit.
Strong growth in net interest income was supported by loan book growth
of 15.1% to GBP9.4 billion (31 March 2017: GBP8.1 billion) and a reduction
in the cost of funding. This was offset by a decrease in non-interest revenue
following particularly strong investment banking and client flow trading
activity levels in the prior year. In line with the division's current investment
strategy to support franchise growth, IT infrastructure costs and headcount
increased, notably for the continued build out of the private client banking
offering. Impairments increased marginally with the credit loss ratio amounting
to 0.24% (2017: 0.27%).
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
Group costs
These largely relate to group brand and marketing costs and a portion of
executive and support functions which are associated with group level
activities. These costs are not incurred by the operating divisions and are
necessary to support the operational functioning of the group. These costs
amounted to GBP49.6 million (2017: GBP48.8 million).
Financial statement analysis - ongoing basis
Total operating income
Total operating income before impairment losses on loans and advances
increased by 6.9% to GBP2,442.8 million (2017: GBP2,285.9 million).
Net interest income increased by 11.7% to GBP760.1 million
(2017: GBP680.5 million) driven by robust levels of lending activity across the
banking businesses and further supported by a reduction in the UK's cost of
funding. This was slightly offset by the roll off of higher yielding debt securities
and increased subordinated debt in South Africa.
Net fee and commission income increased by 7.0% to GBP1,361.2 million
(2017: GBP1,271.6 million) supported by higher average funds under
management and strong net inflows in the Asset Management and
Wealth Management businesses, as well as a good performance from the
South African banking businesses.
Investment income reduced by 4.4% to GBP129.7 million
(2017: GBP135.6 million) as a result of a weaker performance from the unlisted
investment portfolio in South Africa as well as certain of the group's listed
investments.
Share of post taxation profit of associates of GBP46.8 million
(2017: GBP18.9 million) primarily reflects earnings in relation to the group's
investment in the IEP Group.
Trading income arising from customer flow decreased by 12.5% to
GBP138.2 million (2017: GBP158.0 million) as a consequence of lower
volatility, relative to the elevated levels experienced in the prior year
following the Brexit vote, as well as losses incurred in South Africa on
Steinhoff (refer to additional information). Trading income from other trading
activities reflected a loss of GBP4.3 million (2017: GBP8.1 million income)
predominantly impacted by currency volatility over the year.
Impairment losses on loans and advances
Impairments on loans and advances increased from GBP57.1 million to
GBP63.9 million; however, the group's credit loss ratio reduced to 0.26%
(2017: 0.29%), remaining at the lower end of its long-term average.
Since 31 March 2017 gross defaults have increased to GBP329.3 million
(2017: GBP249.8 million) largely due to a few specific defaults in the
UK banking business. The percentage of default loans (net of impairments
but before taking collateral into account) to core loans and advances
amounted to 0.82% (31 March 2017: 0.69%).
Operating costs
The ratio of total operating costs to total operating income amounted to 66.5%
(2017: 65.8%). Total operating costs grew by 8.0% to GBP1,623.2 million
(2017: GBP1,502.6 million) reflecting continued investment into IT and digital
initiatives and higher headcount across divisions to support increased activity
and growth strategies; notably the build out of the UK private client offerings.
Cost growth in South Africa was somewhat offset by the pending acquisition
of the South African head office building and the related rental provision no
longer required.
Taxation
The effective tax rate amounted to 9.6% (2017: 18.5%) mainly impacted by the
lower rate in South Africa following the release of provisions no longer required.
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests mainly comprises:
- GBP23.8 million profit attributable to non-controlling interests in the
Asset Management business.
- GBP52.6 million profit attributable to non-controlling interests in the
Investec Property Fund Limited.
Balance sheet analysis
Since 31 March 2017:
- Total shareholders' equity (including non-controlling interests) increased
by 12.9% to GBP5.4 billion largely due to an increase in retained earnings
and the issuance of Additional Tier 1 securities during the year.
- Net asset value per share increased 5.0% to 452.5 pence and net
tangible asset value per share (which excludes goodwill and intangible
assets) increased by 6.5% to 401.5 pence.
- The return on adjusted average shareholders' equity decreased from
12.5% to 12.1%.
- The return on adjusted average shareholders' equity of the ongoing
business decreased from 14.2% to 14.1%.
Liquidity and funding
As at 31 March 2018 the group held GBP12.8 billion in cash and near
cash balances (GBP5.8 billion in Investec plc and R116.5 billion in
Investec Limited) which amounted to 41.4% of customer deposits.
Loans and advances to customers as a percentage of customer
deposits amounted to 79.6% (31 March 2017: 76.2%). The cost of
funding in the UK has been successfully managed down over the year.
The group will continue to focus on maintaining an optimal overall liquidity
and funding profile. The group comfortably exceeds Basel liquidity
requirements for the Liquidity Coverage Ratio (LCR) and Net Stable
Funding Ratio (NSFR). Investec Bank Limited (solo basis) ended the
period to 31 March 2018 with the three-month average of its LCR at
133.9% and an NSFR of 108.4%. Further detail with respect to the bank's
LCR and NSFR in South Africa is provided on the website. For Investec plc
and Investec Bank plc (solo basis) the LCR is calculated using our own
interpretations of the EU Delegated Act. The LCR reported to the PRA at
31 March 2018 was 306% for Investec plc and 301% for Investec Bank plc
(solo basis). Ahead of the implementation of the final NSFR rules, the
group has applied its own interpretations of regulatory guidance and
definitions from the BCBS final guidelines to calculate the NSFR which
was 142% for Investec plc and 133% for Investec Bank plc (solo basis).
The reported NSFR and LCR may change over time with regulatory
developments and guidance.
Capital adequacy and leverage ratios
The group is targeting a minimum common equity tier 1 capital ratio above
10% 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.
31 March 31 March
2018 2017
Investec plc^
Capital adequacy ratio 15.4% 15.1%
Tier 1 ratio 12.9% 11.5%
Common equity tier 1 ratio 11.0% 11.3%
Common equity tier 1 ratio ('fully loaded'*) 11.0% 11.3%
Leverage ratio (current) 8.5% 7.8%
Leverage ratio ('fully loaded'*) 8.4% 7.7%
Investec Limited**
Capital adequacy ratio 14.6% 14.1%
Tier 1 ratio 11.0% 10.7%
Common equity tier 1 ratio 10.2% 9.9%
Common equity tier 1 ratio ('fully loaded'*) 10.2% 9.9%
Leverage ratio (current) 7.5% 7.3%
Leverage ratio ('fully loaded'*) 7.1% 6.8%
^ 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 charges
and dividends when calculating common equity tier 1 (CET1) capital as required
under the Capital Requirements Regulation and European Banking Authority technical
standards. The impact of this deduction totalling GBP65 million for Investec plc would
lower the CET1 ratio by 45bps (31 March 2017: 45bps).
* The key difference between the 'reported' basis at 31 March 2018 and the 'fully loaded'
basis is primarily relating to capital instruments that previously qualified as regulatory
capital, but do not fully qualify under the CRD IV rules/ SARB regulations. These
instruments continue to be recognised on a reducing basis in the 'reported' figures
until 2022.
** Investec Limited's capital information includes unappropriated profits. If unappropriated
profits are excluded from the capital information, Investec Limited's common equity tier 1
ratio would be 25bps (31 March 2017: 24bps) lower.
Legacy business - overview of results
Since 31 March 2017 the group's legacy portfolio in the UK has continued
to be actively managed down from GBP476 million to GBP313 million
through asset sales, redemptions and write-offs. The legacy business
reported a loss before taxation of GBP93.5 million (2017: GBP64.6 million)
reflecting an increase in impairments for accelerated exits anticipated
to occur on certain legacy assets. Total net defaults in the legacy book
amounted to GBP90 million (31 March 2017: GBP125 million).
Additional information - Investec exposures to the
Steinhoff Group of companies
On 11 December 2017 the group released an announcement on the
Johannesburg Stock Exchange in relation to its exposures to Steinhoff
International Holdings NV (Steinhoff), its subsidiaries and related entities.
Trading and investment losses incurred in respect of these exposures
amounted to R220 million (approximately GBP13 million) in the current
financial year, less than the estimate referred to in the December
announcement. As noted in that announcement Investec has credit
exposures largely to Steinhoff Africa Holdings (Pty) Ltd subsidiaries and
Steinhoff Africa Retail Ltd, which represent a small portion of the group's
balance sheet. Based on the information currently available to the group,
Investec is not expecting to suffer any losses on these exposures.
Outlook
The group has achieved a satisfactory operating performance, supported
by sound growth in key earnings drivers, solid levels of client activity and
a robust recurring income base.
Whilst the complexities of Brexit continue to cause uncertainty in the
UK economy, the final quarter of the 2018 financial year has started to
see an uplift in the South African economic outlook.
The group's continued investment in infrastructure, digital platforms and
people means it is well positioned for future growth.
Investec remains committed to delivering shareholder value and has the
right people and skills to take advantage of opportunities in its core markets,
whilst providing exceptional service to our clients.
On behalf of the boards of Investec plc and Investec Limited
Perry Crosthwaite Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
16 May 2018
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 year-end 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.
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:
Year to Year to
31 March 2018 31 March 2017
Currency per Period Period
GBP1.00 end Average end Average
South African Rand 16.62 17.21 16.77 18.42
Australian Dollar 1.83 1.72 1.64 1.75
Euro 1.14 1.14 1.17 1.19
US Dollar 1.40 1.33 1.25 1.31
Exchange rates between local currencies and Pounds Sterling have
fluctuated over the year. The most significant impact arises from the volatility
of the Rand. The average exchange rate over the period has appreciated by
6.6% and the closing rate has appreciated by 0.9% since 31 March 2017.
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 year
ended 31 March 2018 are consistent with those adopted in the financial
statements for the year ended 31 March 2017.
Standards and interpretations issued but not yet
effective
The following significant standards and interpretations, which have been
issued but are not yet effective for the current financial year, are applicable to
the group.
IFRS 9 Financial Instruments
IFRS 9 is effective and will be implemented by the group from 1 April 2018.
The group will provide its detailed transitional disclosures when it publishes
its annual report for the year ended 31 March 2018 on 29 June 2018.
IFRS 9 replaces IAS 39 and sets out the new requirements for the recognition
and measurement of financial instruments. These requirements focus
primarily on the classification and measurement of financial instruments and
measurement of impairment losses based on an expected credit loss (ECL)
model.
Investec plc and Investec Limited apply the Standardised approach when
calculating capital requirements. The impact of IFRS 9 on Investec plc's
and Investec Limited's common equity tier 1 (CET 1) ratios is potentially
more significant when compared to Internal Ratings Based approach
banks, who already deduct from CET 1 capital any excess expected
losses over impairment allowances.
Subject to finalisation, the adoption of IFRS 9 is expected to result in the
following estimated impact for Investec plc and Investec Limited, respectively.
Investec plc
Balance sheet impairment allowance and provisions
Total balance sheet impairment allowance and provisions are expected
to increase by approximately GBP106 million from GBP158 million as at
31 March 2018 to approximately GBP264 million as at 1 April 2018. This is
driven by an increase in legacy impairments of approximately GBP57 million
and an increase in ongoing impairments of approximately GBP70 million,
partially offset by a reduction of approximately GBP21 million as a result of
changes in classification and measurement of the group's financial assets to
fair value. The increase in impairment allowance and provisions is expected
to reduce the CET 1 ratio by approximately 66bps on a fully loaded basis, or
approximately 3bps on a day one impact transitional basis.
Changes in classification and measurement of certain
financial assets
In addition, changes in classification and measurement to fair value of certain
of the group's other financial assets is expected to result in a decrease to
equity of approximately GBP11 million (post taxation), with an approximate
7bps impact on the CET 1 ratio.
Reclassification of subordinated liabilities to fair value
As a result of the adoption of IFRS 9 Investec plc has elected to designate
its subordinated liabilities to fair value. The interest rate portion of the
subordinated debt is expected to reduce equity by approximately GBP48
million (post taxation) with an approximate 37bps impact on the day one
transitional CET 1 ratio which will come back into retained earnings over the
duration of the remaining term of the instrument (maturing February 2022).
In addition, an amount of approximately GBP55 million (post taxation) has
been transferred to an own credit reserve which does not have an impact on
capital ratios.
Taken together, the adoption of IFRS 9 is expected to result in a decrease in
Investec plc's transitional CET 1 ratio of approximately 47bps from 11.0% to
approximately 10.5%, ahead of the group's target and in excess of minimum
regulatory requirements. Investec plc confirmed to the PRA that it will use the
transitional arrangements to absorb the full impact permissible of IFRS 9 in
regulatory capital calculations.
Investec Limited
Balance sheet impairment allowance and provisions
Total balance sheet impairment allowance and provisions are expected to
increase by approximately R657 million from R1.5 billion as at 31 March 2018
to approximately R2.2 billion as at 1 April 2018. This is driven by an increase
in stage 1, stage 2, and stage 3 impairments of approximately R811 million,
partially offset by a reduction of approximately R154 million as a result of the
changes in classification and measurement of certain of the group's financial
assets to fair value. The increase in impairment allowance and provisions is
expected to reduce the CET 1 ratio by approximately 15bps on a fully loaded
basis, or approximately 4bps on a day one impact transitional basis.
Changes in classification and measurement of certain
financial assets
In addition, changes in classification and measurement of certain of the
group's other financial assets is expected to result in a decrease to equity of
approximately R419 million (post taxation), with an approximate 16bps impact
on the CET 1 ratio.
Taken together, the adoption of IFRS 9 is expected to result in a decrease
in Investec Limited's transitional CET 1 ratio of approximately 20bps from
10.2% to approximately 10.0%, in line with the group's target and in excess
of minimum regulatory requirements. Investec Limited confirmed to the
SARB that it will use the transitional arrangements to absorb the full impact
permissible of IFRS 9 in regulatory capital calculations.
IFRS 15 Revenue from contracts with customers
IFRS 15 is effective for annual periods beginning on or after 1 January 2018
and will be implemented by the group from 1 April 2018. IFRS 15 provides
a principles-based approach for revenue recognition and introduces the concept of
recognising revenue for obligations as they are satisfied. The group's current
measurement and recognition principles are aligned to the standard and the
group does not expect an impact to measurement principles currently applied.
The impact of the disclosure requirements of the standard is currently being
assessed.
The financial results have been prepared under the supervision of Glynn Burger,
the Group Risk and Finance Director. The financial statements for the year ended
31 March 2018 will be posted to stakeholders on 29 June 2018. These accounts
will be available on the group's website on 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 16 May 2018.
- The information in the announcement for the year ended 31 March
2018, which was approved by the board of directors on 16 May 2018,
does not constitute statutory accounts as defined in section 435 of
the UK Companies Act 2006. The 31 March 2017 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
Financial assistance
Shareholders are referred to the Special Resolution number 3, which was
approved at the annual general meeting held on 10 August 2017, relating to
the provision of direct or indirect financial assistance in terms of section 45 of
the South African Companies Act, No 71 of 2008 to related or inter-related
companies. Shareholders are hereby notified that in terms of s 45(5)(a) of
the South African Companies Act, the board of directors of Investec Limited
provided such financial assistance during the period 1 October 2017 to
31 March 2018.
Johannesburg and London
Sponsor: Investec Bank Limited
Ongoing financial information
Consolidated summarised ongoing income statement
For the year to 31 March 31 March
GBP'000 2018 2017
Net interest income 760 101 680 539
Net fee and commission income 1 361 214 1 271 591
Investment income 129 722 135 631
Share of post taxation profit of associates 46 823 18 890
Trading income/(loss) arising from
- customer flow 138 244 158 006
- balance sheet management and other trading activities (4 326) 8 078
Other operating income 11 038 13 158
Total operating income before impairment losses on loans and advances 2 442 816 2 285 893
Impairment losses on loans and advances (63 890) (57 149)
Operating income 2 378 926 2 228 744
Operating costs (1 623 210) (1 502 623)
Depreciation on operating leased assets (2 421) (2 169)
Operating profit 753 295 723 952
Profit attributable to other non-controlling interests (52 288) (60 239)
Profit attributable to Asset Management non-controlling interests (23 817) (20 291)
Operating profit before taxation 677 190 643 422
Taxation (77 448) (130 438)
Preference dividends accrued (33 527) (25 838)
Adjusted earnings 566 215 487 146
Adjusted earnings per share (pence) 61.3 54.1
Number of weighted average shares (million) 923.5 900.4
Cost to income ratio 66.5% 65.8%
Combined consolidated ongoing segmental analysis
Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items,
taxation and after other non-controlling interests - ongoing business
For the year to 31 March 2018 UK and Southern Total
GBP'000 Other Africa group
Asset Management 103 918 74 127 178 045
Wealth & Investment 69 269 29 296 98 565
Specialist Banking 153 460 320 535 473 995
326 647 423 958 750 605
Group costs (33 789) (15 809) (49 598)
Total group 292 858 408 149 701 007
Other non-controlling interest - equity 52 288
Operating profit 753 295
For the year to 31 March 2017 UK and Southern Total
GBP'000 Other Africa group
Asset Management 91 262 73 562 164 824
Wealth & Investment 65 190 28 053 93 243
Specialist Banking 169 196 285 226 454 422
325 648 386 841 712 489
Group costs (36 163) (12 613) (48 776)
Total group 289 485 374 228 663 713
Other non-controlling interest - equity 60 239
Operating profit 723 952
Reconciliation from statutory summarised income statement to ongoing summarised
income statement
Statutory
For the year to 31 March 2018 as UK legacy Ongoing
GBP'000 disclosed business business
Net interest income 760 398 297 760 101
Net fee and commission income/(expense) 1 361 207 (7) 1 361 214
Investment income 130 048 326 129 722
Share of post taxation profit of associates 46 823 - 46 823
Trading income/(loss) arising from
- customer flow 138 226 (18) 138 244
- balance sheet management and other trading activities (4 307) 19 (4 326)
Other operating income 11 115 77 11 038
Total operating income before impairment losses on loans and advances 2 443 510 694 2 442 816
Impairment losses on loans and advances (148 556) (84 666) (63 890)
Operating income/(loss) 2 294 954 (83 972) 2 378 926
Operating costs (1 632 740) (9 530) (1 623 210)
Depreciation on operating leased assets (2 421) - (2 421)
Operating profit/(loss) 659 793 (93 502) 753 295
Profit attributable to other non-controlling interests (52 288) - (52 288)
Profit attributable to Asset Management non-controlling interests (23 817) - (23 817)
Operating profit/(loss) before taxation 583 688 (93 502) 677 190
Taxation (59 099) 18 349* (77 448)
Preference dividends accrued (33 527) - (33 527)
Adjusted earnings 491 062 (75 153) 566 215
Adjusted earnings per share (pence) 53.2 61.3
Number of weighted average shares (million) 923.5 923.5
Cost to income ratio 66.9% 66.5%
* Applying the UK's effective taxation rate of 19.6%.
Statutory
For the year to 31 March 2017 as UK legacy Ongoing
GBP'000 disclosed business business
Net interest income/(expense) 679 895 (644) 680 539
Net fee and commission income/(expense) 1 271 524 (67) 1 271 591
Investment income 136 203 572 135 631
Share of post taxation profit of associates 18 890 - 18 890
Trading income/(loss) arising from
- customer flow 158 001 (5) 158 006
- balance sheet management and other trading activities 8 218 140 8 078
Other operating income 13 483 325 13 158
Total operating income before impairment losses on loans and advances 2 286 214 321 2 285 893
Impairment losses on loans and advances (111 454) (54 305) (57 149)
Operating income/(loss) 2 174 760 (53 984) 2 228 744
Operating costs (1 513 231) (10 608) (1 502 623)
Depreciation on operating leased assets (2 169) - (2 169)
Operating profit/(loss) 659 360 (64 592) 723 952
Profit attributable to other non-controlling interests (60 239) - (60 239)
Profit attributable to Asset Management non-controlling interests (20 291) - (20 291)
Operating profit/(loss) before taxation 578 830 (64 592) 643 422
Taxation (118 488) 11 950* (130 438)
Preference dividends accrued (25 838) - (25 838)
Adjusted earnings 434 504 (52 642) 487 146
Adjusted earnings per share (pence) 48.3 54.1
Number of weighted average shares (million) 900.4 900.4
Cost to income ratio 66.3% 65.8%
* Applying the group's effective taxation rate of 18.5%.
Statutory financial information
Salient financial features
Results in Pounds Sterling
Actual as Actual as Neutral
reported reported Actual as currency^ Neutral
Year to Year to reported Year to currency
31 March 31 March % 31 March %
2018 2017 change 2018 change
Operating profit before taxation* (million) 608 599 1.4% 578 (3.5%)
Earnings attributable to shareholders (million) 506 442 14.3% 478 8.1%
Adjusted earnings attributable to shareholders** (million) 491 435 13.0% 465 6.9%
Adjusted earnings per share** 53.2p 48.3p 10.1% 50.3p 4.1%
Basic earnings per share 51.2p 50.8p 0.8% 48.4p (4.7%)
Dividends per share 24.0p 23.0p 4.3% n/a n/a
* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.
** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.
^ For income statement items we have used the average Rand: Pounds Sterling exchange rate that was applied in the prior year, i.e. 18.42.
Results in Pounds Sterling
Actual as Actual as Neutral
reported reported Actual as currency^^ Neutral
Year to At reported At currency
31 March 31 March % 31 March %
2018 2017 change 2018 change
Net asset value per share 452.5p 431.0p 5.0% 454.0p 5.3%
Net tangible asset value per share 401.5p 377.0p 6.5% 403.0p 6.9%
Total equity (million) 5 428 4 809 12.9% 5 403 12.4%
Total assets (million) 57 617 53 535 7.6% 57 288 7.0%
Core loans and advances (million) 25 132 22 707 10.7% 24 995 10.1%
Cash and near cash balances (million) 12 825 12 038 6.5% 12 763 6.0%
Customer deposits (million) 30 987 29 109 6.5% 30 815 5.9%
Third party assets under management (million) 160 576 150 735 6.5% 160 138 6.2%
Return on average adjusted shareholders' equity 12.1% 12.5%
Return on average risk-weighted assets 1.45% 1.45%
Defaults (net of impairments and before collateral) as a percentage
of net core loans and advances to customers 1.17% 1.22%
Loans and advances to customers as a percentage of customer deposits 79.6% 76.2%
Credit loss ratio (income statement impairment charge as a % of average
gross core loans and advances) 0.61% 0.54%
^^ For balance sheet items we have assumed that the Rand: Pounds Sterling closing exchange rate has remained neutral since 31 March 2017.
Combined consolidated income statement
Year to Year to
31 March 31 March
GBP'000 2018 2017
Interest income 2 491 009 2 230 765
Interest expense (1 730 611) (1 550 870)
Net interest income 760 398 679 895
Fee and commission income 1 543 447 1 429 588
Fee and commission expense (182 240) (158 064)
Investment income 130 048 136 203
Share of post taxation profit of associates 46 823 18 890
Trading income/(loss) arising from
- customer flow 138 226 158 001
- balance sheet management and other trading activities (4 307) 8 218
Other operating income 11 115 13 483
Total operating income before impairment losses on loans and advances 2 443 510 2 286 214
Impairment losses on loans and advances (148 556) (111 454)
Operating income 2 294 954 2 174 760
Operating costs (1 632 740) (1 513 231)
Depreciation on operating leased assets (2 421) (2 169)
Operating profit before goodwill and acquired intangibles 659 793 659 360
Impairment of goodwill - (4 749)
Amortisation of acquired intangibles (16 255) (17 197)
Operating profit 643 538 637 414
Additional costs on acquisition of subsidiary (6 039) -
Profit before taxation 637 499 637 414
Taxation on operating profit before goodwill and acquired intangibles (59 099) (118 488)
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries 3 253 4 070
Profit after taxation 581 653 522 996
Profit attributable to other non-controlling interests (52 288) (60 239)
Profit attributable to Asset Management non-controlling interests (23 817) (20 291)
Earnings attributable to shareholders 505 548 442 466
Impairment of goodwill - 4 749
Amortisation of acquired intangibles 16 255 17 197
Additional costs on acquisition of subsidiary 6 039 -
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries (3 253) (4 070)
Preference dividends paid (32 980) (25 658)
Accrual adjustment on earnings attributable to other equity holders (547) (180)
Adjusted earnings 491 062 434 504
Headline earnings adjustments** (41 415) (79)
Headline earnings 449 647 434 425
Earnings per share (pence)
- Basic 51.2 50.8
- Diluted 49.8 48.8
Adjusted earnings per share (pence)
- Basic 53.2 48.3
- Diluted 51.7 46.4
Dividends per share (pence)
- Interim 10.5 10.0
- Final 13.5 13.0
Headline earnings per share (pence)
- Basic 48.7 48.2
- Diluted 47.4 46.3
Number of weighted average shares - (million) 923.5 900.4
** The headline earnings adjustments are made up of property revaluations, the impairment of goodwill and non-current assets held for sale,
gains on available for sale instruments recycled through the income statement and profit on sale of associate. This line represents the
reconciling items from adjusted earnings to headline earnings.
Summarised combined consolidated statement of comprehensive income
Year to Year to
31 March 31 March
GBP'000 2018 2017
Profit after taxation 581 653 522 996
Other comprehensive income:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive income* (5 746) 53 324
Gains on realisation of available-for-sale assets recycled to the income statement* (6 676) (7 781)
Fair value movements on available-for-sale assets taken directly to other comprehensive income* 20 051 54 863
Foreign currency adjustments on translating foreign operations (25 300) 540 534
Items that will never be reclassified to the income statement
Re-measurement of net defined benefit pension asset 3 938 (43 580)
Total comprehensive income 567 920 1 120 356
Total comprehensive income attributable to ordinary shareholders 451 913 892 201
Total comprehensive income attributable to non-controlling interests 83 027 202 497
Total comprehensive income attributable to perpetual preferred securities 32 980 25 658
Total comprehensive income 567 920 1 120 356
* Net of taxation of GBP11.7 million (year to 31 March 2017: GBP16.8 million).
Summarised combined consolidated cash flow statement
Year to Year to
31 March 31 March
GBP'000 2018 2017
Cash inflows from operations 732 242 708 810
Increase in operating assets (3 352 869) (445 528)
Increase in operating liabilities 3 075 779 498 146
Net cash inflow from operating activities 455 152 761 428
Net cash outflow from investing activities (37 799) (59 615)
Net cash inflow from financing activities 45 383 37 523
Effects of exchange rate changes on cash and cash equivalents (54 085) 332 092
Net increase in cash and cash equivalents 408 651 1 071 428
Cash and cash equivalents at the beginning of the year 5 721 728 4 650 300
Cash and cash equivalents at the end of the year 6 130 379 5 721 728
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 At
31 March 31 March
GBP'000 2018 2017
Assets
Cash and balances at central banks 4 040 512 3 351 702
Loans and advances to banks 2 165 533 3 191 041
Non-sovereign and non-bank cash placements 601 243 536 259
Reverse repurchase agreements and cash collateral on securities borrowed 2 207 477 2 358 970
Sovereign debt securities 4 910 027 3 804 627
Bank debt securities 587 164 639 189
Other debt securities 903 603 1 115 558
Derivative financial instruments 1 352 408 1 185 848
Securities arising from trading activities 1 434 391 1 376 668
Investment portfolio 885 499 835 899
Loans and advances to customers 24 673 009 22 189 975
Own originated loans and advances to customers securitised 459 088 517 162
Other loans and advances 347 809 355 248
Other securitised assets 148 387 148 964
Interests in associated undertakings 467 852 392 213
Deferred taxation assets 157 321 133 972
Other assets 1 876 116 1 900 480
Property and equipment 233 340 105 939
Investment properties 1 184 097 1 128 930
Goodwill 368 803 367 579
Intangible assets 125 389 143 261
Non-current assets held for sale - 27 218
49 129 068 45 806 702
Other financial instruments at fair value through profit or loss
in respect of liabilities to customers 8 487 776 7 728 130
57 616 844 53 534 832
Liabilities
Deposits by banks 2 931 267 2 736 066
Derivative financial instruments 1 471 563 1 296 206
Other trading liabilities 960 166 978 911
Repurchase agreements and cash collateral on securities lent 655 840 690 615
Customer accounts (deposits) 30 987 173 29 109 428
Debt securities in issue 2 717 187 2 386 180
Liabilities arising on securitisation of own originated loans and advances 136 812 90 125
Liabilities arising on securitisation of other assets 127 853 128 838
Current taxation liabilities 185 486 227 828
Deferred taxation liabilities 32 158 40 408
Other liabilities 2 012 268 1 910 830
42 217 773 39 595 435
Liabilities to customers under investment contracts 8 484 296 7 725 604
Insurance liabilities, including unit-linked liabilities 3 480 2 526
50 705 549 47 323 565
Subordinated liabilities 1 482 987 1 402 638
52 188 536 48 726 203
Equity
Ordinary share capital 240 237
Perpetual preference share capital 31 31
Share premium 2 416 736 2 341 228
Treasury shares (160 132) (126 879)
Other reserves (345 606) (310 275)
Retained income 2 530 825 2 226 751
Shareholders' equity excluding non-controlling interests 4 442 094 4 131 093
Other Additional Tier 1 securities in issue 304 150 32 798
Non-controlling interests 682 064 644 738
- Perpetual preferred securities issued by subsidiaries 92 312 91 492
- Non-controlling interests in partially held subsidiaries 589 752 553 246
Total equity 5 428 308 4 808 629
Total liabilities and equity 57 616 844 53 534 832
Summarised combined consolidated statement of changes in equity
Year to Year to
31 March 31 March
GBP'000 2018 2017
Balance at the beginning of the year 4 808 629 3 859 307
Total comprehensive income for the year 567 920 1 120 356
Share-based payments adjustments 69 218 55 961
Dividends paid to ordinary shareholders (227 908) (216 602)
Dividends declared to perpetual preference shareholders and Other
Additional Tier 1 security holders (15 736) (15 279)
Dividends paid to perpetual preference shareholders included in non-controlling
interests and Other Additional Tier 1 security holders (17 244) (10 379)
Dividends paid to non-controlling interests (63 688) (48 195)
Issue of ordinary shares 125 240 228 086
Issue of Other Additional Tier 1 security instruments 271 058 -
Redemption of perpetual preference shares - (81 743)
Issue of equity by subsidiaries 12 695 17 042
Net equity impact of non-controlling interest movements 20 057 12 500
Other equity movements - (80)
Movement of treasury shares (121 933) (112 345)
Balance at the end of the year 5 428 308 4 808 629
Combined consolidated segmental analysis
Year to 31 March UK and Southern Total
GBP'000 Other Africa group
Segmental geographical and business analysis of operating profit
before goodwill, acquired intangibles, non-operating items, taxation and after
other non-controlling interests
2018
Asset Management 103 918 74 127 178 045
Wealth & Investment 69 269 29 296 98 565
Specialist Banking 59 958 320 535 380 493
233 145 423 958 657 103
Group costs (33 789) (15 809) (49 598)
Total group 199 356 408 149 607 505
Other non-controlling interest - equity 52 288
Operating profit 659 793
2017
Asset Management 91 262 73 562 164 824
Wealth & Investment 65 190 28 053 93 243
Specialist Banking 104 604 285 226 389 830
261 056 386 841 647 897
Group costs (36 163) (12 613) (48 776)
Total group 224 893 374 228 599 121
Other non-controlling interest - equity 60 239
Operating profit 659 360
Analysis of financial assets and liabilities by category of financial instrument
Non-financial
Total Insurance instruments
Total instruments related linked or scoped
At 31 March 2018 instruments at amortised instruments out of
GBP'000 at fair value cost at fair value IAS 39 Total
Assets
Cash and balances at central banks 7 784 4 032 728 - - 4 040 512
Loans and advances to banks 236 077 1 929 456 - - 2 165 533
Non-sovereign and non-bank cash placements 34 544 566 699 - - 601 243
Reverse repurchase agreements and cash collateral on securities borrowed 787 905 1 419 572 - - 2 207 477
Sovereign debt securities 4 701 643 208 384 - - 4 910 027
Bank debt securities 369 172 217 992 - - 587 164
Other debt securities 630 280 273 323 - - 903 603
Derivative financial instruments 1 352 408 - - - 1 352 408
Securities arising from trading activities 1 434 391 - - - 1 434 391
Investment portfolio 885 499 - - - 885 499
Loans and advances to customers 1 171 628 23 501 381 - - 24 673 009
Own originated loans and advances to customers securitised - 459 088 - - 459 088
Other loans and advances - 347 809 - - 347 809
Other securitised assets 130 388 17 999 - - 148 387
Interests in associated undertakings - 11 371 - 456 481 467 852
Deferred taxation assets - - - 157 321 157 321
Other assets 190 740 1 239 331 - 446 045 1 876 116
Property and equipment - - - 233 340 233 340
Investment properties - - - 1 184 097 1 184 097
Goodwill - - - 368 803 368 803
Intangible assets - - - 125 389 125 389
11 932 459 34 225 133 - 2 971 476 49 129 068
Other financial instruments at fair value through profit or loss in respect of
liabilities to customers - - 8 487 776 - 8 487 776
11 932 459 34 225 133 8 487 776 2 971 476 57 616 844
Liabilities
Deposits by banks - 2 931 267 - - 2 931 267
Derivative financial instruments 1 471 563 - - - 1 471 563
Other trading liabilities 960 166 - - - 960 166
Repurchase agreements and cash collateral on securities lent 90 049 565 791 - - 655 840
Customer accounts (deposits) 2 375 704 28 611 469 - - 30 987 173
Debt securities in issue 471 886 2 245 301 - - 2 717 187
Liabilities arising on securitisation of own originated loans and advances - 136 812 - - 136 812
Liabilities arising on securitisation of other assets 127 853 - - - 127 853
Current taxation liabilities - - - 185 486 185 486
Deferred taxation liabilities - - - 32 158 32 158
Other liabilities 17 533 1 245 016 749 719 2 012 268
5 514 754 35 735 656 - 967 363 42 217 773
Liabilities to customers under investment contracts - - 8 484 296 - 8 484 296
Insurance liabilities, including unit-linked liabilities - - 3 480 - 3 480
5 514 754 35 735 656 8 487 776 967 363 50 705 549
Subordinated liabilities - 1 482 987 - - 1 482 987
5 514 754 37 218 643 8 487 776 967 363 52 188 536
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 (i.e. as prices) or indirectly
(i.e. 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. These are all classified as level 1.
Fair value category
Total
At 31 March 2018 instruments
GBP'000 at fair value Level 1 Level 2 Level 3
Assets
Cash and balances at central banks 7 784 7 784 - -
Loans and advances to banks 236 077 236 077 - -
Non-sovereign and non-bank cash placements 34 544 - 34 544 -
Reverse repurchase agreements and cash collateral on securities borrowed 787 905 196 170 591 735 -
Sovereign debt securities 4 701 643 4 701 643 - -
Bank debt securities 369 172 293 830 75 342 -
Other debt securities 630 280 256 255 357 256 16 769
Derivative financial instruments 1 352 408 - 1 308 208 44 200
Securities arising from trading activities 1 434 391 1 405 197 22 440 6 754
Investment portfolio 885 499 190 395 107 285 587 819
Loans and advances to customers 1 171 628 - 1 037 888 133 740
Other securitised assets 130 388 - - 130 388
Other assets 190 740 190 740 - -
11 932 459 7 478 091 3 534 698 919 670
Liabilities
Derivative financial instruments 1 471 563 - 1 470 121 1 442
Other trading liabilities 960 166 863 123 97 043 -
Repurchase agreements and cash collateral on securities lent 90 049 - 90 049 -
Customer accounts (deposits) 2 375 704 - 2 375 704 -
Debt securities in issue 471 886 - 457 687 14 199
Liabilities arising on securitisation of other assets 127 853 - - 127 853
Other liabilities 17 533 - 17 533 -
5 514 754 863 123 4 508 137 143 494
Net financial assets/(liabilities) at fair value 6 417 705 6 614 968 (973 439) 776 176
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current year.
Level 2 financial assets and financial liabilities
The following table sets out the group's principal valuation techniques as at 31 March 2018 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 assumptions
Assets
Non-sovereign and non-bank cash placements Discounted cash flow model Yield curves
Reverse repurchase agreements and cash Discounted cash flow model, Hermite interpolation, Yield curves
collateral on securities borrowed Black-Scholes Volatilities
Bank debt securities Discounted cash flow model Yield curves
NCD curves
Other debt securities Discounted cash flow model Yield curves and NCD curves, external prices,
broker quotes
Derivative financial instruments Discounted cash flow model, Hermite interpolation, Yield curves, risk free rate, volatilities, forex forward
industry standard derivative pricing models including points and spot rates, interest rate swap curves and
Black-Scholes credit curves
Securities arising from trading activities Standard industry derivative pricing model Interest rate curves, implied bond spreads,
equity volatilities
Investment portfolio Discounted cash flow model, relative valuation model Discount rate and fund unit price, net assets
Comparable quoted inputs
Loans and advances to customers Discounted cash flow model Yield curves
Liabilities
Derivative financial instruments Discounted cash flow model, Hermite interpolation, Yield curves, risk free rate, volatilities, forex forward
industry standard derivative pricing models including points and spot rates, interest rate swap curves and
Black-Scholes credit curves
Other trading liabilities Discounted cash flow model Yield curves
Repurchase agreements and cash collateral on
securities lent Discounted cash flow model, Hermite interpolation Yield curves
Customer accounts (deposits) Discounted cash flow model Yield curves
Debt securities in issue Discounted cash flow model Yield curves
Other liabilities Discounted cash flow model Yield curves
The following is a reconciliation of the opening balances to the closing balances for fair value measurement in level 3 of the fair value hierarchy.
Total level 3
For the year to 31 March 2018 financial
GBP'000 instruments
Balance at 1 April 2017 770 686
Total gains or losses 52 226
In the income statement 49 490
In the statement of comprehensive income 2 736
Purchases 208 531
Sales (144 027)
Settlements (13 790)
Transfers into level 3 7 165
Transfers out of level 3 (73 192)
Foreign exchange adjustments (31 423)
Balance as at 31 March 2018 776 176
During the year, GBP55.3 million has been transferred to level 2 due to an observable input becoming available to the valuation model.
In addition GBP17.9 million has been transferred to level 2 due to valuation methodologies being reviewed and observable inputs being used to determine the
fair value.
GBP7.1 million has been transferred into level 3 due to inputs to valuation methods becoming unobservable.
The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods changes.
The following table quantifies the gains or (losses) included in the income statement and other comprehensive income recognised on level 3 financial instruments:
For the year to 31 March 2018
GBP'000 Total Realised Unrealised
Total gains or (losses) included in the income statement for the year
Net interest income 1 613 1 613 -
Fee and commission income 93 - 93
Investment income 49 759 54 119 (4 360)
Trading loss arising from customer flow (3 598) (488) (3 110)
Trading income arising from balance sheet management and other trading activities 1 623 40 1 583
49 490 55 284 (5 794)
Total gains or losses recognised in other comprehensive income for the year
Gains on realisation of available-for-sale assets recycled through the income statement 8 092 8 092 -
Fair value movements on available-for-sale assets taken directly to other comprehensive income 2 736 - 2 736
10 828 8 092 2 736
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:
Balance Range of Favourable Unfavourable
sheet value Significant unobservable unobservable changes changes
31 March 2018 GBP'000 input input used GBP'000 GBP'000
Assets
Other debt securities 16 769 Reflected in income statement 729 (840)
Cash flow adjustments CPR 8.3% - 10% 254 (363)
EBITDA (5%)/5% 327 (327)
Other^ ^ 148 (150)
Derivative financial instruments 44 200 Reflected in income statement 6 507 (8 729)
Volatilities 4% - 9% 356 (356)
Cash flow adjustments CPR 8% - 10% 154 (140)
EBITDA (10%)/10% 131 (131)
WACC 19.5% - 48.5% 4 049 (5 750)
Other^ ^ 1 817 (2 352)
Securities arising from trading activities 6 754 Reflected in income statement
Cash flow adjustments CPR 8% 1 180 (1 080)
Investment portfolio 587 819 Reflected in income statement 125 231 (138 497)
Price earnings multiple 5.0 x - 10 x 6 159 (6 120)
EBITDA * 50 197 (43 893)
Precious and industrial
metals prices (10%)/6% 2 420 (4 081)
Property prices (10%)/10% 2 046 (2 046)
WACC 19.5% - 48.5% 12 799 (23 769)
Cash flows * 2 301 (2 483)
Other^ ^ 49 309 (56 105)
Reflected in other
comprehensive income 2 138 (2 113)
Price earnings multiple 4.0 x - 5.5 x 175 (246)
Other^ ^ 1 963 (1 867)
Loans and advances to customers 133 740 Reflected in income statement 15 490 (16 771)
EBITDA 10% 10 349 (10 349)
Other^ ^ 5 141 (6 422)
Other securitised assets* 130 388 Reflected in income statement
Cash flow adjustments CPR 8% 875 (733)
Total level 3 assets 919 670 152 150 (168 763)
Liabilities
Derivative financial instruments (1 442) Reflected in income statement (110) 122
Cash flow adjustments CPR 10% (107) 119
Volatilities 8% (3) 3
Debt securities in issue (14 199) Reflected in income statement
Volatilities 6% (157) 157
Liabilities arising on securitisation of other assets* (127 853) Reflected in income statement
Cash flow adjustments CPR 8% (236) 231
Total level 3 liabilities (143 494) (503) 510
Net level 3 assets 776 176
* 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, other equity investments 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.
** The EBITDA and cash flows have been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations.
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 (including WACC) are used to adjust for the time value
of money when using a discounted cash flow valuation method. Where
relevant, the discount rate also accounts for illiquidity, market conditions and
uncertainty of future 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.
Price earnings multiple
The price-to-earnings ratio is an equity valuation multiple. It is a key driver in
the valuation of unlisted investments.
Property value and precious and industrial metals
The property value and the price of precious and industrial metals is a key driver of future cash flows
on these investments.
Fair value of financial assets and liabilities at amortised cost
At 31 March 2018 Carrying
GBP'000 amount Fair value
Assets
Loans and advances to banks 1 929 456 1 929 497
Reverse repurchase agreements and cash collateral on securities borrowed 1 419 572 1 419 659
Sovereign debt securities 208 384 208 034
Bank debt securities 217 992 229 095
Other debt securities 273 323 270 801
Loans and advances to customers 23 501 381 23 496 971
Other loans and advances 347 809 344 894
Other assets 1 239 331 1 235 273
Liabilities
Deposits by banks 2 931 267 2 937 012
Repurchase agreements and cash collateral on securities lent 565 791 565 629
Customer accounts (deposits) 28 611 469 28 646 834
Debt securities in issue 2 245 301 2 334 238
Other liabilities 1 245 016 1 108 294
Subordinated liabilities 1 482 987 1 695 153
Investec Limited
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
Ordinary share dividend announcement
Declaration of dividend number 125
Notice is hereby given final dividend number 125, being a gross dividend
of 232 cents (2017: 225 cents) per ordinary share has been recommended
by the Board from income reserves in respect of the financial year ended
31 March 2018 payable to shareholders recorded in the shareholders'
register of the company at the close of business on Friday, 27 July 2018.
The relevant dates for the payment of dividend number 125 are as follows:
Last day to trade cum-dividend Tuesday, 24 July 2018
Shares commence trading ex-dividend Wednesday, 25 July 2018
Record date Friday, 27 July 2018
Payment date Monday, 13 August 2018
The final gross dividend of 232.00000 cents per ordinary share has been
determined by converting the Investec plc distribution of 13.50000 pence per
ordinary share into Rands using the Rand/Pounds Sterling average buy/sell
forward rate at 11h00 (SA time) on Wednesday, 16 May 2018.
Share certificates may not be dematerialised or rematerialised between
Wednesday, 25 July 2018 and Friday, 27 July 2018, both dates inclusive.
Additional information to take note of:
- Investec Limited South African tax reference number: 9800/181/71/2
- The issued ordinary share capital of Investec Limited is
310 722 744 ordinary shares
- The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions
as legislated)
- Shareholders who are exempt from paying the Dividend Tax will receive a
net dividend of 232 cents per ordinary share
- Shareholders who are not exempt from paying the Dividend Tax
will receive a net dividend of 185.60000 cents per ordinary share
(gross dividend of 232 cents per ordinary share less Dividend Tax of
46.40000 cents per ordinary share).
By order of the board
N van Wyk
Company Secretary
16 May 2018
Investec Limited
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
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares
("preference shares")
Declaration of dividend number 27
Notice is hereby given that preference dividend number 27 has been
declared from income reserves for the period 01 October 2017 to
31 March 2018 amounting to a gross preference dividend of 397.31947
cents 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, 08 June 2018.
The relevant dates for the payment of dividend number 27 are as follows:
Last day to trade cum-dividend Tuesday, 05 June 2018
Shares commence trading ex-dividend Wednesday, 06 June 2018
Record date Friday, 08 June 2018
Payment date Monday, 18 June 2018
Share certificates may not be dematerialised or rematerialised between
Wednesday, 06 June 2018 and Friday, 08 June 2018, both dates inclusive.
Additional information to take note of:
- Investec Limited South African tax reference number: 9800/181/71/2
- The issued preference share capital of Investec Limited is 32 214 499
preference shares
- The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions
as legislated)
- The net dividend amounts to 317.85558 cents per preference share for
shareholders liable to pay the Dividend Tax and 397.31947 cents per
preference share for preference shareholders exempt from paying the
Dividend Tax.
By order of the board
N van Wyk
Company Secretary
16 May 2018
Investec plc
Incorporated in England and Wales
Registration number: 3633621
LSE ordinary share code: INVP
JSE ordinary share code: INP
ISIN: GB00B17BBQ50
Ordinary share dividend announcement
In terms of the DLC structure, Investec plc shareholders registered on the
United Kingdom share register 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 registered on the South African branch register 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.
Declaration of dividend number 32
Notice is hereby given that the final dividend number 32, being a gross dividend of
13.5 pence (2017: 13 pence) per ordinary share has been recommended by the
Board from income reserves in respect of the financial year ended 31 March 2018
payable to shareholders recorded in the shareholders' register of the company at
the close of business on Friday, 27 July 2018.
- for Investec plc shareholders, registered on the United Kingdom share
register, through a dividend payment by Investec plc from income
reserves of 13.5 pence per ordinary share
- for Investec plc shareholders, registered on the South African branch
register, through a dividend payment by Investec plc from income reserves of
6.5 pence per ordinary share and through a dividend paid by Investec Limited,
on the SA DAS share, payable from income reserves, equivalent to 7 pence
per ordinary share
The relevant dates for the payment of dividend number 32 are as follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday, 24 July 2018
On the London Stock Exchange (LSE) Wednesday, 25 July 2018
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday, 25 July 2018
On the London Stock Exchange (LSE) Thursday, 26 July 2018
Record date (on the JSE and LSE) Friday, 27 July 2018
Payment date (on the JSE and LSE) Monday, 13 August 2018
Share certificates on the South African branch register may not be dematerialised
or rematerialised between Wednesday, 25 July 2018 and Friday, 27 July 2018,
both dates inclusive, nor may transfers between the United Kingdom share
register and the South African branch register take place between Wednesday,
25 July 2018 and Friday, 27 July 2018, both dates inclusive.
Additional information for South African resident
shareholders of Investec plc
- Shareholders registered on the South African branch register are advised
that the distribution of 13.5 pence, equivalent to a gross dividend of
232 cents per share, has been arrived at using the Rand/Pound Sterling
average buy/sell forward rate, as determined at 11h00 (SA time) on
Wednesday, 16 May 2018
- Investec plc United Kingdom tax reference number: 2683967322360
- The issued ordinary share capital of Investec plc is 669 838 695 ordinary
shares
- The dividend paid by Investec plc to South African resident shareholders
registered on the South African branch register and the dividend paid by
Investec Limited to Investec plc shareholders on the SA DAS share are
subject to South African Dividend Tax (Dividend Tax) of 20% (subject to
any available exemptions as legislated)
- Shareholders registered on the South African branch register who are
exempt from paying the Dividend Tax will receive a net dividend of
232 cents per share, comprising 120.29630 cents per share paid by
Investec Limited on the SA DAS share and 111.70370 cents per ordinary
share paid by Investec plc
- Shareholders registered on the South African branch register who are
not exempt from paying the Dividend Tax will receive a net dividend of
185.60000 cents per share (gross dividend of 232 cents per share less
Dividend Tax of 46.40000 cents per share) comprising 96.23704 cents
per share paid by Investec Limited on the SA DAS share and 89.36296
cents per ordinary share paid by Investec plc.
By order of the board
D Miller
Company Secretary
16 May 2018
Investec plc
Incorporated in England and Wales
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares
("preference shares")
Declaration of dividend number 24
Notice is hereby given that preference dividend number 24 has been
declared from income reserves for the period 01 October 2017 to
31 March 2018 amounting to a gross preference dividend of 7.26027 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, 08 June 2018.
For shares trading on the Johannesburg Stock Exchange (JSE), the dividend
of 7.26027 pence per preference share is equivalent to a gross dividend of
123.53712 cents per share, which has been determined using the Rand/
Pound Sterling average buy/sell forward rate as at 11h00 (SA Time) on
Wednesday, 16 May 2018.
The relevant dates for the payment of dividend number 24 are as follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday, 05 June 2018
On The International Stock Exchange (TISE) Wednesday, 06 June 2018
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday, 06 June 2018
On The International Stock Exchange (TISE) Thursday, 07 June 2018
Record date (on the JSE and TISE) Friday, 08 June 2018
Payment date (on the JSE and TISE) Monday, 18 June 2018
Share certificates may not be dematerialised or rematerialised between
Wednesday, 06 June 2018 and Friday, 08 June 2018, both dates inclusive,
nor may transfers between the United Kingdom share register and the
South African branch register take place between Wednesday, 06 June 2018
and Friday, 08 June 2018, both dates inclusive.
Additional information for South African resident
shareholders of Investec plc
- Investec plc United Kingdom tax reference number: 2683967322360
- The issued preference share capital of Investec plc is 2 754 587
preference shares
- The dividend paid by Investec plc to shareholders recorded on the South
African branch register is subject to South African Dividend Tax (Dividend
Tax) of 20% (subject to any available exemptions as legislated)
- The net dividend amounts to 98.82970 cents per preference share
for preference shareholders liable to pay the Dividend Tax and
123.53712 cents per preference share for preference shareholders
exempt from paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
16 May 2018
Investec plc
Incorporated in England and Wales
Registration number: 3633621
JSE share code: INPPR
ISIN: GB00B4B0Q974
Rand-denominated preference share dividend announcement
Rand-denominated non-redeemable non-cumulative non-
participating perpetual preference shares ("preference shares")
Declaration of dividend number 14
Notice is hereby given that preference dividend number 14 has been
declared from income reserves for the period 01 October 2017 to
31 March 2018 amounting to a gross preference dividend of 485.34589
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, 08 June 2018.
The relevant dates for the payment of dividend number 14 are as follows:
Last day to trade cum-dividend Tuesday, 05 June 2018
Shares commence trading ex-dividend Wednesday, 06 June 2018
Record date Friday, 08 June 2018
Payment date Monday, 18 June 2018
Share certificates may not be dematerialised or rematerialised between
Wednesday, 06 June 2018 and Friday, 08 June 2018, both dates inclusive.
Additional information for South African resident
shareholders of Investec plc
- Investec plc United Kingdom tax reference number: 2683967322360
- The issued Rand-denominated preference share capital of Investec plc is
131 447 preference shares
- The dividend paid by Investec plc to shareholders recorded on the South
African register is subject to South African Dividend Tax (Dividend Tax) of
20% (subject to any available exemptions as legislated)
- The net dividend amounts to 388.27671 cents per preference share for
preference shareholders liable to pay the Dividend Tax and 485.34589
cents per preference share for preference shareholders exempt from
paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
16 May 2018
Investec plc
Incorporated in England and Wales
(Registration number 3633621)
JSE ordinary share code: INP
LSE ordinary share code: INVP
ISIN: GB00B17BBQ50
Registered office:
2 Gresham Street, London
EC2V 7QP, United Kingdom
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Company Secretary:
D Miller^
Investec Limited
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
Registered office:
100 Grayston Drive
Sandown, Sandton, 2196
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Company Secretary:
N van Wyk
Directors:
PKO Crosthwaite^ (Chairman),
S Koseff# (Chief Executive),
B Kantor# (Managing Director),
ZBM Bassa, LC Bowden^
GR Burger#, CA Carolus,
HJ du Toit#, D Friedland,
PA Hourquebie~, CR Jacobs^^,
IR Kantor##, Lord Malloch-Brown KCMG^,
KL Shuenyane, F Titi
# Executive ^British ##Dutch ^^Irish
~ Appointed on 14 August 2017.
PRS Thomas resigned effective 10 August 2017.
PKO Crosthwaite was appointed as chairman on 16 May 2018.
Sponsor:
Investec Bank Limited
Date: 17/05/2018 07:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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